Morning Star: IMF & World Bank admit to inequality crisis but continue to create it

23 October 2017 - 10:45am
News

The World Bank and the International Monetary Fund (IMF) have been forced to admit to the crisis of soaring inequality. But it is the policies they have spent 40 years forcing on the world's poor that led us here. This charm offensive is unlikely to signal a significant shift in thier approach but it may be an indication that cracks in the system run deeper than they appear. 

By Marienna Pope-Weidemann, War on Want 

This isn’t the first time that the IMF and World Bank have changed their tune. It happens about once every 20 years, when the gulf between their real-world impact and their stated aims of sustainable development, democracy and poverty reduction grows a little too wide to explain.

Like the gap between rich and poor, it’s the widest it’s been since the IMF and World Bank were founded after World War II.

Then, the US towered over a wrecked world economy and the systems it produced still reflect that balance of power. At the World Bank today, the entire African continent now has a collective vote share of 0.16 per cent.

Since the 1970s, their development model has hung quite openly on the brutal realities of global capitalism: a carnival of resource extraction, exploitation, privatisation and plunder which devastates the Global South to the benefit of corporations based in the Global North.

That’s an old pattern going back through the colonial era to the transatlantic slave trade. By the 1960s, however, the success of anti-colonial struggles threatened access to valuable resources and cheap labour in the former colonies. But the rise of neoliberal ideology offered up new mechanisms of control: debt. 

Periodic rebranding aside, the neoliberal development story has remained essentially the same and, like most myths, it is best understood from the beginning.

The history of global capitalism is a string of unprecedented debt crises and another exploded in the late ’70s. It was then that the first major rebrand occurred and the neoliberal “Washington consensus” first put itself in the driver’s seat of international development.

People in the Global South were about as responsible for that crisis as people in the Global North were for the sub-prime mortgage crash of 2008.

And similarly, the storm clouds cleared to reveal those least responsible had been left with the bill, in this instance owed to their former colonisers. The economies of the Global South were crippled.

The emergency-response loans issued by the IMF and World Bank, in place of rightful reparations for generations of slavery and exploitation and which the South was in no position to refuse, came with a set of conditions that have perpetuated poverty, dependency and oppression ever since.

These “structural adjustment programmes” forced countries to lower living standards for their own people; to cut wages, social spending, public healthcare and education; and open their fledgling economies to predatory transnational corporations, all to expedite the repayment of that toxic debt.

Structural adjustment was a major cause of global poverty and instability and its aftershocks are still being felt today. They had their justifications: that if the financiers, the “real creators of wealth” could be repaid, that wealth would trickle down. Above all else, the debt had to be repaid for the sake of future generations — even as children went hungry.

If the story sounds familiar, it is. Its telling was trialled in the South long before they dared to share it with a European audience.

When the IMF first sounded the alarm over the impacts of austerity in Europe in 2013, you’d never guess they’d spent a generation ignoring them in the Global South, where growing human cost simply reflected growing profit margins for Northern banks.

Falling short of its stated aim — development — reflected the achievement of neoliberalism’s true goals: profits for the few, dependence for the many.

As renowned US diplomat George Kennan put it in a startling moment of straight talk just a few years after the institutions were founded: “We have about 50 per cent of the world’s wealth… Our real task in the coming period is to devise a pattern of relationships, which will permit us to maintain this position of disparity without positive detriment to our national security.”

Poorer, post-colonial societies being the testing laboratory for austerity means there is much to be learned from their history.

The first lesson is that the neoliberal development model has not failed. It is doing what it was designed to do: perpetuate poverty and economic dependence in the former colonies.

That is why it’s worlds away from the development path taken by today’s global powers, which centered on self-sufficiency, economic regulation and investment in social welfare.

The second lesson is that contradictions betray weakness. Over the 1980s, another “lost decade of development,” the collective debt of poorer countries soared from $596 billion to $1,419bn — this despite repayments over $1,660bn, which cost countless lives.

At this point, when the centrality of corporate interests became a little too transparent, the Washington consensus became the post-Washington consensus and “structural adjustment” became “poverty-reduction.”

The rules of the game stayed the same but it is a sign of weakness that these goliath institutions again now lack the confidence to say what they mean. George Orwell Had a word for this: doublethink. 

In his dystopian classic 1984, he explored how people could be taught to believe things to be their opposite: “War is peace, freedom is slavery, ignorance is strength.” In the same way, for 50 years inequality has meant development. Clearly, the cracks in that theory have grown too big to hide.

Last week’s meetings were crawling with contradictions. Their anti-inequality rhetoric was met by an powerful challenge from global civil society to change course.

152 organisations from 45 countries launched a global campaign against their public-private partnerships, which have impoverished governments, undermined democracy, human rights and social support for women and children.

The World Bank also came under fire for increasing fossil fuel investments to a quarter of its total over recent years, while warning publicly of the “acute threat” of global warming.

They will work hard to appear to be closing these gaps but, like last time, rebranding won’t rewrite the rules.

The 1990s post-Washington consensus was presented as a moderate version of its predecessor, prioritising good governance and social provision, but it paved the way for a host of dangerous public-private partnerships, while undermining democracy and sovereignty for the Global South.

The third lesson is to understand the system that exploits us is a global one and look to the Global South not just for learning but for leadership.

I’ve been reminded of that working with War on Want, which supports a range of powerful social justice movements across Asia, Africa and Latin America, where communities on the front line are going toe-to-toe with the banks and corporations.

It is where people have been hit the hardest and have the most to lose, that some of the most radical alternatives and courageous resistance is emerging. Wherever this happens, it demands our support; and it shows us what’s possible.

The eight richest people in the world own as much wealth as the poorer half of the global population. All 3.8 billion of them.

This is what it had to come to before the World Bank and IMF would finally, after 40 years of delusion and denial, admit what most of us see around us every day: inequality is tearing us apart.

War on Want is one of over 100 organisations calling out these institutions over their role creating inequality around the world.

With another embryonic debt crisis in the Global South and subprime mortgages back in business in Britain, these are prime conditions for another global economic shock.

Whether that shock acts as cover for a renewed neoliberal offensive by international finance or opens the door to radical alternatives — that will be decided by what we do now.

 

Originally published by the Morning Star

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