[Dryerase] AGR IMF, World Bank

[Shawn G]

Asheville Global Report
www.agrnews.org

Reprinting permitted for non-profit use, and for the members of the 
Dry-erase news wire.

IMF, World Bank--Year in Review

Analysis by Shawn Gaynor

Asheville, NC, Sept. 25 (AGR)—  Last fall, in the wake of the Sept. 11 
attacks on the World Trade Center and the Pentagon, the International 
Monetary Fund (IMF) and World Bank canceled their annual fall meetings in 
Washington, DC.   The world’s largest lending institutions, with a combined 
portfolio of over $300 billion, had been embattled in the “developed” world 
for three years, after a upswing in the anti-corporate globalization 
movement in the wake of the 1999 Seattle protests against the World Trade 
Organization.  Their meeting, scheduled to take place in Barcelona, Spain in 
June 2001, had been canceled for fear of massive protests and unrest.
No one can know what would have taken place if the meetings had not been 
canceled, but it was clear the Bank’s opponents had geared up for a massive 
demonstration, that may well have eclipsed,  in both scale and outrage, the 
previous anti-corporate globalization protests in North America.
The IMF and World Bank were created in 1946 during the post-World War II 
era.  Though they where conceived as institutions for the rebuilding of 
post-war Europe, the massive Marshal Plan filled this financial niche, and 
the newly-created Bretton Woods institutions looked to the poor nations of 
the world to promote the new Truman “development model,” and to act as a 
project to soften the harsh effects of industrial capitalism on these 
nations in order to counter the Soviet model of economics.
This new development model held that, through loans and aid, underdeveloped 
nations could overcome the trappings of colonial economics and 
industrialize.  Furthermore, it sought through this industrialization a 
general rise in the standard of living throughout the impoverished areas of 
the world.
This model produced modest success in some of the countries receiving loan 
and aid, especially in cases where a developing nation combined foreign help 
with market protections through tariffs. However, by the early 1980s a new 
model of global economics was emerging — Neo-Liberalism.  This model held 
that rather then foreign aid, the future profits of exports alone would lift 
the Third World from poverty.  This would be accomplished with a worldwide 
reduction of tariffs, which would encourage product export around the world.
It is unclear whether this shift in economic policy was due to an honest 
belief  in its ability to succeed, or was a way to ratchet up profits and 
cut foreign aid now that the Soviet model threat to capitalism had passed.
What is clear, though, is that many World Bank-funded projects, through 
scale, mismanagement, or corruption, have failed to generate the future 
projected profits on which the credit was extended.  This caused a deep 
crisis in the nations with large loan payments, and created a dilemma: 
default on loan payments and face the abandonment of First World investors, 
or raise more funds toward the debt payments. With budgets already tight in 
these impoverished nations, funds could only be raised in two primary ways; 
cut social spending in health, education and welfare, and/or sell 
(privatize) state-owned ventures like schools, water, rail lines, and power.
As these waves of financial crises spread, the IMF stepped in to make the 
choice for the Third World debtor nations.  In order to receive the capital 
with which to ease the financial crisis — and make loan payments — the IMF 
demanded as a stipulation of emergency loans (to be used for interest 
payments on World Bank development loans), that programs of “structural 
adjustment” be enacted.  The structural adjustments favor privatization, and 
prohibit or reduce spending on domestic social programs.
While the Bank’s opponents in the US have spent a year trying to integrate 
anti-globalization and anti-war messages, without shattering the coalitions 
that made the anti-globalization movement possible, the IMF and World Bank 
have continued unimpeded in their domination of Third World economics.
What follows is a summary of some examples of World Bank and IMF actions 
since their missed meeting last year, and international reaction to these 
policies.

Oil
The main investor in, and therefore influence upon, the World Bank and IMF 
is the US. With the current ruling party deeply dependent on the energy 
lobby, oil exploration and pipelines have been at the forefront of some 
large World Bank programs this year.
In Ecuador, the OCP pipeline which will carry heavy crude from the Amazon 
region to the coast has been the cause of much friction between the people 
of Ecuador, their government, and the IMF.  IMF negotiators, who will fund 
the project, have demanded that all revenues from the new pipeline go toward 
servicing that nation’s foreign debt.  However, the Ecuadorian Congress has 
stipulated that 10 percent of revenues must go toward social spending.  This 
small demand has held up funding of the project, which is reportedly between 
$240 and $900 million.  Bank officials, who this spring stated that the 10 
percent social spending was the major obstacle of the project, have now 
turned down the project over “environmental and social concerns.”
Oil has also been on the top of the World Bank’s agenda in the Sudan, Chad, 
and Nigeria, where tensions between poor populations and wealthy investment 
banks have run high.  In Sudan, a vast de-population campaign has been 
underway to forcibly remove residents from oil exploration areas to clear 
the way for development.

