The IMF and the World Bank: It’s time to replace them

4 October 2013 by Eric Toussaint


In 2014, the World Bank and the IMF will turn 70, and in October 2013, they will hold their usual annual meeting in Washington. Many organisations, including the CADTM, are joining together to call for a worldwide week of action against illegitimate debt and international financial institutions, from 8 to 15 October 2013. This article assesses the performance of the IMF and the World Bank, and offers ideas for a new international financial system.

Build a new international financial system

Paths must be chosen that radically redefine the foundations of the international financial system (its missions, operations, and so on.) Let us consider the example of the WTO, the IMF, and the World Bank.

In terms of trade, the new WTO should work to have a series of fundamental international agreements adopted, based on the Universal Declaration of Human Rights and all the fundamental treaties concerning human rights (individual or collective) and environmental rights. Its function would be to supervise and regulate trade so that it would strictly comply with social (International Labour Organisation – ILO conventions) and environmental standards. Such a definition is in direct contradiction with the WTO’s current goals. This obviously implies a strict separation of powers. It is out of the question for the WTO, or for that matter any other organisation, to have its own tribunal. Therefore, the Dispute Settlement System must be eliminated.

The organisation that could replace the World Bank should be highly regionalised (banks in the South could be brought together within it). Its role would be to supply loans with very low or no 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. and grants, which could only be given on condition that they be used in strict adherence to social and environmental standards, and more generally, respect of fundamental human rights. Unlike the current World Bank, this new bank which the world needs would not seek to defend the interests of creditors, while forcing debtors to submit to an all-powerful market. Its primary mission would be to defend the interests of the people who receive the loans and grants.

Meanwhile, the new IMF, should recover part of its original mandate to guarantee currency stability, fight speculation, keep watch over movements of capital, and act to prohibit tax havens and tax evasion. To attain this goal, it could assist in the collection of various international taxes by working with national authorities and regional monetary funds.

All these solutions require the development of a coherent international financial system that is hierarchical and has an internal division of powers. The UN could be its cornerstone, provided that its General Assembly becomes the actual decision-making body – which implies eliminating the status of permanent member of the Security Council (and the associated veto power). The General Assembly could delegate specific missions to ad hoc entities.

Another issue that has not yet been sufficiently investigated is that of an international legal mechanism, an international judicial power (independent of the other international bodies) which would complement the existing system, mainly made up of the International Court of Justice in The Hague, and the International Criminal Court. With the neoliberal offensive of the past thirty years, trade law has increasingly overshadowed public law. International institutions like the WTO and the World Bank operate with their own tribunals – the Dispute Settlement System within the WTO and the ICSID ICSID The International Centre for the Settlement of Investment Disputes (ICSID) is a World Bank arbitration mechanism for resolving disputes that may arise between States and foreign investors. It was established in 1965 when the Washington Convention of that year entered into force.

Contrary to some opinions defending the fact that ICSID mechanism has been widely accepted in the American hemisphere, many States in the region continue to keep their distance: Canada, Cuba, Mexico and Dominican Republic are not party to the Convention. In the case of Mexico, this attitude is rated by specialists as “wise and rebellious”. We must also recall that the following Caribbean States remain outside the ICSID jurisdiction: Antigua and Barbuda, Belize, Dominica (Commonwealth of) and Suriname. In South America, Brazil has not ratified (or even signed) the ICSID convention and the 6th most powerful world economy seems to show no special interest in doing so.

In the case of Costa Rica, access to ICSID system is extremely interesting: Costa Rica signed the ICSID Convention in September, 1981 but didn’t ratify it until 12 years later, in 1993. We read in a memorandum of GCAB (Global Committee of Argentina Bondholders) that Costa Rica`s decision resulted from direct United States pressure due to the Santa Elena expropriation case, which was decided in 2000 :
"In the 1990s, following the expropriation of property owned allegedly by an American investor, Costa Rica refused to submit the dispute to ICSID arbitration. The American investor invoked the Helms Amendment and delayed a $ 175 million loan from the Inter-American Development Bank to Costa Rica. Costa Rica consented to the ICSID proceedings, and the American investor ultimately recovered U.S. $ 16 million”.

https://icsid.worldbank.org/apps/ICSIDWEB/Pages/default.aspx
within the World Bank, whose role has increased out of all proportion. The UN’s Charter is regularly violated by permanent members of its own Security Council. New zones outside the rule of law have been created (Guantánamo, where the USA denies its prisoners all legal rights). The United States, after having condemned the International Court of Justice in The Hague (where they had been convicted in 1985 of aggression against Nicaragua), refuses to recognise the International Criminal Court. All this is grounds for great concern, and means that initiatives must be taken immediately to bolster an international judicial body.

In the meantime, institutions like the World Bank and the IMF must be held accountable for their actions before national jurisdictions [1], the debts they are trying to collect must be cancelled, and action must be taken to prevent the harmful policies they recommend or impose from being applied.

Translated by Judith Harris, Snake Arbusto and Charles La Via




Éric Toussaint, doctor of political science, is president of the CADTM Belgium (Committee for the Abolition of Third World Debt, www.cadtm.org). He is the author of The World Bank : A critical Primer, London, Pluto Press, 2008, http://cadtm.org/The-World-Bank-A-critical-Primer
His latest book is Procès d’un homme exemplaire (The Trial of an Exemplary Man), Édition Al Dante, Marseille, September 2013. He is co-author with Damien Millet of Debt, the IMF, and the World Bank: Sixty Questions, Sixty Answers, Monthly Press, New York, 2010 http://cadtm.org/Debt-the-IMF-and-the-World-Bank); La dette ou la vie (Debt or Life?) co-published by CADTM- Aden, Liège-Brussels, 2011. Prix du Livre Politique awarded by the Foire du Livre Politique in Liège http://www.cadtm.org/The-CADTM-recoit-the-prix-of%20the-livre

See also Eric Toussaint, doctoral thesis in political science, presented in 2004 at the Universities of Liège and Paris VIII: “Enjeux politiques de l’action de la Banque mondiale et du Fonds monétaire international envers le tiers-monde” (“Political aspects of the World Bank and the International Monetary Fund actions toward the Third World”), http://cadtm.org/Enjeux-politiques-de-l-action-de

Footnotes

[1As of today, there is still no competent international jurisdiction for trying the crimes of the World Bank and the IMF.

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: https://en.wikipedia.org/wiki/%C3%89ric_Toussaint
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.

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