Editor's Choice
April 17, 2000

The IMF/World Bank Protest

The weekend of April 15th saw the second major organized protest of the past six months against global multilateral institutions: the first last October was against the World Trade Organization (see our editor's choice column for December 1999).   This time the protest is against the International Monetary Fund (IMF) and the World Bank.  These are probably the largest organized protests since those directed against United States involvement in the Vietnam War some three decades ago.  The question is why should groups as diverse as environmentalists, trade unionists, and church organizations be crusading against global financial institutions whose existence went virtually unnoticed until the past few years?  Furthermore, why should the activities of these agencies be of concern to anthropology?  These are the questions we will try to answer in this and the next Editor's Choice column.  But first, a little historical background.

In 1944 the President of the United States, Franklin D. Roosevelt,   gathered the government financial leaders of forty-four nations to a meeting at the Mt. Washington Hotel in Bretton Woods, New Hampshire.  Their purpose was to plan for the restructuring of the world economy at the end of World War II.   The meeting led to the creation of three agencies whose purpose was to be the resurrection and control of global financial transactions.  The International Bank for Reconstruction and Development (The World Bank) to provide money and strategies for the rebuilding of economies shattered by the war, the IMF to control currency exchange rates and short-term financial aid to stricken countries, and the General Agreement on Tariffs and Trade (GATT) that was to regulate trade between countries and which led in 1995 to the establishment of the World Trade Organization (WTO).   Each of these Bretton Woods institutions were to be operated by officials appointed by member countries.  Thus they are run by officials who are responsible to virtually no one other than the governments who appoint them.   And they have enormous power to control the economies of member nations, particularly those who must seek their assistance.    It is this control and the effects it has had, particularly on poor countries, that are the focus of the protest in Washington.  (For some positive views of the global impacts of the Bretton Woods Institutions see an article by Fred Bergsten, Fifty Years of the GATT/WTO; for a critical perspective see David Korten's article, GATT and Democracy.)

The year 1994 marked the fiftieth anniversary of the Bretton Woods institutions, prompting a worldwide review of their successes and failures. Generally the reviews were not favorable.  Thus the World Bank alone has lend to poor countries over a quarter of a trillion dollars for projects that were supposed to support economic development; however, by the Banks own estimate, the vast majority of these projects have been failures.  Furthermore,   the disparity of wealth in the world between developed countries and developing countries has doubled in the last thirty years. The richest 20 percent of the world’s people now consume 150 times more of the world’s goods than the poorest 20 percent.  Worse still, the loans offered by the World Bank and the IMF have left developing countries with a staggering debt to repay.  In some cases the debt exceeds the entire annual economic output of indebted countries. (see Global Debt and Third World Development)  It is the claim that these multilateral financial institutions have left billions of people in poverty that has drawn thousands of people to the rally in Washington, D.C. to demand the closing down of these institutions.  But let's look at some of the specific claims of protesters.

First, protesters claim that IMF/World bank structural adjustment programs have increased poverty around the world.  Structural Adjustment programs are agreement between the IMF/World Bank and indebted programs that allow countries to pay back their loans at a slower rate than called for in the original agreement.  In exchange, indebted countries agree to make substantial changes in the way their economy operates.  These agreements include promises to cut back on government expenditures, provide more favorable environments for foreign investors, and, occasionally, devalue currencies to make products grown or manufactured in the countries cheaper to foreign buyers.  However, cutting government expenses usually means cutting government spending programs that are beneficial to the poor, such as health, education, and welfare programs.  Thus government programs to deliver food to those too poor to afford it have had to be cut back or abandoned altogether to fulfill structural adjustment goals.   Devaluing currencies may make goods cheaper to foreign buyers, but it also raises the price of goods for domestic consumers.   Thus items that cost the equivalence of $1.00 before devaluation, will cost $2.00 if the value of the currency is cut in half.  (For an extensive list of resources on global poverty see Resources on Hunger, Poverty, and Economic Development at the authors Web Site).

A second criticism is that World Bank/IMF programs devastate the environment.  This claim is most obvious in regards to World Bank projects.  In its desire to lend money to poor countries, the World Bank has favored big projects, particularly the building of dams and roads.  But these projects have led the the devastation of millions of acres of land, and the opening up to lumber interests of huge tracts of once inaccessible forests.   Furthermore, structural adjust programs and debt repayment encourage countries to raise as much cash as possible by selling-off valuable natural resources such as forests and valuable minerals.  The problem is that since so many countries are strapped for cash, when each tries to sell their resources they glut the global markets and drive prices down, requiring still more environmental exploitation. (see Environmental Resources at the authors Web Site)

A Third criticism is that World/Bank programs benefited only the rich members of debtor countries and served also to enrich corporations of the rich countries.   Critics point out that many of the loans went to finance military buildups that cemented in power ruthless dictators or members of the elite friendly to capital accumulation.  Furthermore, protester argue, much of money that was lent went right back to rich countries to purchase armaments or other products, or, after it was lent, went right back to rich countries in the form of investments in condominiums or car dealerships.  Thus one person joked that the problem was not that Latin Americans had no assets; they do.  The problem is that they are all in Miami.

(We'll continue this analysis of the World Bank/IMF protest in the next Editor's Choice column.)

I'd appreciate your comments; you can reach me at robbinrh@splava.cc.plattsburgh.edu