Water
Increasing pressures on the world’s supply of fresh and unpolluted water 
have caused massive competition for the dwindling resource.  The IMF, 
through it’s structural adjustment programs, has encouraged and in some 
cases forced privatization of water.  According to Vandana Shiva’s book 
Water Wars, “out of 40 IMF loans… in 2000, 12 had requirements for partial 
or full privatization of water supplies.”
Multinationals such as the US-based Bechtel and Monsanto have invested 
heavily in the privatization of water, seeing it as a vast new area of 
revenue.  As water rights have fallen out of municipal and national hands, 
and into the hands of large multinationals, water prices in these countries 
have soared.
In Bolivia, which was forced by the IMF to privatize its water in 2000, 
water was re-nationalized this year.  Massive unrest had followed the 
privatization, as water costs had increased to 1/5 of a person’s average 
earnings, and a general strike followed. The International Center for the 
Settlement of Investment Disputes (ICSID), a branch of the World Bank, has 
ruled that Bolivia (one of the world’s poorest countries) must pay $25 
million in damages for breaching its 40 year water contract.
In Ghana, water privatization plans under the World Bank are being 
developed.  The plan calls for the country to be divided into two water 
regions, with the water rights to be sold to the highest bidder.  This would 
eliminate the current government process of charging wealthy families more 
for water, in order to subsidize water to poor districts.  The plan also 
calls for the Ghanaian government to take responsibility  for subsidizing 
the water companies if they raise prices beyond what poor customers can 
afford, jeopardizing any financial gains in selling the rights.  It is 
estimated  that water prices could climb 300 percent due to the deal. 
International consulting firms that have endorsed the deal are all being 
paid by the World Bank, with the poor nation of Ghana unable to hire their 
own consultants.

Africa
For several years activists in Africa and in the First World have been 
calling for debt relief, mainly the cancellation of World Bank loan 
repayment, for the nations of sub-Saharan Africa.  Though the principals of 
the loans to these nations have largely been repaid, interest payments on 
the loans continue to cripple Africa’s ability to deal with massive issues 
of poverty and hunger. The annual interest payments on foreign debt in 
sub-Saharan Africa is currently estimated at just under $15 billion per 
year.  While in the first world this is not viewed as very much money (the 
2003 US defense budget increases spending by $24 billion), in these 
countries payment of the debts has had a crippling effect on agriculture and 
health.
The main crisis faced in sub-Saharan Africa is AIDS.  Many countries in that 
region now have adult AIDS rates at over 1/3 of the adult population. 
Maintenance on their World Bank debts has prevented these countries from 
addressing the epidemic, because Structural Adjustment Programs have gutted 
national health care budgets thoughout the region.
Many of these countries have seen agricultural exports of cash crops as a 
major method in meeting dept payments over the years.  Instead of competing 
with First World (particularly US) subsidized grains and staple foods, these 
nations have encouraged the planting of coffee, chocolate, cotton and other 
cash crops, in their most fertile land.  Two major problems have ensued from 
this choice.  The first is that the projected profits of these crops have 
not been realized, due largely to overproduction and falling worldwide 
prices.  The second impact has been a reduction in these nations’ abilities 
to feed their populations. In the 1980s, during the great famine that took 
place in Ethiopia, land that had traditionally been planted for food was 
instead growing cash crops.  Much more than drought, these choices starved 
the Ethiopian people, as cotton exports continued to expand even throughout 
the worst of the famine.  This year has seen a return of these problems, as 
worldwide coffee prices plummeted, leaving Africa both hungry and poor.
This year a startling new proposal has emerged — even among some of the 
world’s most conservative economists — that African nations unilaterally 
default on their debt.  Economist Jeffrey D. Sachs has said, “If you try to 
collect the debt, you are killing millions of people.  If the countries pay 
their debt, they can’t meet their development needs … If there is not 
international understanding, many countries in duress in history have taken 
a unilateral action.  That is important for African leaders to understand.”  
The Heritage Foundation, a Washington-based economic think tank, has also 
recommended that African leaders default.
Many African nations remain unwilling to do so, however, out of fear that 
this will leave them completely abandoned by international investors.

Public pressure
Massive public pressure has continued to be expressed against the 
institutions of the IMF and World Bank in the last year.  In April of this 
year over 100,000 protesters converged on Washington, DC during the spring 
meetings of the IMF and World Bank.
World Bank Bonds, a favored investment worldwide, are the driving economic 
force behind the Bank’s portfolio.  Campaigns for divestment in the World 
Bank through bond boycotts have grown in popularity in the last year, as a 
way to pressure the Bank to reform.  This year the city of Milwaukee, WI, 
along with the city of Cambridge, MA, and five other US cities joined in 
boycotting World Bank bonds.  Several unions, including the Wisconsin 
AFL-CIO, the SEIU, Steel Workers local 1304, and Teamsters local 85 have 
also joined the boycott this year.
Though they represent a small percentage of total World Bank bond buyers, 
these campaigns hold the possibility of forcing concessions from the Bank by 
starving it of new funds.
In addition, protests in the Third World have remained consistently strong.  
In Brazil, Venezuela, Argentina, Equador, and Nigeria, it appears that 
governments are on the verge of relenting to citizens’ demands that these 
institutions, and the others that represent the neo-liberal model, be 
abandoned. The outstanding question in these areas,  however, is: “Abandoned 
in favor of what?” Though Venezuela and Nigeria may have the natural 
resources (mainly oil) to weather the international investor fallout over 
unilateral debt default, many nations that desire to abandon the Bank loan 
interest cycle have been unable to find a realistic economic alternative 
that can alleviate poverty.
It is impossible to calculate with accuracy the human toll that these 
economic policies have had.  Clearly, 5,000 avertable deaths each day from 
hunger, lack of health care, and lack of potable water is a very 
conservative estimate.  Resistance has had its price also.  According to the 
report “States of Unrest II,” release in April of this year, 76 IMF/World 
Bank protesters have been documented as having died due to state repression, 
with injuries and arrests running into the thousands. Yet people worldwide 
continue to risk resistance and voice their opposition to economic 
reductionism.


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