The IMF dictates more than ever

12 February 2011 by Jérôme Duval

As an instrument of the big creditors, the IMF tramples on basic human rights to enforce neoliberal policy in the North and in the South

The superpowers have used the current crisis to move 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.
(IMF) back into the center of politics. Its legitimation has fallen intensely for years. Together with the European Union, the IMF enforces its austerity policy in Europe and in the South. The IMF is ready to carry out its goals even against resistance and single-mindedly pursues the same neoliberal policy implemented since the 1980s with its “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).

programs” in developing countries. In the North these programs are called the “austerity course” or “austerity measures.” The IMF increases the pressure by blocking its credits - irrespective of the resulting social consequences – in the case of refusal or disobedience as in 2001 in Argentina or in 2009 in the Ukraine and Rumania. This happens although the blatant failures of this policy have often been documented. Everywhere the gulf between poor and rich deepens and poverty increases.

If one sees the IMF’s goal as serving the world of finance, one finds meaning in actions that otherwise seem contradictory and intellectually disconnected.
Joseph Stiglitz, Nobel Prize winner in economics 2001. “The Shadows of Globalization” (2002)

Since its genesis, the IMF was controlled by the superpowers

Both the IMF and its twin institution 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.

saw the light of day at Bretton Woods (Massachusetts) in July 1944. Today there are 186 member states in these two organizations with their headquarters only a stone’s throw from each other near the White House in Washington. Their neighborhood is ideological, not merely geographic. Both support the famous Washington Consensus whose ten commandments are prescribed as return favors for credits of all heavily-indebted countries through structural adjustment programs. The rule “one dollar, one vote” according to which they operate enables the rich countries to control the two powerful institutions, especially the US, the only country with a blocking minority. According to a silent rule, the post of IMF general director elected for five years is reserved for a European while the post of general director of the World Bank is reserved for an American.

1982: the debt crisis erupts

On August 20, 1982 the debt crisis erupted when Mexico could not pay its colossal debt burden as the first country in a long list of developing countries. The IMF appeared as a creditor and final authority. Like an arsonist, the IMF distributes its credits to bankrupt countries with the goal of first repaying the creditors, not rescuing the debt-heavy population. The credits are tied to a structural adjustment program burdening countries with structural measures and shock measures, massive privatizations, liberalization of the economy and opening markets, drastic cuts in the social budgets, subsidy reductions for basic products, development of monocultures for export at the expense of growing foods and higher interests for capital. As Michel Camdessus, general director of the IMF from 1987 to 2000, predicted: “All the fetters that restrict liberalization of trade are removed so businesses have the freedom to produce and export their goods according to their own desires and the decisions of the market.”

The affected countries become heavily indebted to pay off their earlier credits, this time at a higher 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. rate… The subtle mechanism of an economic neocolonialism is permanently established. The debt service Debt service The sum of the interests and the amortization of the capital borrowed. fattens creditors. Policy is controlled by Washington. There is no state independence any more. The international financial institutions force through the will of the creditors and opens countries really run by the IMF, the multinational corporations mainly located in the North. As an example of the omnipotence of the IMF, we recall that Brazilian president Lula was obligated in writing to respect the agreements between Brazil and the IMF before assuming office in 2002. His economic policy had to follow the very dubious directions of the IMF. Continuing the budget restrictions to 2005 was fixed contractually with his predecessor president Cardosa. Who won the 2002 election was not important.

Many developing countries that were independent in food production at the start of the 1980s import the food necessary for their population today. The subsidized agriculture of western countries has flooded the countries of the South, ruined tens of thousands of farmer families and driven them from their land to the slums. Senegal must import all the ingredients for the national “Yassa-chicken.” Haiti imports the rice that it once cultivated for feeding its population. When speculators attack these products on the Chicago exchange as in 2008, the prices on the local markets explode and dozens of countries experience dramatic famines.

Protest expands

The resistance against the ultra-liberal experts has multiplied in the last 25 years as a direct consequence of the removal of subsidies for basic foodstuffs ordered by the IMF. “IMF-rebellions break ou9t at regular intervals in the South. Peru is an example. Over night, the price of bread soared twelve-fold. Because of the 1989 enforcement of a structural adjustment program in Caracas, Venezuela, the three-day national uprising led to a large number of deaths.

In the face of the unpopularity of the conditions tied to the awarding of credits, different countries (Brazil, Argentina, Uruguay, Indonesia, the Philippines and Turkey) repaid their debts to the IMF in the middle of this decade earlier than arranged to free themselves from the annoying subordination under the IMF. Borrowing from the IMF melted away. In the spring of 2008, the institution had to release 380 of its 2634 workers and sold part of its gold reserves. In addition, the institution fell into a grave legitimation crisis. The last three directors of the IMF resigned before the end of their term in office.

The IMF and the crisis

As a result of the G20 G20 The Group of Twenty (G20 or G-20) is a group made up of nineteen countries and the European Union whose ministers, central-bank directors and heads of state meet regularly. It was created in 1999 after the series of financial crises in the 1990s. Its aim is to encourage international consultation on the principle of broadening dialogue in keeping with the growing economic importance of a certain number of countries. Its members are Argentina, Australia, Brazil, Canada, China, France, Germany, Italy, India, Indonesia, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, USA, UK and the European Union (represented by the presidents of the Council and of the European Central Bank). summit in London on April 2, 2009, the funds of the IMF were tripled so it could expand its credit awards in all directions. The conditions are severe everywhere: wage cuts or freezing wages for state workers, pension cuts, privatization of enterprises in public authority etc.

In less than a year, dozens of Eastern European countries negotiated a credit framework with the IMF. When Latvia wanted financial assistance from the IMF and the EU, it had to cut public service salaries 20% and pensions 10%. This policy provokes reactions in the population who take to the streets. One general strike in Greece follows the next. There are teacher demonstrations in Latvia and protests of public service workers in Rumania. Over 90% of all Icelanders refuse to pay back the debts that they consider illegal as a consequence of a referendum.

John Lipsky, Number 2 at the IMF and former top executive of the JP Morgan bank, told developed countries that they should prepare public opinion for the coming austerity measures and reductions in subsidies for health care and pension cuts (Reuters, March 21, 2010).

If people do not resist resolutely and immediately the exactions of the IMF and the governments of the North serving the financial markets, devastating social dislocations will occur. It is high time to prevent this.

This article published April 6, 2010 is translated from the German on the Internet,

Jérôme Duval

member of CADTM network and member of the Spanish Citizen’s Debt Audit Platform (PACD) in Spain ( He is the author, with Fátima Martín, of the book Construcción europea al servicio de los mercados financieros (Icaria editorial, Barcelona 2016) and he also co-authored La Dette ou la Vie (Aden-CADTM, 2011), which received the award for best political book in Liège (Belgium) in 2011.




8 rue Jonfosse
4000 - Liège- Belgique

00324 60 97 96 80