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IMF, World Bank & Trade

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Since the 1999 protest in Seattle, the international debate on globalization has focused more directly on the activities of those influential organizations at the heart of this economic process - the International Monetary Fund (IMF), the World Bank (WB) and the World Trade Organization (WTO). The vast majority of progressives concerned with critical issues such as the growing levels of inequality, poverty, unfair trade, unsustainable debt and climate change, are vociferously calling for a debate on whether these organizations should be simply reformed or progressively dismantled.

Working For Development?

The mandates of the IMF and World Bank have changed significantly since their creation by the US and UK Governments at The Bretton Woods Conference in 1944. They were initially designed to ensure global financial stability and economic growth in countries affected by the war - mainly in Europe, a function which they were largely successful in thanks to a generous Marshall Plan initiative.

Since then the World Bank has steadily increased its original mandate to become the single largest source of development finance in the world, lending for large-scale development and infrastructure projects such as building roads, dams, pipelines, and extracting natural resources. Whilst the IMF was originally created to maintain global financial stability and monetary cooperation by making loans to countries with balance of payment problems, it is now the lender of last resort for cash strapped developing countries.

In their respective capacities, both institutions are often heavily criticized for imposing harsh conditions on their loans known as Structural Adjustment programs (SAPs). These SAPs tend to reduce government expenditure for social needs such as education, health and welfare in order to channel finance to loan repayments, and in this way exacerbate poverty in many developing countries.

In 1995, the World Trade Organization (WTO) was established to replace the General Agreement on Tariffs and Trade (GATT), with the intention of providing an international framework for the rules that govern trade and to staunchly promote free trade. The liberalizing or ‘opening up' of markets in developing countries to global competition is one of the WTO's key policies, and the organization clearly states that trade rules, although binding on governments, are primarily for the benefit of the business community that produce, import and export goods and services.

Economic Growth and Globalization

Together the policies of free-trade, development loans, SAPs and privatization are the key ingredients of economic globalization, and have been for the past few decades.  There is now a glut of evidence that supports the fact that these institutions, which are broadly unaccountable and opaque, are not effective at reducing poverty and inequality, or in facilitating fair trade or fair finance. They are also heavily criticized for ignoring human and labor rights, and for being heavily biased in favor of the economically dominant countries which largely control their operation. So widespread is the dissent and criticism against them that Latin America as a continent has recently created an alternative means of financing trade and development - The Bank of the South.

It is the underlying ‘neoliberal' ideology that these organizations propagate which needs most careful examination - namely the belief that economic growth and free-markets are the best means of generating wealth for development and poverty reduction. The evidence, after the 30 years of economic globalization that these institutions have spearheaded, is that the benefits are unevenly distributed, accruing more readily to corporations and the wealthy. In addition, the export-led agriculture policies that these institutions promote tend to reduce domestic food security and leave developing countries at the mercy of market forces.

The Need for Reform

Whilst market efficiency and economic growth are important for development in many respects, the blind pursuit of these goals is clearly harmful to a planet whose resources are vastly over-consumed, as well as failing the world's poorest citizens - almost half of whom still lack the essentials of life such as access to basic food, clean water and essential medicine.

Calls to substantially reform these institutions, and even to progressively dismantle them in favor of representative, pro-poor alternatives which operate within the United Nations framework, are increasingly pertinent in this time of growing economic disparity. They demand serious consideration if the distribution of essential goods and services is to be coordinated in a more sustainable and cooperative manner by the international community.