THE WORLD BANK AND THE INTERNATIONAL MONETARY FUND
(notes by Róbinson Rojas)(1998)

After the Second World War, the industrialized countries' government
met in United States (Bretton Wood) to organize an "international
management" of the world economy. The general idea was to deal with
monetary, financial and trade problems, avoiding economic crises like
the one in the early 1930s, the period known as the Great Depression.

Three international bodies were set up, all of them managed by U.S.,
British, and French representatives of their respective governments:

1.- The International Monetary Fund, known as the IMF.
2.- The International Bank of Reconstruction, later known as the
    World Bank.
3.- The International Trade Organization. After becoming the General
    Agreement of Trade and Tariffs (GATT), and now transformed into the
    World Trade Organization (WTO).

Membership of the IMF is open to any country willing to abide by its
regulations. The philosophy of the Fund, at its outset, rested on three
pillars:
 a) the maintenance of stable exchange rates;
 b) the provision of a multi-national credit system;
 c) the imposition of a capitalist economic system in the country
    asking for help if deficit on balance of payments arise.

THE IMF

For a detailed study of the role of the International Monetary Fund
see R.Rojas: The IMF. Effects on strategies for development

THE WORLD BANK

Time Magazine, July 25, 1994, in an article entitled "Development.
Damning the World Bank. Despite its many achievements, the institution
marks its 50th birthday amid a flood of complaints", wrote:

"A few weeks after the allied invasion of Normandy on June 6, 1944,
delegates from 44 nations gathered at Bretton Woods, in New Hampshire,
U.S.A., to think about a world beyond war. The 700-odd economists,
bankers, diplomats and politicians conferred for three weeks about
financial reconstruction and a global economic order that would make
bloody conflict less likely. They created the basis of the postwar
international economic system, and in the process, established the
International Bank for Reconstruction and Development, better known
as the World Bank. "We have to go out from here as missionaries,
inspired by zeal and faith," John Maynard Keynes told the conference.
"We have sold all this to oursleves. But the world at large still needs
to be persuaded". The proselyting worked. Since those groundbreaking
days, the bank has become one of the globe's most important engines for
economic development"..."Some $300 billion in World Bank loans have
financed 6,000 projects in scores of countries, from Japan's bullet
train to a clinic for catarat surgery for 11 million blind people in
India"..."All around the globe, the lives and living standards of tens
of millions of people have been affected by the bank's activities".

But, at the same time that the World Bank was celebrating its 50th
anniversary "a coalition of 35 human-rights and environmental groups
is demanding that bank projects cease to harm the environment or bolster
regimes with poor human-rights records" (Time Magazine, July 25, 1994)

The main criticism of the Bank have been that it tends to aprove the
funding of large infrastructure projects in developing countries...which
primarily benefit the wealthy at the expense of the impoverished.

Time Magazine listed five key complaints against the Bank:

"1.- In the past fiscal year the bank distributed nearly $16 billion and
     took in nearly $20 billion in repayments and interests from
     borrowers; thus, according to some critics, siphoning off badly
     needed capital from poor countries.
"2.- Loans too often finance huge Third World construction projects that
     harm the environment and force millions of people to relocate.
"3.- The bank's stringent prescriptions for borrowers can do harm to
     vulnerable populations, especially small farmers and the urban poor.
"4.- The bank "pushes money out the door" without sufficient planning.
"5.- The bank is badly managed, and its employees are overpaid (average
     compensation: $123,000 annually)".

STRUCTURAL ADJUSTMENT

Most of the criticism in the last fifteen years have been in relation
with the Bank imposing structural adjustment policies as a condition for
a country to receive a loan to fund projects. Time commented:

"Structural adjustment is often proposed by the IMF and then made a
condition for the approval of bank loans. Steps such as
                   privatization of state-owned industries,
                   currency devaluation,
                   fiscal austerity, and
                   export-oriented strategies
are advocated by the bank with a view to attracting foreign investment
and promoting long-term growth. But governments frequently pay for such
programs by cutting back on subsidies for food and other basics crucial
to the poor."

"A currency devaluation promoted by the bank and the IMF in Francophone
West Africa this year provides a striking example of the problem. About
80 million people in 14 African countries awoke one morning last January
to find that basic goods had doubled in price; the decision provoked
protest riots in Senegal.

