IMF/World Bank Bashing and the Role of Nuanced Critiques

Dear econo-missed,

What’s the difference between the IMF and the World Bank? Are these institutions solely about accumulation, privatization, and neoliberalism? Are there other big international financial institutions whose basic functions demonstrate how resources get stolen from the Global South over time?

– With love from Philadelphia

Dear love from Philadelphia,

As the International Monetary Fund (IMF) says on its website, you’re not alone if you tend to blur the distinctions between the IMF and the World Bank – even John Maynard Keynes, the first Keynesian and one the designers of these two institutions, found the names confusing. While the IMF and the World Bank often collaborate, their stated purposes differ significantly. The IMF attempts to manage the global monetary system, and the World Bank works for economic and social “development” in the Global South. The history of these institutions contains many more failures than successes from a justice perspective, but acting in solidarity with the desires of people in the Global South is more nuanced than simply bashing these institutions and their attempts at “development.” To explain why, it is first helpful to contrast the two organizations.

Even though the IMF takes on many roles as it tries to manage global flows of money, it involves itself most intensely with countries in the Global South if they cannot finance their national budgets (including payments on past debts) with taxes or through more traditional lending. In these circumstances, the IMF decides to help the country in crisis only if politicians agree to certain conditions. While there is a long list of conditions that the IMF has historically favored, examples include cutting budgets, privatizing state companies, deregulating, and reducing barriers to foreign investment. These IMF prescriptions are called structural adjustment programs (which the World Bank also uses), and these programs impose conditions in an attempt to stabilize or address certain sectors of a country’s economy. The long-term goal is to reconstruct the economy for future economic “development” through integration with global markets (i.e. subordination to global capital). In general, the IMF forces governments to be accountable to foreign capital instead of their own people, subverting sovereignty. While every structural adjustment program looks somewhat different, Herbert Jauch explains how in Southern Africa, the programs have worsened poverty, destroyed infant industries, and ballooned debts.

In contrast to the IMF’s crisis management role, the World Bank tends to fund state or private sector projects that promote the power and reach of capital in order to support “development,” often with little regard to the social or environmental impacts. For example, the World Bank and the Inter-American Development Bank lent $400 million to fund the Chixoy Hydroelectric Dam in Guatemala between 1978 and 1989. This project is associated with the murder of 440 indigenous Guatemalans, the displacement of 3,500, and damage to 33 communities. (After decades of organizing, communities along the Chixoy River have won reparations from the Guatemalan government.) Similarly, the World Bank lent $45 million in 2004 to the Marlin mine project in Guatemala without going through a necessary community consultation process. In 2005, a majority of the people of Sipakapa, the municipality where part of the mine is located, voted against the project, but that did not stop its construction. A 42-day blockade to stop construction equipment ended in 2005 when 1,200 soldiers and 400 police fired volleys towards unarmed protesters, killing the farmer Raul Casto Bocel. Violence and threats against local activists have continued since. The Marlin mine is also associated with water contamination, skin diseases, lung problems, as well as other economic and health damages. Legal groups correctly argue that the 1997 Mining Law violates rights guaranteed to indigenous Guatemalans under their constitution and international law. While communities face tremendous environmental risks, profits fly out of Guatemala; a study from Tufts University found that the Guatemalan government only gets about six percent of revenues from the mine, significantly lower that what most countries receive. Needless to say, the government has not been using that money to address the environmental and social consequences of the mine.

While activists tend to focus on these two major International Financial Institutions (IFI), many others exist, often on a more regional level. I tend to agree with you that history shows how many of these financial institutions have effectively helped capital steal resources from the Global South over time either through unfair lending practices or through buying natural resources and labor at far below their value. One partial explanation for how some decently intentioned people from the Global North, hoping to reduce inequality and eliminate poverty, have helped create such a tragic history is that many in the “development” industry naively believe that expanding capital’s reach always helps the poor. The fundamental logic behind this ideology is that markets only allow mutually beneficial decisions to occur. It’s easy to see why this often isn’t the case. For example, this logic can break down because people who have the power to make deals with foreign capital can profit from decisions economically or politically that hurt others today or in a distant tomorrow. For example, an entrepreneur may decide to open a mine that tramples the rights of indigenous communities or a politician may allow fiscal problems to fester if they can gain in the short term.

