World Bank Conference on Development Economics

On Track? Derailed? Other Voices for Other Routes

30 June 2004 by Eric Toussaint

Eric Toussaint, president of the Committee for the Abolition of the Third World Debt (CADTM), made the following contributions to the debate “ ON TRACK? DERAILED? OTHER VOICES FOR OTHER ROUTES” at the Annual World Bank World Bank
The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 189 members in 2017), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.

Conference on Development Economics, organised by the World Bank at the Palais d’Egmont, in Brussels, on 10th May 2004 [1]

The question that the moderator put to me is, what have we learned from the World Bank and the International Monetary Fund IMF
International Monetary Fund
Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.
, in recent years in terms of evolution.

As far as I am concerned, the World Bank, and more recently the IMF, are evolving in the wrong direction. They are regressing.

Not so many years ago, reformers such as Joseph Stiglitz and Ravi Kanbur [2] were expressing themselves, making proposals. And you would have thought moderate Keynesianism was back in the Bank. Clearly, that episode is over; those people have gone.

As far as the IMF is concerned, the election of Rodrigo Rato, once again a European, as Director General of that institution, shows that in spite of the repeated requests of several member countries of the World Bank and the IMF, the intention of good governance is not respected within these two institutions. It is as though they were saying, “Do good governance the way you are told and not the way we do it”.

As regards the Millennium Development Goals [3], it is obvious that they are not going to be achieved, moderate and timid as they now are.

Poverty, we are told, is on the decrease. Too slowly, perhaps, but still, it is decreasing.

Come, come. The two countries upon which the World Bank bases its claim that the total number of poor has decreased are India and China - two countries that, according to the WB, do not fully implement WB and IMF recommendations.

As you very well know, a series of measures to control capital flows, prevent convertibility of Chinese currency, etc. do not comply with WB and IMF recommendations.

You in the WB and the IMF are hoping to change all that, when China joins the WTO WTO
World Trade Organisation
The WTO, founded on 1st January 1995, replaced the General Agreement on Trade and Tariffs (GATT). The main innovation is that the WTO enjoys the status of an international organization. Its role is to ensure that no member States adopt any kind of protectionism whatsoever, in order to accelerate the liberalization global trading and to facilitate the strategies of the multinationals. It has an international court (the Dispute Settlement Body) which judges any alleged violations of its founding text drawn up in Marrakesh.

, with all the consequences that will entail. And then we will see whether poverty still carries on falling in China, or whether the cost of full integration in world trade on its current terms will not, on the contrary, lead to increased poverty.

In my view there is a great probability that it will increase poverty.

In any case, one thing is sure: the regions of the world which have been the most diligent in applying IMF and World Bank recommendations, namely sub-Saharan Africa, Latin America and the Caribbean, and Central and Eastern Europe are, according to your own figures, the regions that have experienced the most dramatic increase in absolute poverty.

So the poverty reduction goals of the Millennium Round will not be achieved by implementing your recommendations.

Next, let us consider the debt of the HIPC Heavily Indebted Poor Countries
In 1996 the IMF and the World Bank launched an initiative aimed at reducing the debt burden for some 41 heavily indebted poor countries (HIPC), whose total debts amount to about 10% of the Third World Debt. The list includes 33 countries in Sub-Saharan Africa.

The idea at the back of the initiative is as follows: a country on the HIPC list can start an SAP programme of twice three years. At the end of the first stage (first three years) IMF experts assess the ’sustainability’ of the country’s debt (from medium term projections of the country’s balance of payments and of the net present value (NPV) of debt to exports ratio.
If the country’s debt is considered “unsustainable”, it is eligible for a second stage of reforms at the end of which its debt is made ’sustainable’ (that it it is given the financial means necessary to pay back the amounts due). Three years after the beginning of the initiative, only four countries had been deemed eligible for a very slight debt relief (Uganda, Bolivia, Burkina Faso, and Mozambique). Confronted with such poor results and with the Jubilee 2000 campaign (which brought in a petition with over 17 million signatures to the G7 meeting in Cologne in June 1999), the G7 (group of 7 most industrialised countries) and international financial institutions launched an enhanced initiative: “sustainability” criteria have been revised (for instance the value of the debt must only amount to 150% of export revenues instead of 200-250% as was the case before), the second stage in the reforms is not fixed any more: an assiduous pupil can anticipate and be granted debt relief earlier, and thirdly some interim relief can be granted after the first three years of reform.

