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IMF, World Bank & Trade

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Key Facts
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Institutional structure

Both the IMF and the World Bank institutions are based in Washington USA, and are owned by their 184 member countries.

The World Bank is the single largest source of development finance in the world, managing a loan portfolio totalling over US$250 billion.

Voting rights at the World Bank are the same for each member state, but additional votes can be granted, depending on financial contributions to the organization.

Voting rights at the IMF are allocated according to financial strength (‘one dollar one vote'), resulting in those financially powerful countries (and the commercial interests that influence them) determining the monetary, economic and development architecture of the global economy. The majority (40%) of all votes are held by just 7 countries (the G7).

For both institutions, the US holds the largest share at 16-17%. Significant changes in policy direction require a "super-majority" of 85%; therefore the US can block any major change in policy.

Structural Adjustment Programmes (SAPs)

IMF/World Bank conditions, known as "structural adjustment programs" (though the institutions are trying to escape that term's negative reputation by changing the name to "poverty reduction and growth programs") generally implement "free market" programs and policy. These programs include internal changes (notably privatization and deregulation) as well as external ones, especially the reduction of trade barriers. Countries which fail to enact these programs may be subject to severe fiscal discipline. Critics argue that financial threats to poor countries amount to blackmail, and that poor nations have no choice but to comply.

In addition, the SAPs divert funds away from social and welfare services (such and health and education) as governments must instead prioritise loan repayments. This is seen to block achievement of the UN's Millennium Development Goals.

Iraq's entire economy has recently been fashioned by the IMF and World Bank. The Paris Club of creditors, through the IMF, quickly approved the cancellation of 80% of Iraq's debts, approximately $39 billion. Using this as leverage, neoliberal structural changes were swiftly enacted including the privatisation of assets and state owned enterprises.

SAPs in Bolivia resulted in per capita income dropping to less than it was 25 years ago, with 63% of Bolivians living in poverty.

Corporate links to IMF

These institutions have financially supported corporations directly - in 1995 the IMF gave almost $18 billion to Wall Street interests who stood to lose billions with the Peso devaluation.

The IMF bailed out foreign investors in Russia with an $11 billion package and orchestrated a massive payout to large banks that made bad loans to Asian countries in the 90's.

Growing resistance to IMF

The IMF has faced criticism as a result of the East Asian financial crisis (where it imposed austerity programs on South Korea, Indonesia, and Thailand) and the massive default in Argentina.

Most recently, seven Latin Americans formed The Bank of the South as an alternative to the World Bank and IMF.

WTO and world trade

The World Trade Organization (WTO) was established in 1995 to provide an international framework for the regulation of rules that govern trade.

The increase in international commerce - corporate globalization that followed the widespread imposition of SAPs in the 1980s - led to demands by corporations and investors for ways to lock in their privileges and protection against the perceived danger of governments seizing assets or imposing new regulations. The WTO, established in 1995, was the answer to those demands, an institution whose tribunals can overrule national laws if they are found to violate the rights of corporations.

The WTO is, constitutionally, a democratic organisation with an equal share of votes distributed to all member nations regardless of their economic power. Yet the poorer nations still find themselves unable to exercise their democratic rights in WTO global trade negotiations.

The dominant economic powers - USA, Canada, the EU and Japan (also known as the ‘Quad' or ‘Quartet') - very clearly establish the agenda before a round of trade talks. The Quad then invite a selected group of poorer nations to a ‘Green Room' meeting where the key decisions are made about which issues will be open to negotiation in the formal talks, and a declaration is drafted. During the formal talks, nations can only agree with or block the predetermined proposals.

World Trade

Global trade is very big business, currently accounting for around 55% of global economic growth, and as much as 75% of GDP in the EU.

Foreign direct investment now exceeds $1 trillion per year for projects such as the privatisation of public utilities and the creation of banking systems.

500 corporations control 70% of world trade. For example Cargill, one of the world's largest global food trading corporations, reported profits of $2.1billion in 2005- almost five times those of 2000.

Benefits are also minimal for the employees of these corporations. In 2002, the top 200 corporations had combined sales equivalent to 28% of world GDP, whilst employing less than 1% of the global work force.

The share of world trade for the 50 least developed countries has declined to 0.6%, less than a third of what it was 40 years ago.

Growing resistance to WTO

Developing countries continue to resist the imposition of WTO agreements, and recently this resulted in the collapse of the Doha Round of trade talks (2006).