The help provided by the World Bank and International Monetary Fund to debt-stricken countries is aimed at aiding their recovery, but it seems to be dragging them deeper into trouble.
The International Monetary Fund (IMF) provides loans and influences policy changes of borrowing countries. But economist Mark Weisbrot from the Center for Economic and Policy Research says the neo-liberal measures pushed by the institution often cause more damage than good.
“They’re looking out for the interest of the creditors,” says Mark Weisbrot. “Right now, the IMF is very heavily involved in Europe, even when they’re not loaning money. In Ireland, Spain, Portugal, Greece, Latvia, Estonia, the IMF is working with the European authorities and a lot of these countries are not going to recover for as much as ten years.”
Public frustration with rampant unemployment, high food prices and privatization deals is believed to have helped spark the mass uprising in Egypt. At the suggestion of the IMF and World Bank, ousted President Hosni Mubarak sold public companies to local and foreign investors, while 40 per cent of Egyptians earned US$2 per day.
“It’s definitely a catalyst and the timing is very much related to what was tremendous financial deregulation and opening to privatization by external banks of Egypt and other countries and what has had dramatic negative circumstances,” says author and journalist Nomi Prins.
Egypt may eventually go the way of Latin America, where socially oriented governments have rejected the IMF’s neo-liberal policies after decades of economic struggle.
“You had this long period, from 1980 to 2005, where it was a huge failure in Latin America, in Africa, in places where the IMF was most involved. You had an unprecedented economic failure,” says Mark Weisbrot.
Since its inception, the World Bank’s president has always been an American, the IMF director always a European, despite the 187 nation membership.
Former IMF chief economist Simon Johnson believes the US pulls the strings.
“The World Bank and the IMF are located three blocks from the White House for a reason. It was the structure of political and economic power in 1944 and 1946, and that’s the primary structure of power in the world today,” says Simon Johnson.
Five of the largest emerging nations in the world are now demanding an end to the Western monopoly over the global institutions. Brazil, Russia, India, China, and South Africa – known as BRICS – say leadership of the IMF and World Bank must reflect the changes of the global economy, a transformation from club-based to all-inclusive.