Simultaneously the IMF and the World Bank change their vocabulary : their loans, which so far had been called, “enhanced structural adjustment facilities” (ESAF), are now called “Growth and Poverty Reduction Facilities” (GPRF) while “Structural Adjustment Policies” are now called “Poverty Reduction Strategy Paper”. This paper is drafted by the country requesting assistance with the help of the IMF and the World Bank and the participation of representatives from the civil society.
This enhanced initiative has been largely publicised: the international media announced a 90%, even a 100% cancellation after the Euro-African summit in Cairo (April 2000). Yet on closer examination the HIPC initiative turns out to be yet another delusive manoeuvre which suggests but in no way implements a cancellation of the debt.

List of the 42 Heavily Indebted Poor Countries: Angola, Benin, Bolivia, Burkina Faso, Burundi, Cameroon, Central African Republic, Chad, Comoro Islands, Congo, Ivory Coast, Democratic Republic of Congo, Ethiopia, Gambia, Ghana, Guinea, Guinea-Bissau, Guyana, Honduras, Kenya, Laos, Liberia, Madagascar, Malawi, Mali, Mauritania, Mozambique, Myanmar, Nicaragua, Niger, Rwanda, Sao Tome and Principe, Senegal, Sierra Leone, Somalia, Sudan, Tanzania, Togo, Uganda, Vietnam, Zambia.
and the so-called emerging countries.

Concerning the HIPC, you will have heard of the extremely worrying and bleak report published by the U.S. General Accounting Office on 20 April 2004 [4] on the funding of this initiative. It mentioned a considerable funding gap. According to the GAO, the initiative will be short of 375 billion dollars to achieve the sustainability goal of the HIPC debt by 2020. So here too, the outlook is a source of utmost concern.

As for the debt of the emerging countries, one may legitimately ask what the consequences of the increase of emerging countries’ debt will be in the coming years. Currently, the price of raw materials is increasing slightly. There is high credit renewal and a large amount of government bonds being issued. Thus debt increases while interest rates Interest rates When A lends money to B, B repays the amount lent by A (the capital) as well as a supplementary sum known as interest, so that A has an interest in agreeing to this financial operation. The interest is determined by the interest rate, which may be high or low. To take a very simple example: if A borrows 100 million dollars for 10 years at a fixed interest rate of 5%, the first year he will repay a tenth of the capital initially borrowed (10 million dollars) plus 5% of the capital owed, i.e. 5 million dollars, that is a total of 15 million dollars. In the second year, he will again repay 10% of the capital borrowed, but the 5% now only applies to the remaining 90 million dollars still due, i.e. 4.5 million dollars, or a total of 14.5 million dollars. And so on, until the tenth year when he will repay the last 10 million dollars, plus 5% of that remaining 10 million dollars, i.e. 0.5 million dollars, giving a total of 10.5 million dollars. Over 10 years, the total amount repaid will come to 127.5 million dollars. The repayment of the capital is not usually made in equal instalments. In the initial years, the repayment concerns mainly the interest, and the proportion of capital repaid increases over the years. In this case, if repayments are stopped, the capital still due is higher…

The nominal interest rate is the rate at which the loan is contracted. The real interest rate is the nominal rate reduced by the rate of inflation.
remain low.

We know that interest Interest An amount paid in remuneration of an investment or received by a lender. Interest is calculated on the amount of the capital invested or borrowed, the duration of the operation and the rate that has been set. rates will increase.

If the prices of raw materials, which are volatile, should fall again, what will happen in a year or two years’ time?

This is the question I am raising here. And in my view, it should be a serious source of concern.

I would like to end with two more points.

There is again a negative net transfer on debt [5]. Indebted countries repay more than they get. This has also been the case for the World Bank since 1998. The amount that you, the World Bank, get as repayments is higher than the amount of new loans you grant. And you must be aware of this since you yourselves publish the figures in the World Debt Tables.

My last point is that as disparities continue to grow, you no longer talk about the redistribution of income, as you did long ago, in the days of Hollis Chenery [6] in the 1970s.