"The IMF and World Bank defended the policy as necessary to removing
economic distortions that stiffle agriculture and basic industries.
Critics argue that the cure is worse than the disease. "Structural
adjustment is usually imposed without involving local populations in the
debate", says Douglas Hellinger, managing director of the Development
Group for Alternative Policies. "Very often the result is falling wages,
rising income inequality and deepening poverty".

On 20 July, 1994, The Guardian published an article by Kevin Watkins,
policy adviser to Oxfam ("A continent driven to economic suicide"),
stating that:

"For more than three decades, the World Bank has shaped Africa's
development, first through large-scale projects and, more recently,
through Structural Adjustment Programmes (SAPs) designed with the
International Monetary Fund. The record of environmental disasters
caused by tha bank has become widely known, but the greater disaster of
economic policies which have exacerbated poverty is one of the
catastrophes of the post-war era.

"All over the world's poorest continent are dotted the failures of
ambitious projects through which the World Bank aimed 'to propel African
producers into world markets'. The social fabric of one country after
another was changed by settlement schemes, dams, agriculture and
forestry projects, devised by 100,000 foreign experts for whom Africa
has paid dearly every year.

"In myriad cases, bank projects, supposedly targeted on the poorest of
Africa's poor, not only increased inequality and hunger, but exacerbated
ethnic conflicts. On such project has a terrible resonance this summer:
the Rwanda Mutura Agriculture and Livestock Development Project.

"It was a classic: an ambitious plan to resettle 9,000 families on
51,000 hectares. But according to the Belgian anthropologist, Rene
Lemarchand, the project ignored crucial ethnic and political factors and,
creating a system of political patronage for the dominant Hutu group,
reduced the resource base of the Tutsis of the district, cutting down
their herds and their grazing area. Lemarchand's warnings of the dangers
involved were ignored. A year later the bank went further down the same
path, with a $21 million project for commercial timber and agricultural
settlements in 37,000 acres of the virgin Gishwati forest."

Kevin Watkins goes on describing to huge damaging projects funded by
the bank:

"The director of Human Rights Watch/Africa, Abdullah An-Naim, has
uncovered similar problems with the Manantali dam project on the Senegal
river, jointly managed by Mauretania, Mali, and Senegal. Mr. An-Naim
elleged that bank advice on privatization was used by the Mauretanian
government to justify the expulsion of black Africans, the poorest
people in the country, from their lands on the Senegal border -which,
newly valuable because of the dam's irrigation potential, have been
taken over by white moors linked to the ruling group. The ethnic
explosion, when it came, caused few ripples in the outside world.

"By contrast, the failure of the $110 million Bura irrigation scheme
on the Tana river in Kenya, one of the largest projects in Africa and
based on a World Bank appraisal, was too big to pass unnoticed. A plan
to resettle 5,000 families on unused land rocketed in cost and had to be
scaled down to 2,000 families. Cotton yields were well below what was
forecast. There were serious environmental problems and many of the
settlers left because of health problems or personal debt"..."In London,
the National Audit Office reported to Parliament that Bura had created
40 per cent of the employment intended at treble the intended cost. It
accused the bank of deliberately withholding information on the
unfolding disaster. Similar charges are widespread."

"Across Africa, projects funded by the bank have become synonymous with
                  financial mismanagement,
                  environmental degradation,
                  the displacement of vulnerable populations, and
                  coruption.
"Take Botswana, where the bank financed a massive expansion in cattle
ranching. The beneficiaries have been a few thousand farmers, many of
them government officials, exporting to Europe. Meanwhile, the communal
lands of Kung bush people have been taken over, and fragile grasslands
destroyed by over-grazing".

"The story is a familiar one. In Kenya, a succession of bank-financed
livestock schemes have displaced Masai pastoralists, driving thousands
into destitution. World Bank forestry projects in Guinea, Ghana and
Ivory Coast have accelerated the deforestation of West Africa -with
grave implications for agriculture, touching the key problem of
escalating food shortages- and destroyed the livelihood of forest
dwellers while benefiting only middle-class entrepreneurs".

