Sixty years ago, delegates from governments of 45 countries met in Bretton Woods, New Hampshire, USA, and laid out a blueprint for redesigning the world economy. For the first time, globally binding agreements and institutions were forged, supposedly in the spirit of international economic cooperation. In truth, the meeting, dominated by the victors of World War II led by the United States, paved the way for a handful of powerful and wealthy Northern countries and governments to dictate to all of humanity the shape of the world economy as they saw fit.

Founding the Institutions, Ruling the World Economy

The Bretton Woods Agreement created the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development or simply, the World Bank (WB), giving a mandate to these twin institutions to maintain a global order and economic climate conducive to capitalist development.

The IMF would enforce the agreed rules of a global financial and monetary system with the U.S. dollar as the international currency, striking a balance between a rigidly fixed currency exchange system and an unfettered floating rate system. The World Bank, on the other hand, would extend loans to war-torn economies and poor countries for use in “development projects” and the “alleviation of mass poverty”.

The structures and decision-making processes that were established reflect the grossly imbalanced power relations between nations. Just like private corporations, voting power and rights of members are proportional to their “shares”. Not surprisingly, the biggest owner of the IMF and the World Bank is the United States.

Several changes have taken place since the founding of the IMF and World Bank in 1944. Rules governing the world economy were adapted to emerging problems and new requirements of the global capitalist system. Steps were taken to enhance and reinforce the powers of these institutions over countries of the South, including the formation of new entities under the IMF and World Bank and the establishment of their regional counterparts - the Asian Development Bank, African Development Bank and Inter-American Development Bank.

For the greater part of the 20th century, the needs and requirements of the global capitalist order to thrive and prevail have been defined by these institutions. In turn, the paradigm and policies of these institutions have been determined by its most powerful members, the wealthiest countries of the world led by the United States.

Debt and Destruction

As oil prices rose in the early 1970s, many of the developed countries cut back on demand for goods from South countries to pay for oil and reduce balance-of-payments deficits. Non-oil-producing South countries reeled from the impacts of skyrocketing oil prices, coupled with the fall in the demand for and trading prices of their key commodities.

International banks and financial institutions, on the other hand, found themselves flush with enormous dollar surpluses from the quadrupling of the prices of crude oil. Driven by the need to invest the surplus capital, they took advantage of the economic vulnerabilities of South countries and aggressively peddled loans. Relentless and unscrupulous, creditors showed no regard for internal democratic processes and national laws. Loans were lent irresponsibly to corrupt governments and to dubious projects that were non-viable, damaging to communities and the environment, or tainted with fraud and onerous terms. Creditors also liberally extended loans to private corporations requiring government guarantees, conveniently ensuring repayment with taxpayers’ money.

More insidious, politically motivated reasons also pushed the high wave of lending in the ‘70s and ‘80s, as Northern governments used the IMF and the World Bank to promote their politico-military and economic interests in the South. In the face of strengthening liberation movements in the South, IMF and World Bank loans propped up repressive dictatorships and authoritarian regimes loyal to the United States, such as Marcos’ of the Philippines, Mobutu’s of Zaire, Suharto’s of Indonesia, and the successive dictatorships in Argentina. The ill-gotten wealth that these despots and their cronies pocketed through onerous debt transactions are still being paid for by peoples of the South today.

The external debt of South countries grew enormously through the ‘70s, eventually leading to a debt crisis in the early 1980s. A deep global recession ushered in the ‘80s with the demand for export commodities of South nations declining and interest rates soaring as a result of the floating exchange-rate policy. Only with Mexico’s threat of default in 1982 was the gravity of the debt crisis publicly acknowledged by the international community. By then, many South countries were teetering on the brink of financial collapse or going through severe economic contraction.

In the succeeding years, debt payments of South countries took huge and continually expanding shares of government spending, resulting in the deterioration of basic services and public utilities. A vicious cycle set in as governments borrowed in increasing amounts in order to service their debts.

The IMF, WB and creditor governments led by the G7 countries implemented various “debt relief” schemes. These programs were partly in response to pressure from debt campaigns and public opinion and so were cleverly designed to appear to be in aid of debt-strapped South countries. More importantly, however, these schemes were aimed at keeping the countries in the treadmill of paying their debts, continuing their borrowings, and sticking to the economic conditionalities. Thus, rather than provide real relief, the schemes redounded to far greater benefit for the creditors.

For instance, the Brady Plan of the early 1990s which targeted countries hit by the debt crisis of the ‘80s such as Argentina, Mexico, Brazil, and the Philippines, transformed a large part of commercial debts into bonds, instruments which involve stronger payment guarantees and whose terms cannot be renegotiated. Instead of paving the way for debt reduction, it allowed creditors to cut their losses, turn the debts into paper that could be traded in the secondary markets to generate profits, and improve the debt indicators of target countries so they could lend to these countries again. In short, the Brady Plan led to more borrowing and larger debts. Less than a decade later, Argentina fell into another debt crisis, and other countries are showing signs of following in its wake.

The IMF and WB unveiled the Heavily Indebted Poor Country (HIPC) debt-relief program in the mid- 1990s. Despite its re-launching as the Enhanced HIPC in the late ‘90s, this scheme has been little more than a mechanism for creditors to clean their books and collect payments from countries that were about to default or were already defaulting. HIPC also exacted compliance with structural adjustment programs as requisite for eligibility, and eventually recycling SAPs in the year 2000 into Bank- and Fund-mandated “poverty reduction strategy papers”, or PRSPs.