That being said, it’s important to point out that history does not determine the past. Some respected critics of these two financial institutions, such as Joseph Stiglitz, argue that the “issue is fundamentally of reform.” It might surprise some that Stiglitz, who is the chair of the Socialist International Global Commission on Financial Issues, sees reform of these “development” institutions as possible or even desirable. I often get the feeling in conversations with friends that anyone vaguely left is supposed to abhor the idea of “development” and recognize all conceptions of it as culturally imperialist. While most manifestations of “development” are imperialist and need to be attacked, one of the frustrating internalizations of the post-development approach on the left is that many adopted a reflexive critique of anything called “development” without engaging in the messy work of imagining what it means to create space for “’local agency’ to assert itself,” as post-development theorist Arturo Escobar encourages.

On a personal level, conversations about development (desarrollo en español) in Guatemala over the past three months have shocked me. After attending numerous talks put together by leftist organizations, I have often heard people talk about development as the realization of local communities’ desires. In addition to organizing bravely against destructive “development” projects from organizations such as the World Bank, the intellectuals and activists I have talked to also have concrete ideas about what would support everyday Guatemalans. For example, rural communities across Guatemala recently blocked many major highways for three days in order to push for the passage of the Comprehensive Rural Development Act as security forces killed one protester. Clearly, development discourse in Guatemala is contested.

Oftentimes, leftists who talk about “development” seem content to critique existing institutions without offering alternatives. The lack of interest in presenting alternatives is problematic on two levels. First, it’s wrong; alternatives exist. While finding ways to give power to local groups so they can shape their future is difficult from the Global North, imperfect models and examples exist. For example, some organizations and even parts of the World Bank have been supporting Community Driven Development (CDD), which “provides control of the development process, resources and decision-making authority directly to community groups.” While Bebbington et al. describe how CDD projects need to understand communities as complex political entities, initiatives like this demonstrate the possibility of organizations such as the World Bank genuinely acting in solidarity with people in the Global South. Similarly, while the IMF is a deeply problematic institution today, there are many possible reforms that would allow the IMF to manage fiscal crises more democratically and write off odious or counterproductive debts. Refusing to research or offer alternatives to contemporary “development” institutions is wrong because it ignores how institutions from the Global North could support the self-determination of people around the world.

If “no one is free while others are oppressed,” leftists cannot ignore the fights going on around the world for positive change, which sometimes are termed development. In this vein, it is worth investigating the root of some leftists’ disinterest in supporting the aspirations of communities around the world. I have gotten the sense that many people feel that doing international solidarity work “right” can feel extremely daunting. While many reasons exist, guilt about the history and current reality of imperialism as well as the failures of the “development” industry can seriously discourage leftists from finding ways to act in solidarity. If guilt makes you feel that international solidarity is impossible, find ways to move beyond it. Impressive examples of solidarity on the left exist; just look at United Students Against Sweatshops’ (USAS) work with the Bangladeshi labor movement to use their position as students to pressure brands to sign the Bangladesh Safety Accord. The USAS article hyperlinked above explains that the accord has legal teeth “to adjust [brands’] pricing structures and constrain their ability to shift production to anywhere they please,” and unions “view the agreement as a vital step forward for workers in Bangladesh.” International solidarity isn’t only possible, it’s necessary in the fight for justice.

Second, disinterest in presenting alternatives is a rhetorical mistake. It’s much easier to convince someone that the terrible practices of the IMF and the World Bank must end if you can present alternative methods to support human development. Do you know how many liberals and progressives roll their eyes when they hear people bashing development? Rhetorically speaking, there’s often a wide gap between convincing someone and making a passionate argument. Because many people want to support human development, it can be helpful to have initiatives that you are willing to say “yes” to. If you want to convince someone to change their position radically, it often helps to come across as nuanced.

Ultimately, the roots of the unequal and exploitative economic landscape we see today come from the violent history of colonialism and imperialism. The Global North has “developed” at the tragic expense of the Global South, and addressing this injustice requires listening closely and acting in solidarity. There’s no way to fight global capitalism in the long-term without the workers of the world.

in solidarity,

ben wolcott

Notes: I have been very busy in Guatemala, and I wish that I had enough time to post more to this blog. I’d also like to appreciate and acknowledge the way that friends, teachers, and activists in Guatemala have shaped my thoughts through sharing theirs. Finally, I have made a few small edits.

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