Drawing from the thirty-year experience, Watkins summarized:

"If the supply-side ambitions of SAPs are flawed, the demand-side
restraints demanded by the IMF, which have imposed an austerity solution
on chronic poverty, amount to a programme for regional economic suicide.
Across Africa, IMF control of budget policy has imposed a monetarist
strait-jacket which has sacrificed  broader objectives such as
                            employment creation and
                            poverty reduction
to pursuit of zero inflation.
"Drastic cuts in
                public spending on economic infrastructure,
                high interest rates and
                over-rapid import liberalisation
have undermined
               investment and
               destroyed many of the labour-intensive industries
on which recovery depends.

"In countries such as Tanzania, Ghana and Zambia, potentially viable
industries have all but collapsed, with devastating implications. This
has not prevented the IMF from lauding Zambia, which has lost two-thirds
of its textile industry, as a model for others to follow because of its
achievements in lowering inflation"..."By the end of this decade, some
300 million people -half Africa's population- could be living below
subsistence levels, with potentially disastrous consequences for
democracy and stability. It is hard to imagine that the rest of the
world would escape the consequences".

By the time the above was published, the bank published a report ("The
World Bank Group: Learning from the Past, Embracing the Future"), in
which it was said that "the bank will strengthen its efforts to meet
fundamental development objectives such as
                         universal primary education,
                         access to a minimum package of health care, and
                         the elimination of malnutrition
within the next generation".

The report did set out six principles:

1.- Selectivity: indentifying projects and schemes where the bank can
                 have most impact.
2.- Partnership: seeking out alliances and partnerships with other
                 members of the international community including non-
                 governmental and private organisations.
3.- Clients: responding more effectively to the needs of clients and
             ensuring their participation in design and implementation
             of programmes.
4.- Results: looking beyond lending commitments; better quality of
             service; greater efficiency and more accountability for
             for performance.
5.- Cost effectiveness: ensuring that scarce development resources are
                        spent efficiently by streamlining bureaucracy
                        and reducing paperwork.
6.- Financial integrity: continue to place the highest priority on
                         fincial prudence.

JOBLESS, RUTHLESS, VOICELESS, ROOTLESS

By the end of 1997, the World Bank and the IMF were still imposing
structural adjustment programmes in less developed societies, and
the industrialized countries were still imposing sacrifices on their
populations to reach "zero inflation". The whole planet was being
"structurally adjusted".

The results, coming up from reports by the United Nations Development
Programme, where as follows:

--unemployment affects 35 million people in industrial countries,
  with another four million too discouraged to seek work. The rate
  ranges from 3.5 per cent rate in Japan to 23 per cent in Spain. In
  Eastern Europe and the CIS countries, unemployment has gone from near
  zero before 1990 to double digits in some countries: 19 per cent in
  Albania and 17 per cent in Bulgaria and Poland, with CIS countries
  still counting.

--in developing countries, unemployment statistics are hard to obtain,
  in part because so many people work for themselves as farmers or in
  the informal sector. Employment in the informal sector is increasingly
  part-time and in piecework, "usually with little capital, few skills
  and limited technology".

--women face hurdles that men do not. Globally, some 70 per cent of the
  world's 1.3 billion poor are female; their earnings average 75 per
  cent those of men when paid; three-quarters of their time is spent in
  unpaid home and community work. In many African countries, they
  account for more than 60 per cent of farm work and 80 per cent of
  small-scale food production, yet they receive only 1 per cent of total
  agricultural credit.

--unemployment hits youth hardest everywhere, but especially in the
  cities of the developing world. In Kenya, urban youth unemployment
  is 29 per cent and in Algeria 21 per cent. Industrial nations suffer
  sky-high youth unemployment, too: it hits 20 per cent of youth in
  France and 25 per cent in Ireland and Italy.

Richard Jolly, the chief author of the "Human Development Report 1996",
UNDP, said that it is people and not just the economy that needs the
attention of world leaders: "policy makers are often mesmerized by the
quantity of growth. They need to be more concerned with its quality and
to take timely action to prevent growth that is lopsided and flawed".

