Committee for the Abolition of Illegitimate Debt

Toussaint begins the book with a history of the bank’s founding at the Bretton Woods conference and the evolution of its operations over time. Among the interesting details brought to light are the negotiations over the placement of the WB World Bank
WB 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.

(New York or Washington?). There is much here to outrage even the most jaded of WB critics. An outstanding example of this is the detail Toussaint provides of how the WB transferred debts from the colonial powers that took out loans for the purpose of exploiting their colonies to those colonies once they gained independence. The contrast he provides of the
WB’s treatment of Chile under Allende and Romania under Ceaucescu is telling. Romania was given loans after Ceaucescu distanced Romania from the Warsaw Pact Warsaw Pact A military pact between the countries of the former Soviet Bloc (USSR, Albania, Bulgaria, Hungary, Poland, the German Democratic Republic, Rumania, Czechoslovakia). It was signed in Warsaw in May 1955, as a reaction to the Federal German Republic joining NATO. Albania withdrew in 1968 after Soviet intervention in Czechoslovakia. After the dislocation of the USSR, the Pact’s military organization was dissolved in April 1991. after its invasion of Czechoslovakia in 1968, while Chile was cut out of any WB programs until after Pinochet’s coup. According to legend this dichotomy brought a WB Vice President to ask whether Allende’s Chile had not been socialist enough.

He then presents a series of case studies that capture the main critiques he makes against the bank. In the context of the WB’s support for dictators he discusses Brazil, Nicaragua and Zaire in addition to Chile and Romania. Ensuing chapters include even more detailed evidence of the WB’s support for dictators in the Philippines, Turkey, and Indonesia. Moving on to analyze the Bank’s evolving theories of development, Toussaint contrasts the path to development espoused by WB economists with that actually undertaken by South Korea’s military dictatorships, with full, if reluctant, WB support. This is followed by a critical review of the bank’s role in the lead-up and reaction to the Debt Crisis of the 1980s. This role can be summarized as looking the other way as the crisis was building, and then using the crisis to impose its own orthodoxy on wayward Mexico and many other countries. This part of the narrative will not be news to most readers, though here too, interesting details come to light. Many of these may not be as widely known, such as the imposed socialization of much of the private debt in many debtor countries as part of the Structural Adjustment Structural Adjustment Economic policies imposed by the IMF in exchange of new loans or the rescheduling of old loans.

Structural Adjustments policies were enforced in the early 1980 to qualify countries for new loans or for debt rescheduling by the IMF and the World Bank. The requested kind of adjustment aims at ensuring that the country can again service its external debt. Structural adjustment usually combines the following elements : devaluation of the national currency (in order to bring down the prices of exported goods and attract strong currencies), rise in interest rates (in order to attract international capital), reduction of public expenditure (’streamlining’ of public services staff, reduction of budgets devoted to education and the health sector, etc.), massive privatisations, reduction of public subsidies to some companies or products, freezing of salaries (to avoid inflation as a consequence of deflation). These SAPs have not only substantially contributed to higher and higher levels of indebtedness in the affected countries ; they have simultaneously led to higher prices (because of a high VAT rate and of the free market prices) and to a dramatic fall in the income of local populations (as a consequence of rising unemployment and of the dismantling of public services, among other factors).

IMF : http://www.worldbank.org/ Program (SAP). Of course, as the disastrous consequences of the Debt Crisis and SAPs unfolded throughout the 1980s and 1990s, criticism of and resistance to the WB and 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.

http://imf.org ’s (IMF) policies grew around the world.

The World Bank has made gestures towards reform as a reaction to these criticisms and Toussaint devotes some space to detailing the shortcomings of these. The Highly Indebted Poor Countries (HIPC Heavily Indebted Poor Countries
HIPC 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. ) initiative had been meant to fully relieve the debt burdens of the forty poorest debtor countries, concentrated in Africa. By 2005, it had helped eighteen countries reduce their debt in exchange for imposing the same policies designed to privilege foreign investors at the expense of domestic taxpayers. He briefly describes the replace for the SAP loans, the Poverty Reduction Strategy Paper Poverty Reduction Strategy Paper
PRSP Set up by the World Bank and the IMF in 1999, the PRSP was officially designed to fight poverty. In fact, it turns out to be an even more virulent version of the structural adjustment policies in disguise, to try and win the approval and legitimation of the social participants. , as SAPs with civil society window-dressing. More detail here would have been worthwhile.

The final section provides both the legal justification for bringing suit against the WB and the indictment. Toussaint lays out the legal framework under which the WB could be sued as well as the reasons for doing so. The indictment is sweeping and well supported by the research in the earlier sections of the book. A legal offensive is an interesting strategy for taking on the WB, and may be feasible on the merits, but the case isn’t made how and why this strategy would be effective. Supplemental material includes a useful fact sheet about the WB, an interview with the author taken since the original publication, and a comprehensive glossary.

The book’s greatest weakness is the translation. Overall, the translation was rather choppy, so that in some instances a sentence says the opposite of what would have seemed the natural meaning, or in other instances is simply factually wrong (as in the passage that says that the U.S. Air Force mined Nicaragua’s harbors, when by most accounts the C.I.A. was responsible). This leaves the reader wondering if the argument, in some places weak or missing pieces, is not in actuality compelling and complete in the original. Another weakness of the book is that the argument was polemical in places where it need not have been. The author clearly grasps the details of the topics, but in some instances ends the discussion with a bald assertion, rather than by marshaling the evidence he clearly has at hand. Finally, there is a way in which Toussaint wants to have it both ways. On the one hand, the WB, when it gets involved with a country, is a force for U.S. and, more generally Northern economic interests at the expense of the interests of the people of the country in question. On the other hand, the WB discriminates against countries that are opposed to the political and economic agenda of the United States. For the latter argument to hold any weight in light of the proof provided for the former, Toussaint needs to provide some context in which the World Bank’s involvement has positive effects, otherwise, shouldn’t we be happy for those countries that ’suffer’ from the WB’s benign neglect? Toussaint may well be able to make this argument, but it is left out of the book.

Overall, this book provides an excellent review of the Bank and its associated agencies in the broader context of the evolution of the Bretton Woods institutions, the United Nations and the international economy. It also lays out a comprehensive institutional history of the World Bank, drawing heavily on World Bank sources as well as critical studies of its operations. This is a well-researched book that includes such a wealth of information and detail that even those who are relatively well-informed of the Bank’s operations will find some new information here. It will serve as a useful source of information for activists struggling to reform or replace the international financial institutions and will be a valuable guide for those who wish to pursue a legal strategy.