Series: 1944-2020, 76 years of interference from the World Bank and the IMF (Part 1)

The World Bank: an ABC

3 February 2020 by CADTM

In 2020, the World Bank (WB) and the IMF are 76 years old. These two international financial institutions (IFI), founded in 1944, are dominated by the USA and a few allied major powers who work to generalize policies that run counter the interests of the world’s populations.

The WB and the IMF have systematically made loans to States as a means of influencing their policies. Foreign indebtedness has been and continues to be used as an instrument for subordinating the borrowers. Since their creation, the IMF and the WB have violated international pacts on human rights and have no qualms about supporting dictatorships.

A new form of decolonization is urgently required to get out of the predicament in which the IFI and their main stakeholders have entrapped the world in general. New international institutions must be established. This new series of articles by Éric Toussaint retraces the development of the World Bank and the IMF since they were founded in 1944. The articles are taken from the book The World Bank: a never-ending coup d’état. The hidden agenda of the Washington Consensus, Mumbai: Vikas Adhyayan Kendra, 2007, or The World Bank : A critical Primer, Pluto, 2007.

By way of introduction to this series, we first propose two collective papers by the CADTM: The World Bank: an ABC and The IMF: an ABC.

  1. The World Bank: an ABC
  2. The International Monetary Fund (IMF): an ABC
  3. Concerning the founding of the Bretton Woods’ Institutions
  4. The WB assists those in power in a witch-hunting context
  5. Early conflicts between the UN and the World Bank/IMF tandem
  6. SUNFED versus World Bank
  7. Why the Marshall Plan ?
  8. Why the 1953 cancellation of German debt won’t be reproduced for Greece and Developing Countries
  9. Domination of the United States on the World Bank
  10. World Bank and IMF support to dictatorships
  11. The World Bank and the Philippines
  12. The World Bank’s support of the dictatorship in Turkey (1980-1983)
  13. The World Bank and the IMF in Indonesia: an emblematic interference
  14. Theoretical lies of the World Bank
  15. The South Korean miracle is exposed
  16. The debt trap
  17. The World Bank saw the debt crisis looming
  18. The Mexican debt crisis and the World Bank
  19. The World Bank and the IMF: the creditors’ bailiffs
  20. Presidents Barber Conable and Lewis Preston (1986-1995)
  21. James Wolfensohn switches on the charm (1995-2005)
  22. The Meltzer Commission on the IFI at the US Congress in 2000
  23. The World Bank’s accounts
  24. From Paul Wolfowitz (2005-2007) to David Malpass (2019-...): the US President’s men control the World Bank
  25. World Bank and IMF: 76 Years is Enough! Abolition!
  26. The World Bank, the IMF and the respect of human rights
  27. The IMF and the World Bank in the time of Coronavirus: the failed campaign for a new image
  28. The World Bank did not Foresee the Arab Spring Popular Uprisings and still Promotes the very same Policies that triggered them

What we call World Bank actually covers two bodies, the International Bank for Reconstruction and Development (IBRD) and the international Development Association (IDA). 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.

is a sub-section in the World Bank Group that includes three more bodies: the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA) and the International Centre for Settlement of Investment Disputes (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”.
). Let see what is hiding behind those names and acronyms.

The International Bank for Reconstruction and Development (IBRD) was created at Bretton Woods (USA) in July 1944, by 45 countries that had met for the first UN monetary and financial conference. In 2019, it consists of 189 member countries, Nauru is the the most recent new member (since April 2016). [1]

Its initial objectives were to provide public money for the reconstruction of Western Europe after World War II, be a reliable ally of Washington and to buy goods produced by US companies. Later it turned to financing the development of countries of the South, playing the part of “a vital source of financial and technical assistance to developing countries” according to its own word. [2] The financing choices are in fact very selective and questionable.

Four other bodies were created to become the “World Bank Group”; they are assigned the following missions:

  • 1956: The International Finance Corporation (IFC): financing the private sector in the South;
  • 1960: The International Development Association (IDA).: Lends to the poorest countries;
  • 1966: International Centre for Settlement of Investment Disputes (ICSID: supranational tribunal where a corporations may take legal proceedings against a State if it considers that a decision is unfavourable;
  • 1988: The Multilateral Investment Guarantee Agency (MIGA): Guaranties the interests of private companies in the Southern countries.

Henceforth, mention of the World Bank in these articles will include IBRD and IDA.

 An undemocratic leadership

Each of the member countries names a Governor, usually its finance Minister. They meet as the Board of Governors, the senior decision making body, once a year (in autumn, two years on three in Washington) to set the main policies. The board makes the important decisions (admitting new members, preparing the budget, etc.). Also, the spring reunion in Washington (in common with 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.
) assesses the action of the World Bank and IMF.

