Media Beat, Feb. 9, 1994
By Jeff Cohen and Norman Solomon
IMF and World Bank: Global Loan Sharks and the Media
IMF and World Bank: Global Loan Sharks and the Media
We rarely hear about them in the major news media -- and when we do, we get mostly fluff and flackery.
According to the media image, they function tirelessly to encourage "reforms" so that backward countries can get their economic houses in order.
Who are they? The International Monetary Fund and the World Bank -- the two most powerful financial institutions on earth.
From Russia and Thailand to Bolivia and Chile, the IMF and the World Bank provide loans -- and constant advice. Well-heeled economists from affluent countries routinely offer billions of dollars, if the needy nations prove willing to make certain changes in policies.
Serving as a conduit for money from Western governments and banks and bondholders (with the United States as the biggest single source of funds), the IMF and World Bank require that recipient nations adhere to strict "structural adjustment" programs. They include easing limits on foreign investment, increasing exports, suppressing wages, cutting social services such as health care and education, and keeping the state out of potentially profitable endeavors.
"The World Bank and the IMF don't just have direct control over tens of billions of dollars per year," points out researcher Kevin Danaher of the Global Exchange organization based in San Francisco. "They also indirectly control much more from the commercial banks by functioning as a good housekeeping seal of approval. Offending governments who won't follow IMF/World Bank prescriptions get cut off from international lending -- no matter how well those governments may be serving their own people."
In Africa, Asia and Latin America, the pattern has been grim: To get grants and loans, governments agree to devalue currencies and cut subsidies -- thus raising the prices of necessities like food -- while freezing wages and reducing public employment. Scores of countries are struggling to pay the interest on old loans and qualify for new ones.
The spiral has brought deepening poverty and debt. "From the onset of the debt crisis in 1982, until 1990, debtor countries paid creditors in the North $6,500 million [$6.5 billion] per month in interest alone," reports the British magazine New Scientist. "Yet in 1991 those countries were 61 percent more indebted than they were in 1982."
While the U.S. press is apt to portray the IMF and World Bank as selfless Good Samaritans, the reality is that these 50 year-old institutions function more like global loan sharks. One way countries are encouraged to repay their debts is by shifting from domestic agriculture to export crops.
Davison Budhoo, an economist who resigned from the IMF in protest, contends that the agency's approach has "led to the devastation of traditional agriculture, and to the emergence of hordes of landless farmers in virtually every country where the World Bank and IMF operate." And, he adds, "Food security has declined dramatically in all Third World regions, but in Africa in particular."
In Zimbabwe -- formerly known as the breadbasket of Southern Africa -- the IMF pressured the nation's Grain Marketing Board to make a profit by selling much of its stockpiled grain. And the U.S. Agency for International Development encouraged Zimbabwe to grow high-grade tobacco. As a result, acreage for corn dropped sharply -- and the specter of famine was not far behind.
A disaster for all concerned? Not quite. Such disasters in the Southern Hemisphere have a way of serving as bonanzas for bankers in the North. Interest payments keep flowing northward as debt burdens increase.
Since 1980, "structural adjustment" has been visited upon more than 70 countries. "There are losers and there are winners in structural adjustment," says Leonor Briones, president of the Freedom from Debt Coalition in The Philippines. "The losers are those who are already losing. The winners: the banks, the businessmen, the politicians."
The international affairs director of the D.C.-based Environmental Defense Fund, Bruce Rich, cites the World Bank's "sad record of supporting military regimes and governments openly violating human rights." And he points to environmentally destructive actions such as last summer's approval of a $400 million World Bank loan to India for coalburning power plants -- anathema to those concerned about global warming and C0-2 emissions.
A revealing memo by the World Bank's chief economist, Lawrence Summers, was leaked in January 1992: "The economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable, and we should face up to that.... I've always thought that underpopulated countries in Africa are vastly under-polluted." (Summers went on to become the Clinton administration's undersecretary of the treasury for international affairs.)
In his new book "Utopia Unarmed," the Mexican scholar Jorge Castaneda calls the World Bank and the IMF "the institutions that play the most important role in managing international economic relations today." Yet the U.S. mass media tell us little about these agencies casting enormous fiscal shadows across the globe.
Raising questions about the International Monetary Fund and the World Bank could provoke far-reaching responses. As political analyst Noam Chomsky has put it: "To challenge the right of investors to determine who lives, who dies, and how they live and die -- that would be a significant move toward Enlightenment ideals.... That would be revolutionary."