Since the 1980s you have been talking about poverty reduction without raising the issue of income redistribution. And as long as we do not directly address income and property redistribution in southern countries, in northern countries, and between North and South, the issue of disparities will not be resolved.

Eric Toussaint’s Second Contribution to the Debate.

Brussels, 10th May 2004

The regions of the globe which had systematically applied World Bank and IMF policies had seen a rise in absolute poverty.

Firstly, I will begin by answering Mr. Uri Dadush, Director of the Development Prospects Group, World Bank, who has just declared that I was wrong in asserting that the regions of the globe which had systematically applied World Bank and IMF policies had seen a rise in absolute poverty. He claims that countries which have applied World Bank policies have, on the contrary, had positive results in poverty reduction. This is incorrect.

The figures are very simple, you just have to look at the World Keys Indicators published by the World Bank.

It’s very simple. You add up the estimated numbers of poor people, using the dollar a day threshold and applying your criteria for Latin America, the former Soviet Bloc and Sub-Saharan Africa, and you get 100 million more people living in absolute poverty in 1999 than in 1990.

According to the same source, in China and India the number of absolute poor has decreased by 200 million. From this, you claim that the number of people living in absolute poverty has decreased by 100 million. So this is simple arithmetic: you can say that there are 100 million fewer poor than 10 years ago, thanks to the contribution of China and India.

If you take the former Soviet Bloc, using your own figures, Sub-Saharan Africa using your own figures and Latin America and the Caribbean according to your own figures, the number of poor has increased.

Now you underestimate the actual situation of poverty, of the number of poor, as has been pointed out by the UN Development Programme (UNDP UNDP
United Nations Development Programme
The UNDP, founded in 1965 and based in New York, is the UN’s main agency of technical assistance. It helps the DC, without any political restrictions, to set up basic administrative and technical services, trains managerial staff, tries to respond to some of the essential needs of populations, takes the initiative in regional co-operation programmes and co-ordinates, theoretically at least, the local activities of all the UN operations. The UNDP generally relies on Western expertise and techniques, but a third of its contingent of experts come from the Third World. The UNDP publishes an annual Human Development Report which, among other things, classifies countries by their Human Development Rating (HDR).

United Nations Conference on Trade and Development
This was established in 1964, after pressure from the developing countries, to offset the GATT effects.

in several studies.

So my statement is serious. This is something I’m adamant about. I’m basing myself on your data which I think fall short of reality.

For my second point, I would like to take history into account. The International Monetary Fund and the World Bank were set up after World War II, after a long period of depression and instability, to regulate the economy.

Since 1980 we have been through 25 years of systematic disbanding of regulatory mechanisms, control of capital flows and labour market rules. This is something that you admit yourselves: you want to undo, you want to take away mechanisms that are an obstacle to the liberalisation of markets. And you’ve been doing this for 25 years.

I think we can now reasonably draw the lessons of 25 years’ work. If it were 5 years, you could say “OK, let us give ourselves time”, but you have had 25 years and the results are horrendous. That much is clear.

And I hope that as the neo-liberal agenda is fostered, there is going to be a swing of the pendulum. In other words, there will be a new regulatory movement. Some people have made suggestions in your institutions (such as J. Stiglitz) and they have not been listened to. There are still some reformists here but their opinions are not published; others have just stepped down. And you have not been able to make the necessary changes. Change is bound to happen because the reality is there, pressure is extremely high.

There are movements opposing corporate-driven neo-liberal globalisation and other popular movements. So pressure will be such that you will be bound to acknowledge at some stage that a different approach is needed.

Now I come to my third point. If we take UNDP data and World Bank data, then we need an extra US$ 80 billion over a period of ten years if we are to see all the populations of the whole world access a range of basic services.

Let us do some simple arithmetic. In terms of external public debt, the Third World countries refund 3 times this amount a year. I am not talking about the whole debt, I am talking about the official, government debts. They reimburse between $220 and $240 billion a year.

Another comparison: $80 billion represents 1/5 of the overall US military budget. It is 8% of what is spent on advertising. It is half of the total fortunes of the four richest people on earth. It is 0.3% of the total fortunes of all the millionaires on this planet, who account for less than 0.1% of the world’s population.

In other words, if you need money, these are a few avenues that could be explored. Take the money where it is.

