Hunger, poverty and the real agenda of the IMF and world bank

Cameron Walker

Created out of the Bretton Woods Conference of 1944 the World Bank and International Monetary Fund (IMF) claim to have the noble aims of helping third world nations to finance the building of infrastructure and to bridge balance of payments difficulties. However, many claim both institutions help ruin the economies of Third World nations through forced structural adjustment programmes, which are a condition to any loans or aid from them. Many also claim that the policies of both institutions directly benefit powerful multi-national corporations.

IMF logoThe draconian terms of the structural adjustment programmes often include the elimination of tariffs on imports, the forced privatisation of state owned assets, the removal of subsidies to local producers, the reduction of crop diversity and the forced export of crops to a small number of foreign buyers. These policies often lead to much poverty and injustice.

In 1999 the Bolivian city of Cochabamba privatised its public water supply under the intense pressure of the World Bank. The citizens of Cochabamba then as a result faced water bill price hikes of $20 a month. In a nation where the minimum wage is under $100 a month this was absolutely disastrous. What is even more shocking is that after privatisation the citizens of Cochabamba ended up paying more a month for water than people who live in the wealthiest suburbs of Washington D.C.

The policies of the World Bank and IMF are largely blamed for causing Malawi’s 2002 famine. The strings which were attached to an IMF loan package to Malawi included the privatisation of the Agricultural Development and Marketing Corporation, removal of agricultural subsidies to small farmers and the deregulation of price controls on staple foods such as maize. Between October 2001 and March 2002 the price of maize increased by 400 percent as a result of these policies. In 2002 Malawi spent 20 percent of its national budget on debt repayment to Western creditors. This is more than Malawi spent on health, education and agriculture combined.

The foreign debt of many Third World nations will literally take hundreds of years to pay off. Indonesia’s foreign debt for example is $262 billion. This is 170 percent of Indonesia’s gross domestic product. Every day poor nations pay $100 million to Western creditors in debt repayment, mainly to institutions such as the IMF and the World Bank. Since the 1980’s the policies of these institutions have led to developing nations paying out five times as much capital to rich industrialised nations as they have received in aid.

Decisions at the World Bank and the IMF are made by a vote of the board of executive directors, which represent member states. The voting process does not reflect proper democracy because voting power is determined by the amount a member state contributes to the institutions. This means the U.S.A has roughly 17 percent of the vote and has a dominant voice on policy and at times has exercised the power of veto. The World’s seven largest industrialised nations have 45 percent of the vote at the World Bank and IMF. As a result of this the policies of the World Bank and IMF often directly benefit industries based in Western industrialised nations. The company which bought Cochabamba’s water supply after it was privatised was Aguas del Tunari, part of International Water Limited, a British based company half owned by the American engineering giant, Bechtel. U.S. treasury officials have estimated that for every $1 the United States contributes to International development banks, U.S. exporters win more than U.S. $2 in bank financed procurement contracts.

It would seem to be common sense for poor nations to be encouraged to be self sufficient in food production; common sense seems to be contrary to World Bank and IMF policy. Some poor nations have had to endure having their crop diversity limited and then being forced to export the few crops produced to Western Nations. In the early 1990’s the famous investigative journalist John Pilger pointed out that forty percent of arable land in Senegal is used for growing peanuts for Western margarine and in Ghana fifty percent of arable land is used for growing cocoa for export to make Western chocolate bars. Both of these nations suffer malnutrition yet export most of their crops; a scene reminiscent of Ireland under British Imperialism during the potato famine of the 1840’s.

It is easy to come to the conclusion that the World Bank and IMF’s true agenda is very different than the one they sell to the public. They claim to help poor nations but really aid multinational corporations at the expense of Third World nations. These two institutions need to be greatly reformed to be any use in helping tackle one of the greatest problems of the early 21st Century, poverty.

References

Burgo, Ezequiel and Stewart, Heather ( 29/10/2002) The Guardian

Pilger, John (1994) Distant Voices London: Vintage

Pilger, John (2002) The New Rulers Of The World London: Verso

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World Bank/IMF Factsheet

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