Bank to the Future

The International Monetary Fund and the World Bank are two powerful instruments of the developed world that offer hope – with lots of strings – to poorer nations in need of external funding. They both were created at the same Bretton Woods Conference in 1944, a meeting that dealt with restructuring the post-World War II global economy. “The International Monetary Fund (IMF) is an international organization … formed with a stated objective of stabilizing international exchange rates and facilitating development [that] offers highly leveraged loans mainly to poorer countries.” Wikipedia. D.C.-located IMF operates with a pool of capital contributed by its 186 member nations and benefits it members by reacting to economic imbalances and stop-gapping monetary shortfalls in poorer countries.” The World Bank, also D.C.-based, has a similar mandate, but its primary focus is providing capital to impoverished nations with a goal to build infrastructure, foment growth and end poverty.”

Such nobility? Critics have long-held the belief that these financial benefits to poorer nations were really created (or have changed over time) (1) to provide huge projects for the big nations that fund these organizations (string: if you take the money, you have to use companies from our big fat countries to do the building) and (2) to make these poorer nations politically beholden to their developed lenders. As the debt piles up, the poor little debtor nation is pretty much under the political thumb of the big fat lenders (string: we are nice to you about all the money you owe us, and you vote the way we want at the UN and support our policies in your region). Not exactly an exemplar of Judeo-Christian charity, is it?

Together, these financial behemoths have become incredibly powerful instrumentalities of corporate globalization and are often the steering mechanisms for global economic and market reform. And one of the recent mandates of the World Bank has been to target the disruptive and poverty-inducing issue of corruption within the borrowing nations. Both the IMF and the World Bank have firmly committed to this goal, significantly reacting to two years of hearings by U.S. Senate subcommittees regarding the destructive power of corruption on poorer nations.

One of the architects of the “neo-con” movement, former Bush administration Deputy Secretary of Defense, Paul Wolfowitz, is the head of the World Bank, which is very much influenced by its biggest contributing nation, the United States. According to IPS.com (The British Inter Press Service News Agency, September 13, 2009), “Wolfowitz recently announced a long-term strategy for using the Bank's funds and expertise to help developing countries rid their governments of bribe-taking and other dishonest practices. A key component will be the deployment of anti-corruption teams in many World Bank country offices.” Nice, right?

Well, what one sees on the surface may not exactly be what is actually going on. “[S]ome non-governmental organisations that oppose the pro-corporate policies of the [International Monetary] Fund and the [World] Bank have questioned whether Wolfowitz, a major architect of the U.S. neo-conservative-led war in Iraq, is using an agenda of democracy and reform to squeeze regimes unfriendly to the United States.” IPS.com. It seems obvious to some that if local regimes play ball with U.S. policies, the squeeze on corruption will be relaxed accordingly.

Further, critics believe that the domination of rich industrialized nations (particularly the United States) at the expense of emerging and smaller nations has skewed the decision-making emphasis of both these organizations to favor huge industrial and corporate powers. IPS.com provides an example: “The [World] Bank's plan for clean energy and climate change [was] another major item on the annual meetings' agenda… The plan was drafted at the urging of the world's most industrialised nations last year as they faced spiraling oil prices. The Bank…says it will help combat climate change and expand energy access for the poor. The lender says it committed 871 million dollars to renewable energy and energy efficiency programmes in 2006… But critics argue its mandate is primarily to serve wealthier nations in their never-ending quest for energy sources and facilitate their search for oil outside of OPEC nations. They say that the document largely ignores alternative and renewable energy sources while advocating mega-projects like hydro-electric dams and nuclear plants, which have traditionally come at a high price for local communities and the environment and fat profit margins for multinational corporations.”

As the global economy shifts heavily toward new powers, nations like China, India and Brazil, and as the United States, heavily burdened with massive deficit-induced borrowings and embroiled in military expeditions in Iraq and Afghanistan, slips in its global influence, we are very likely to see organizations like the World Bank and the IMF to be significantly restructured back towards their original mandates and be redirected away from any semblance of being the instrument of American policy.

While it is intellectually fascinating to watch these global power shifts, at some level, this forces the U.S. to play ball with other nations – no longer able to dictate global policies without first generating a consensus – and in the end, these seemingly abstract changes in global alignment will have a very real impact on the quality of American lives. While there may be some pain in these realities, perhaps it is a pain we can bear with a smile.

I’m Peter Dekom, and this blog was suggested by my son, Chris.