The Imf and the World BankEssay Preview: The Imf and the World BankReport this essayThe World Bank and the International Monetary Fund (IMF) claim that their mission is to “concentrate on building the climate for investment, jobs and sustainable growth [in third world countries], so that economies will grow, and by investing in and empowering poor people to participate in development,” (World Bank Group 2005). Every year the directors of these two institutions meet for one week, enjoying elite social events and extravagant meals in order to validate this vision of fighting poverty and promoting growth in the “third world.” In a speech during one of these annual gatherings, former World Bank president Mr. Barber Conable described the duty of the World Bank and the IMF to “look through the eyes of the most underprivileged, [to] share their hopes and their fears, [to] serve their needs and help them realize their strength, potential, and aspirations.”
However, needing 10 million dollars worth of luxurious meals and elegant limousine rides to look through the eyes of the impoverished and to realize that they are in fact needy is a demonstration of something essentially flawed in this system of the extremely wealthy trying to help the severely poor, without any hidden agendas or intentions. The hypocrisy of these meetings represents the corrupt functioning of the organizations, and this paper shall further delve into this and expose aspects of their purely corporate agenda.
Initially, the World Bank and the IMF were created for the reconstruction of Europe after the Second World War. But as most of Europe was already under the Marshall Plan, which provided for the assistance it needed, the World Bank started to consider third world countries as potential customers. The oil crisis of 1970 and soaring interest rates resulted in third world countries to over extend their already existing debts. Needless to say, the World Bank and IMF both seized this opportunity and stepped in as mediators between international lenders and the virtually bankrupt countries (Korten 2001). The World Bank facilitated loans for these nations, and developed structural adjustment policies or SAPs that these countries had to follow in order to repay their debts. Privatization, removal of price and wage controls, and balanced fiscal budgets were integral to these policies. Consequently, by 1980 the debt of these low-income countries increased from $21 billion a decade before, to $110 billion, and by 1992, to $473 billion (Korten 2001). This indebtedness helped the World Bank and IMF to accumulate vast power over third world countries; the kind of power that put the underprivileged at a further disadvantage while only benefiting the elite.
For the World Bank and the IMF to dispatch money to these third world nations, they require that a neo-liberal economic ideology be applied. As mentioned earlier, there are many ways this is done, and diminishing the role of the government and making sure the fiscal budget is balanced, ranks fairly high on the list. There are two ways to balance a fiscal deficit: raising taxes or by cutting government spending. Because increasing taxes would redistribute income more fairly and thus empower the poor, the latter option is strongly recommended by the IMF and World Bank. This requires reduced spending on necessities like health, education, development and the removal of subsidies designed to control the price of basics such as food. The negative effects of these policies are apparent. In Chile, for example, “the percentage of poor households rose from 28.5% in 1969 to 41.2% in 1989,” where as unemployment rates went from “3.1% in 1972 to 41.2% in 1989,” and the financial support for “health care was cut from being 3% to 0.9%” causing corrosion of infant and maternal health (Comelo 1996).
Privatization, which is thought to increase efficiency, productivity and output, is encouraged as well. A good example of this is India, which has experienced widespread privatization in recent years due to the policies imposed by the World Bank and IMF. While many in India would like to see improvements in the countrys public sector, as well as technological advancement, privatization only benefits, and is aggressively endorsed by a very small percentage of Indias vast population. This percentage mainly consists of the English-speaking urban population that arent too concerned with the higher prices that would follow privatization and the effect that would have on the majority of Indias poor (Comelo 1996). Privatization results in basic services that were initially provided at low rates by government organizations to be offered by profit seeking firms at much higher rates, to the extent that the impecunious can no longer afford them (Lloyd & Weissman 2001). These companies may even refuse to provide services to poor or rural areas if its deemed to be financially unbeneficial, leading to suffering for the already poverty-stricken; proving that greater government involvement in the production of fundamental necessities serves the needs of the poor far better than the privatization policies imposed by the World Bank and IMF.
The tactics of the IMF and the World Bank are also responsible for the exploitation of workers in these countries. The ideas proposed by these organizations tempt countries into weakening labour laws to attract much needed foreign investment. Furthermore, the World Bank and the IMF demand countries to keep their wage levels low. Because of mass unemployment resulting from privatization and cuts in government spending, people are willing to accept jobs no matter how low the wage is, which only serves a purpose for multinational corporations. In Haiti, for instance, the government was told to abolish an act in their labour code that permitted an increase in the minimum wage if inflation was to exceed by 10 percent. The elimination of this statute resulted in the minimum wage being only $2.40 a day by the end of 1997 (Global Exchange 2005).
Tremendously low wages are not the only examples of such mass maltreatment of labour. In fact, there are many more unfortunate occurrences such as in the Philippines where domestic wages are kept low and women are encouraged to work abroad officially as maids but in actuality, often as sex slaves (Comelo 1996). Women and children are the primary victims of poverty in the third world. As a group, females in poverty stricken countries, despite their age, receive education, health care and food than males. The female literacy rate in the developing world is 28%, almost three-quarters that of the male literacy rate (Human Development Reports 2005). Women work twice as many hours, much of it unpaid. In addition to this, they care for the young, the old, and the ill, (UNICEF 2005). The wellbeing of the young is even more threatened. “17 million children die each year as a
A more recent survey of 3 million young children by Nihon.com and the International School for the Development of Social Development (IDDK) found that most of these children suffer from a poor sense of well being and a lack of social safety nets.
On the one hand, these children are poor because, despite their poverty, they were never raised on their own. On the other hand, these boys and girls show a very strong sense of belonging, and have been often given the chance to earn money and, as such, are increasingly more capable of helping one another and helping others in the world (Table 3,
http://www.idk.go.jp/index.php/index.php#index.html
).
And so, in total, the poor are the least social system in the world, which means it is only through good work, good families, good social interactions, and good social support and care that we can prevent, at least at the low and medium level, the most suffering children.
On the contrary, a strong sense of belonging and social integration can ensure that all the children of the poorest people are able to be free from the pressures that come with poverty.
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So, even more troubling is the situation of girls. Girls, after all, are the primary recipients of social assistance and protection from social neglect and the pressures of social segregation, even though they are often deprived of such social security or education as child refugees (Kim et al., 1995). Indeed, the gender gap in welfare payments for young girls and young women is even greater than that of their male counterparts (Kim et al., 1995a). The UN Office on Drugs and Crime concluded in 2006 that the average annual gross income of a young girl of less than US$1,000 was equivalent to £1,000. This is not only the largest disparity, but more than double the average worldwide national average in the 1960s (Kim et al., 1995). In effect, so is the system that helps children. However, more and more countries have been developing better methods of social control, for both primary prevention and for social adjustment. The U.N.’s Global Fund for Poverty Action (GFPARC) reported in 2009 that the United Nations Educational, Scientific, and Cultural Organization was responsible for most of the development of public schools in the three countries listed above (GFPARC 2009a).
While it may be tempting to state that the U.N.’s research on children’s health issues (GFPARC 2010a) presents the majority of evidence, the reality is that most of the health and nutrition data are scanty or unreliable, and that most of the data on nutrition for the poorest families are not available at all. Indeed, not all research on nutrition is available for kids. As a result, the U.N. research on children’s health has been hampered by poor data sets and is often incomplete or limited to the poorest communities. This is precisely because at the minimum level of analysis, the U.N. population is relatively small and many communities do not yet have high levels of literacy among their children (Nakhnaga et al., 1996; Poyote et al., 2001). Even so, the U.N.’s recommendations to focus on children