Series: 1944-2024, 80 years of interference from the World Bank and the IMF, that’s enough !

Early conflicts between the UN and the World Bank/IMF tandem

24 January by Eric Toussaint


In July 2024, the World Bank and the IMF will be 80 years old. 80 years of financial neo-colonialism and the imposition of austerity policies in the name of debt repayment. 80 years is enough! The Bretton Woods institutions must be abolished and replaced by democratic institutions serving an ecological, feminist and anti-racist bifurcation. To mark these 80 years, we are republishing a series of articles every Wednesday until July, looking in detail at the history and damage caused by these two institutions.

In March 1946, on the occasion of the first meeting of the governors of the 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.

and the IMF 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.
, the president of the Economic and Social Council of the United Nations [1] (known by the acronym ECOSOC) handed a letter to the directors of the World Bank asking it to set up liaison facilities with its organization. The Bank postponed discussion of this issue until the executive directors’ meeting to be held in May 1946.

In fact, the Bank dragged its feet so successfully that it was only in November 1947 that an agreement between the two parties was found. According to Mason and Asher, the Bank’s historians, the negotiations were not particularly cordial [2]. The first letter from ECOSOC having gone unanswered, a second letter was sent, to which the executive directors of the Bank replied that, in their view, a meeting on the subject would be premature. Meanwhile, the United Nations had already signed cooperation agreements with the International Labour Organization, UNESCO and the FAO.

In July 1946 a third attempt was made when the UN Secretary General proposed that the Bank and the IMF begin negotiations in September 1946. The directors of the IMF and the World Bank subsequently met and decided that such a meeting was still not timely. This is what Mason and Asher had to say about these stalling tactics: “The Bank was very fearfull that becoming a specialized agency of the UN would subject it to undesirable political control or influence and hurt its credit rating in Wall Street …” [3]. The Bank finally adopted a draft text to be submitted for discussion with the United Nations; this text was more a declaration of independence than a declaration of cooperation. Then followed a day of discussions at UN headquarters, during which the Bank’s president, John J. McCloy, agreed to exercise a little more moderation.

The resulting agreement was accepted by ECOSOC’s negotiating committee, but it raised a furore within ECOSOC itself and at its General Assembly. During ECOSOC’s 1947 session, the Soviet Union delegate described the draft agreement as a flagrant violation of at least four articles of the UN Charter. Even more embarassing for the Bank’s directors, and obliquely, for the United States, was the attack led by the delegate from Norway (the native country of the current UN secretary general, Trygve Lie). He declared that Norway could not tolerate such privileges being granted to the Bank and the IMF, because it would undermine UN authority. To which the United States delegate retorted that nothing would undermine UN authority more than the impossibility of its coming to an agreement with the Bank and the IMF. Finally, ECOSOC adopted (13 for, 3 against and 2 abstentions) the draft text which was ratified in September 1947 by the Bank’s governing council (the governor representing Yugoslavia abstained). The agreement was approved by the UN General Assembly in November 1947.

This agreement ratified the Bank’s status as a UN specialized agency, but, at the Bank’s request, allowed it to operate as an “independent international organization”. Following the same line, it authorized the Bank to use its own judgment as to what information could be usefully communicated to ECOSOC, which constituted a departure from article 17, paragraph 3 and article 64 of the United Nations Charter (article 64 gives ECOSOC the right to obtain regular reports from specialized agencies). It was also a departure from article 70, which allows for reciprocal representation at each deliberation. Yet in spite of this, the Bank and the IMF reserved the right to invite UN representatives only to the meeting of the Governing Council. In reviewing these events, the Bank’s historians declare that this agreement was considered unsatisfactory by the United Nations secretariat, but that it felt obliged to accept it. They go on to say that the Bank’s president, “McCloy, could not be classified as a admirer of the United Nations, and Garner (the Bank’s vice president) was considered anti-UN” [4].

The World Bank’s refusal to comply with UN demands concerning Portugal and South Africa

From 1961, when most colonial countries had won their independence and become UN members, the General Assembly on several occasions adopted resolutions condemning the apartheid regime in South Africa and Portugal’s iron dominance over several African and Asian countries. In 1965, in view of the continued financial support of the Bank and the IMF for these regimes, the UN made a formal demand: “To all the specialized agencies of the United Nations, and in particular the International Bank for Reconstruction and Development and the International Monetary Fund (…) to refrain from granting Portugal any financial, economic or technical assistance so long as the Portuguese Government fails to renounce its colonial policy, which constitutes a flagrant violation of the provisions of the Charter of The United Nations” [5]. It issued a similar demand concerning South Africa.

The Bank’s directors met to take position and a majority of executive directors decided to continue making loans. To justify this decision, they invoked article 4, section 10 of the Bank’s statutes [6] which forbid political involvement! All the most industrialized countries, backed by a certain number of Latin-American countries, voted to continue the loans. In 1966, the Bank approved a 10 million dollar loan to Portugal and a 20 million dollar loan to South Africa. Subsequently, under further pressure, the Bank stopped making new loans to these countries. However, a UN structure, the Decolonization Committee, continued for 15 years to denounce the fact that the Bank allowed South Africa and Portugal to apply for World Bank financing for projects in other countries. In addition, the Bank sought the favours of South Africa to obtain donations to IDA [7]

Translated by Judith Harris.


[1The Economic and Social Council of the United Nations makes recommendations with a view to coordinating the programmes and activities of the specialized institutions of the UN (article 58 of the United Nations Charter). To this end, ECOSOC enjoys powers which are granted to it by virtue of the terms of Chapter X of the Charter. Article 62 paragraph 1 thus states: “The Economic and Social Council may make or initiate studies and reports with respect to international economic, social, cultural, educational, health, and related matters and may make recommendations with respect to any such matters to the General Assembly, to the Members of the United Nations, and to the specialized agencies concerned.”

[2Mason Edward S. and Asher, Robert E. 1973. The World Bank since Bretton Woods, The Brookings Institution, Washington, D.C., p.55.

[3Idem, p.56.

[4Ibid., p.59.

[5UN Doc. A/AC.109/124 and Corr. 1 (June 10, 1965).

[6Article IV, section 10 stipulates : “The Bank and its officers shall not interfere in the political affairs of any member; nor shall they be influenced in their decisions by the political character of the member or members concerned. Only economic considerations shall be relevant to their decisions, and these considerations shall be weighed impartially in order to achieve the purposes (set by the Bank) stated in Article I ”.

[7Kapur, Devesh, Lewis, John P., Webb, Richard. 1997. The World Bank, Its First Half Century, Volume 1, p. 692

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 Greece 2015: there was an alternative. London: Resistance Books / IIRE / CADTM, 2020 , 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, 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.

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