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The World Bank and the International Monetary Fund

The World Bank and the International Monetary Fund (IMF) were both established in 1944 at a conference of world leaders in Bretton Woods, New Hampshire. The Bretton Woods Conference confirmed the position of the United States as the strongest economic power in the world, following the devastation and destruction of the economies of the countries of Europe as World War Two drew to a close. The U.S. dollar replaced the British pound as the dominant currency and the period of "post-war construction" was plotted out, under the domination of the United States.

The work of the World Bank and the IMF are complementary, but their individual roles are different. The World Bank is a primary lending institution, while the IMF supervises the system of payments between member countries. The IMF also steps in to lend money to countries which face balance of payment deficits. What it boils down to is the following: when a country borrows money from the World Bank and is unable to make its loan payments as stipulated, it then borrows more money from the sister IMF to make the payments, thus greatly exacerbating its debt burden. In 1973, a system of "flexible exchange rates" among the currencies of member countries was also implemented, which gave further control to the IMF in determining the value of a debtor country's currency.

The World Bank lends money only to developing or what it calls "transition" countries. Its stated aim is to help integrate these countries into the wider world economy and its slogan is "A World Without Poverty". However, one would be hard pressed to find a more succinct example of words and deeds being the opposite of each other! The actual outcome of the loans extended by both financial institutions has been to strangle the economies of the developing countries and to plunge them into perpetual and increasing debt to the lenders. The more a debtor country falls behind in its payments, the more rapacious the lenders become, to the extent that many countries had to sacrifice the basic needs of their citizens in order to attempt to pay their debts. Furthermore, whereas initially the World Bank's loans were exclusively for projects, it soon expanded into the area of policy reforms, thus giving the lenders significant control of the economic direction of the developing countries. The more money a country owes to the World Bank and the IMF, the more the lenders' dictate is imposed on them.

Who are the lenders? Forty-five percent of the assets of the World Bank are controlled by the G-7 countries. Although it has 183 members, its headquarters are in Washington, D.C. and more than 80 percent of its nearly 11,000 employees work there. Last year, it loaned more than US$15.3 billion. As examples of the size of individual loans, on April 19 the World Bank loaned US$110 million to Madagascar, US$41 million to Rwanda and US$38 million to Tunisia.

As reported in last week's Modern Communism, there are two developing countries --Cuba and North Korea - which are not members of the World Bank In fact, Cuba has attributed its ability to improve in social indicators such as health and education (successes which have even been praised recently by the president of the World Bank) in part to the fact that it has absolutely no ties with it. As the wave of opposition to the FTAA and the WTO increases throughout the Americas and around the world, it becomes necessary to look also at the activities of the World Bank and the IMF, both of which have been working to achieve the same kinds of aims for decades.