For the day-to-day management of World Bank missions, the board of Governors delegates its authority to 25 Executive Directors. Eight countries, USA, Japan, Germany, France, UK, Saudi Arabia, China and Russia, name their own Executive Directors. The other seventeen Directors are appointed by seventeen surprisingly heterogeneous groups of countries: A rich country is grouped with Southern countries and of course it is the rich country that names the Executive Director to represent the whole group.

The Executive Directors normally meet three times a week and their meetings are chaired by a president elected for 5 years. Contrary to all democratic principles it is understood that the post is reserved for a US representative chosen by the President of the United States. The Executive Directors do no more than rubber stamp the choice.

The connivance between business, US big capital and the World Bank is immediately perceptible when we become aware of where all the thirteen US citizens who have succeeded each other at the post have come from.

Eugene Meyer, the first President lasted no longer than eight months. He was editor of the Washington Post and was formerly tied to Lazard Frères. The second, John J. McCloy, was a big corporate lawyer well established on Wall St. He went on to be American High Commissioner for occupied Germany and Chairman of the Chase Manhattan Bank. The third, Eugene R. Black, was Vice President of Chase National Bank and went on to be special advisor to President Lyndon B Johnson. The fourth, George D. Woods, also a banker, was President of the First Boston Corporation. Robert S. McNamara had been the CEO of the Ford motor company, then defense secretary for Kennedy and Johnson. His successor, Alden W. Clausen, afterwards became President of the Bank of America (one of the US’s biggest banks, highly involved in the Third World debt crisis). In 1986 the post went to Barber Conable, former Republican member of Congress, then in 1991 to Lewis T. Preston, former president of the executive committee of JP Morgan. Between 1995 and 2005, the ninth President of the World Bank was J.D. Wolfensohn, former director of the investment banking section of Salomon Brothers in New York. After leaving the World Bank, in March 2005, he joined Citibank-Citigroup, one of the world’s biggest banks. Paul Wolfowitz, former number 2 at the Pentagon was involved in the 2003 invasion of Iraq by a coalition under US orders. Paul Wolfowitz was forced to resign over questions concerning his influence on the career of his girlfriend, who was also on the World Bank payroll. He was replaced by Robert Zoellick, who had been White House Deputy Chief of Staff under G. Bush Sr. United States Trade Representative, Deputy Secretary of State, and having worked for Goldman Sachs, he was heavily involved in the July 2007 subprimes crisis. From 2012 to 2019, Jim Yong Kim, also a US citizen, was at the head of the World Bank before resigning to join a private investment fund Investment fund
Investment funds
Private equity investment funds (sometimes called ’mutual funds’ seek to invest in companies according to certain criteria; of which they most often are specialized: capital-risk, capital development funds, leveraged buy-out (LBO), which reflect the different levels of the company’s maturity.
. David Malpass has officially headed the World Bank since April 2019. Malpass worked for the US Treasury Department and the State Department under Ronald Reagan before becoming Chief Economist at the big investment bank Bears Stearn up to its failure in 2008 as a consequence of its role in creating the subprimes’ speculative bubble Speculative bubble An economic, financial or speculative bubble is formed when the level of trading-prices on a market (financial assets market, currency-exchange market, property market, raw materials market, etc.) settles well above the intrinsic (or fundamental) financial value of the goods or assets being exchanged. In such a situation, prices diverge from the usual economic valuation under the influence of buyers’ beliefs. ! In August 2007, Malpass published an article in the Wall St. Journal reassuring readers on the well-being of the financial markets, going so far as to claim that “Housing and debt markets are not that big a part of the U.S. economy, or of job creation”. In May 2016 he joined the Donald Trump election campaign. He was rewarded by being given the posts of Under Secretary of the Treasury for International Affairs and then President of the World Bank.

The 13 Presidents of the World Bank since 1946

Name Period in office Antecedents
Eugene Meyer June 1946 - December 1946 Wall St. investment banker and editor of the Washington Post
John McCloy March 1947 - June 1949 Director of the Chase National Bank (which became Chase Manhattan)
Eugene Black July 1949 - December 1962 Vice-President of the Chase Manhattan Bank
George Woods January 1963 - March 1968 President of the First Boston
Robert McNamara April 1968 - June 1981 CEO of the Ford motor company and defense secretary for Kennedy and Johnson
Alden Clausen July 1981- June 1986 President of the Bank of America
Barber Conable July 1986 - August 1991 Congressman member of the Banking Commission
Lewis Preston September 1991- May 1995 President of JP Morgan and Co
James Wolfensohn June 1995 - May 2005 Bank H Schroder, then Salomon Brothers and President of James D. Wolfensohn Inc.
Paul Wolfowitz June 2005 - June 2007 Deputy Secretary of State
Robert Zoellick July 2007 - June 2012 Deputy Secretary of State under George W. Bush
Jim Yong Kim July 2012 - February 2019 Doctor, President of Dartmouth College ; head of the WHO Département VIH/SIDA ; joined Global Infrastructure Partners
David Malpass February 2019 - present Chief economist at investment bank Bear Stearns, Under Secretary of the Treasury for International Affairs under Donald Trump