I remember being amazed to read in a 1994 World Bank document something to the effect of: “This is great, the poor are willing to pay taxes...whereas the rich do not like paying taxes.” And the conclusion that the Bank drew was that the poor should be paying taxes because they are willing to pay them, and we should not charge taxes to the rich.

But this changing situation means that a system of progressive taxation will be set up and put into practice by the citizens’ movements that are pressing for it.

And finally, let us look at this chart.

On the white column on the left-hand side here, you have the deposits in Northern banks made by residents of indebted countries. The source of this information is the Bank of International Settlements. So these are Southern nationals depositing money in Northern banks. We are not talking about the poor, we are talking about capitalists living in the South who deposit US$ 1,470 billion (US$ 1,470,000,000,000) in cash in banks located in the North. On the white column, you see 700, that is US$ 700 billion. These are the credits made by the Northern banks to Southern countries, which means that Southern countries are net creditors (net lenders too) and not the reverse. This means that there is a lot of money hidden in the North that none of you mention. At the Bank they do not deem it necessary to investigate capital flows and how to get our hands on this capital.

After 13 years of legal proceedings against the Marcos family initiated by the authorities of the Philippines in the late ’Eighties after the overthrow of the Marcos dictatorship, Switzerland sent $500 million back to the Philippines. That was last year. Money taken by Fujimori and Montesino was returned to Peru by Switzerland; some money was returned to Mexico. What would be the outcome if we were to actually support investigations aimed at locating the exact origin of the money deposited on Northern bank accounts, and if money that had been illicitly acquired was reprocessed and given back to Southern populations through development funds, managed by Southern populations?

In short, the money must be taken from those who have it - the super-rich - and returned to the people of the South. Far-reaching measures must be taken to redistribute wealth fairly.

It is only by applying such measures and abandoning the Washington Consensus that the Millennium Goals have any hope of being reached.


[1This is the edited version of Eric Toussaint’s contribution to the Debate: On Track? Derailed? Other Voices for Other Routes. Chair: Patrice BARRAT, The Bridge Initiative on Globalization. Panelists: Eric TOUSSAINT, President, Committee for the Abolition of Third World Debt; Christophe AGUITON, Militant ATTAC; Augusto LOPEZ-CLAROS, Chief Economist, World Economic Forum; Uri DADUSH, Director, Development Prospects Group, World Bank. On the World Bank site

[2See the World Bank’s declaration on the resignation of Ravi Kanbur in June 2000:

[3The Millennium Goals aim to reduce poverty by 2015, in eight areas going from monetary poverty to health and education to access to decent nutrition. See Who Owes Who? 50 Questions on Third World Debt, by Damien Millet and Eric Toussaint, Zedbooks, London, 2004, The Debt Scam, by the same authors, VAK, Mumbai, 2003.

[4The complete report is available on internet :

[5Net transfer on debt is the difference between debt servicing (annual repayments of interest plus principal to the industrialised countries) and the loans received over the same period. Net transfer on debt is said to be positive when the country or continent concerned receives more (in loans) than it repays. It is said to be negative when the amount repaid is greater than the amount lent to the country or continent concerned. Net transfer on debt has been negative since 1997 for the developing countries taken as a whole. For Latin America and the Caribbean, it has been negative since 1996.

[6Hollis Chenery was Chief Economist at the World Bank from 1970 to 1982 during the mandate of Robert McNamara, president of the World Bank from 1968 to 1981.

Eric Toussaint

is a historian and political scientist who completed his Ph.D. at the universities of Paris VIII and Liège, is the spokesperson of the CADTM International, and sits on the Scientific Council of ATTAC France.
He is the author of Debt System (Haymarket books, Chicago, 2019), Bankocracy (2015); The Life and Crimes of an Exemplary Man (2014); Glance in the Rear View Mirror. Neoliberal Ideology From its Origins to the Present, Haymarket books, Chicago, 2012 (see here), etc.
See his bibliography:
He co-authored World debt figures 2015 with Pierre Gottiniaux, Daniel Munevar and Antonio Sanabria (2015); and with Damien Millet Debt, the IMF, and the World Bank: Sixty Questions, Sixty Answers, Monthly Review Books, New York, 2010. He was the scientific coordinator of the Greek Truth Commission on Public Debt from April 2015 to November 2015.



35 rue Fabry
4000 - Liège- Belgique

00324 226 62 85