Five types of "lopsided and flaw" growth:

JOBLESS GROWTH, where the overall economy grows, but does not expand
opportunities for employment. Developing countries are particularly
hard hit. Pakistan's economy (real gross domestic product) grew by
about 6.3 per cent a year between 1975 and 1992, but employment grew
only 2.4 per cent. In Ghana between 1986 and 1991, GDP grew by 4.8 per
cent but employment FELL by more than 13 per cent. But the picture is
not good in many industrialized countries either. Spain's economy grew
at the industrialized-country average of 2.4 per cent a year from 1980
to 1993, but employment obviously did not keep up, as Spain had 23 per
cent unemployment rate in 1993 - over 40 per cent among its youth.

RUTHLESS GROWTH, where the fruits of economic growth mostly benefit
the rich, leaving millions of people struggling in ever-deepening
poverty. Globalization is the motto of the day, but it is creating
increasing polarization between the haves and the have-nots, between
countries and within countries. Polarization invites instability. In
Latin America, enjoying economic recovery, the poverty rate nevertheless
increased from 23 per cent to 28 per cent from 1985 to 1990, as school
policies favoured the wealthy and land reform was largely ignored.
Brazil, Guatemala and Panama have the greatest recorded rich-poor gaps
in the world. The poorest fifth of the population has only 3 per cent of
the wealth in the region.

VOICELESS GROWTH, where economic growth is not matched by democracy or
individual empowerment. "The debate over choice between economic growth
or economic and social participation is dead. People want both," says
the Human Development Report. "But too many people are still denied even
the most basic forms of democracy, and many of the world's people are in
the grip of repressive regimes". On the positive side, over two-thirds
of the world's people now live under formally democratic regimes...but
some gains are more form than substance, says the report...East Asian
economies have shown that worker's rights can be ignored even when
incomes are rising rapidly...

ROOTHLESS GROWTH, where people's cultural identity withers as economies
grow. There are thought to be about 10,000 distinct cultures in the
world, but many risk being marginalized or eliminated. "This can be
dangerous," warns the report. "The violence in the former Soviet Union
and in the Balkan states of former Yugoslavia is a tragic legacy of
culturally repressive governance".

FUTURELESS GROWTH, in which economic growth consumes its very natural
foundations, squandering resources needed by future generations.
Environmental destruction is often masked by strong economic statistics,
except in the poorest countries where people are all too visibly pushed
onto marginal lands, consuming forests for fuel and destroying farmland.
...A quarter of the world's land area is affected. Even where fast-
growing countries can afford not to strip their forest land, as in
Indonesia and Thailan, they continue to expand the practice. Between
1961 and 1988, Thai forest cover shrank from 55 per cent of the country
to 28 per cent.

The above five negative types of growth, nevertheless, have made
international capital extremely rich. Transnational corporations
operating in developing countries, deforesting, polluting, poisoning
and exploiting farmers and working class over there, have been
creating astronomical rate of profits. They have had two extremely
powerful allies in this operation: the International Monetary Fund and
the World Bank.

As Cheryl Payer, "The World Bank. A critical analysis", Monthly Review
Press, 1982, demonstrated "the World Bank has deliberately and
consciously used its financial power to promote the interests of
private, international capital in its expansion to every corner of the
"underdeveloped" world. It has worked toward this end in many different
ways:

-by acting as intermediary for the flow of funds abroad, with taxpayers'
 money from its developed member countries serving to guarantee the
 safety of the bonds it sells;
-by opening up previously remote regions through transportation and
 telecommunications' investments, thus destroying the natural protection
 such regions had previously enjoyed;
-by directly aiding certain transnational corporations, notably, but not
 exclusively, in the mining sector;
-by pressuring the borrowing governments to improve the legal privileges
 for the tax liabilities of foreign investment;
-by insisting on production for export, which chiefly benefits the
 corporations that control the international trade;
-by selectively refusing to loan to governments that repudiate
 international debts or nationalize foreign property;
-by opposing minimum wage laws, trade union activity, and all kinds of
 measures that would improve the share of labour in the national income;
-by insisting on procurement through international competitive bidding,
 which favors the largest multinationals;
-by opposing all kinds of protection for locally owned business and
 industry; and
-by financing projects and promoting national policies that deny control
 of basic resources -land, water, forests- to poor people and appropriate
 them for the benefit of transnationals and their collaborative local
 elites.

"In summary, the World Bank is perhaps the most important instrument of
the developed capitalist countries for prying state control of its
Third World member countries out of the hands of nationalists and
socialists who would regulate international capital's inroads, and
turning that power to the service of international capital". 

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