Despite these debt-relief schemes, the external debt of the countries of the South came to US$2.4 trillion by the year 2002, up from US$580 billion in 1980. Total debt payments made by South countries came to about US$4.8 trillion for the 22-year period.

Conditionalities, Structural Adjustment Programs, and PRSPS

With the debt of South countries ballooning to mind-boggling proportions, the IMF-World Bank hold even greater sway over South governments. Using debt as leverage, the Fund and the Bank and their regional counterparts compel South countries to implement economic policies as conditionalities attached to loans and as requirements for positive credit ratings, ratings that the international financial community uses to determine a country’s access to, and the terms of, lending.

These economic conditionalities not only include policies deemed necessary to ensure loan repayments, more importantly, they require strategic restructuring of South economies to give free movement to capital and goods. South countries are thus laid bare to even greater plunder by transnational corporations, international banks and other financial institutions, and Northern governments. At the same time, the economies of the South become more oriented to and integrated with the global economy, relying more and more on the demands of the world market, becoming even more dependent on international investments and credit. This process, called globalization, is the direct consequence of the policies of the IMF, the World Bank and their regional partners.

Since the late 1970s, the IMF has been requiring borrowing countries to implement Fund programs that emphasize restrictive fiscal and monetary policies, including those that cover taxes, budget and public spending, interest rates, foreign-exchange rates, international reserves and money supply. In particular, countries undergoing balance-of-payments crises are compelled to implement austere measures known as “stabilization” policies.

The World Bank, on the other hand, has been exacting compliance with broader, longer-term structural adjustment programs that include trade and finance liberalization, deregulation of industries, and privatization of services and utilities. The Bank not only imposes these policies on South countries as loan conditionalities; it finances the implementation of these policies and provides the expertise and technical assistance required.

The impacts of these adjustment policies are well-documented. Numerous testimonies, evaluations and studies bear witness to their disastrous effects:

*Debilitating IMF policies have led to dramatic reductions in public spending on social services and consequently to the severe deterioration of public health, education, housing programs; massive lay-offs of public sector employees; more regressive tax systems; increases in interest rates; and, higher prices of basic commodities.

*The structural adjustment programs of the World Bank and the regional development banks have led to destruction of local enterprises and farms; loss of livelihoods and jobs; decline in incomes, increasing prices of goods; narrower access to health care, education and decent housing; dislocation of entire communities, especially those of indigenous peoples; widespread damage to the environment; and, erosion of sovereign control over natural resources and development policies. Women and girls in particular, additionally disadvantaged by gender discrimination, experience even greater marginalization and impoverishment.

In recent years, these international financial institutions have been relentless in their push for the privatization of water and power services. With the red carpet practically rolled out by the Fund, the World Bank and the regional development banks, the biggest private water and power business empires in the world are being assured lucrative business environments by client South governments.

Country-level experiences on power and water privatization clearly disprove the claim that privately-run firms are more efficient and provide cheaper services. Continuously escalating rates and thus increasingly reduced public access to services, unfulfilled promises of infrastructure improvement and consequently greater risks to public health, malleable regulatory systems, shady financial and management transactions and processes, and extraordinary business perks are common characteristics of privatization that demonstrate the exact opposite. As it turns out, the privatization thrust that these institutions have made contingent to the release of loans have simply provided big multinationals another way to make guaranteed profits at the expense of millions of consumers.

Typical of their propensity for duplicity, the IMF-World Bank officially concedes that some mistakes have been made and recognizes some of the “social impacts of adjustment.” However, they have given no quarter in the continued pursuit of their programs and policies. Instead, these institutions merely performed some face-lifting to structural adjustment programs in the year 2000, re-packaging them as PRSPs required for HIPC eligibility and for loan approval. The policies have remained essentially the same, with the dual purpose of ensuring loan repayments and giving industrialized capitalist countries free rein over the economies of the world.

World Wide Days of Resistance: October 1 to 12, 2004

The IMF-WB pay lip service to poverty reduction, civil-society participation, democracy and transparency, while continuing on this path of destruction. We cannot allow the poverty generation and crises creation by these institutions to continue. Hence, we urge the struggles, campaigns and mobilizations against these institutions in both the South and the North to intensify and to move forward with a renewed sense of urgency.

To mark the 60th year of these Bretton Woods institutions, let us unite and mobilize in a Worldwide Days of Resistance to the IMF-World Bank and their partner institutions during the first two weeks of October 2004. Our global protests will coincide with the Annual Meeting of the IMF and the WB on October 1-4 and continue through October 12, a day of mobilizations in the Americas around injustices perpetuated on indigenous peoples since the landing of Columbus in the Caribbean Islands over 500 years ago.

Let us work together to make the Days of Resistance a resounding cry for the end of the hegemony of these institutions. Let these days mark the beginning of intensified struggle. Let us mobilize for a global expression of unity of the peoples of the North and the South in the struggle to build a new economic order founded on the economic, political, and social empowerment of all people to live fully human lives

Abolish illegitimate debt!
Stop the privatization of education, health, housing, water and power services!
Stop the imposition of neoliberal economic policies!
End 60 years of destruction! IMF-WB OUT NOW!

SIGNATORIES:

Please sign up by submitting your name in the space provided in www.ifi-out.org or www.jubileesouth.org or by sending a message to oct2004@ifi-out.org or to oct2004@jubileesouth.org.