 An unequal distribution of voting rights

All member countries are allocated a number of votes that determines the weight of their influence. A basic right of 250 votes is allocated to each country plus a supplementary part drawn from a precise and complex calculation. Unlike the UN General Assembly, where each country has one vote (not to be confused with the security council where five countries hold vetos), this system grants a voting power directly related to the financial participation. However, one country cannot unilaterally increase or decrease its funding level to increase or decrease its voting rights and weigh more. The system is watertight.

IBRD Directors voting rights in January 2020

Country%Group presided by%Group presided by%
USA 15.44 Austria 4.87 Switzerland 3.05
Japan 7.77 Mexico 4.74 Iceland 3.05
China 4.79 The Netherlands 4.08 Pakistan 3.01
Germany 4.08 South Korea 3.99 Thailand 2.88
France 3.80 Canada 3.98 Kuwait 2.75
UK 3.80 Brazil 3.71 Uruguay 2.28
Russia (+ Syria) 2.82 India 3.54 Cameroon 2.03
Saudi Arabia 2.70 Italy 3.34 Uganda 1.92
Nigeria 1.61
Source: (worldbaIBRD
Source: World Bank

The southern countries do not make the weight against the Northern countries, who maintain their controlling influence and systematically impose their viewpoint.

Source: World Bank

The difference between population and influence is clear:

Country or group Estimated population in 2020 (in millions) Voting rights at IBRD in January 2020 (%)
Group presided by India 1,566 3.54
China 1,439 4.79
Group presided by Uganda 480 1.92
USA 331 15.44
Group presided by Cameroon 326 2.03
Russia (+ Syria) 163 2.82
Japan 127 7.77
France 65 3.80
Saudi Arabia 34 2.70
Source: World Bank, United Nations

On top of this unfair allocation of voting rights the US has imposed an 85% majority vote for all major decisions. Being the only country to wield more than 15% of the voting rights they have a built-in veto on major decisions.

The European Union countries, who could between them, up until now [4], make up 15% generally stay in line with Washington. On the one occasion when they did threaten to use their bloc vote it was in their own selfish 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. . [5] It is imaginable that one day a group of southern countries manage to build a bloc vote to oppose a US candidate to the Presidential seat. However, up to now the US Treasury is the uncontested master on board, with the power to block any change contrary to its interests. That the World Bank is in Washington at a stone’s throw from the White House is no coincidence. Over time, adjusting the voting rights has allowed China to gain some more weight. But the US have made sure their veto has been maintained. [6]

 Doubtful financing choices

IDA (International Development Association) is officially an ordinary association, woven into the IBRD that directs it. In 2020, IDA had 173 member countries, of which 77 [7] filled the conditions for being granted loans, that is an annual income per head of population inferior to $1,175 in 2019 (figure updated annually). These countries take on long term low interest loans (30 to 40 years with grace periods of 5 to 10 years). The funding comes from the rich countries that replenish the available resources every three years and also from gains on loans made to intermediary countries.

Other Southern countries’ borrowing may be from the IBRD at close to financial market Financial market The market for long-term capital. It comprises a primary market, where new issues are sold, and a secondary market, where existing securities are traded. Aside from the regulated markets, there are over-the-counter markets which are not required to meet minimum conditions. rates to fund projects that strict banking practices would approve as potentially profitable, just like an ordinary bank. The World Bank’s creditworthiness is guaranteed by the rich countries who are the biggest stakeholders; this makes it possible for it to borrow funds on the financial markets at favorable 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.
. The IBRD then lends those funds in 15 to 20 year loans.
This privileged situation allows the IBRD to cover running costs and even to make a good profit Profit The positive gain yielded from a company’s activity. Net profit is profit after tax. Distributable profit is the part of the net profit which can be distributed to the shareholders. : between $680 million and $1 billion for the 2011-2015 period. Of the $44.6 billion granted in 2015, $19 billion were granted by IBRD. [8]

With debt growing, the World Bank has, in coordination with the IMF, developed its action in a macro-economic perspective to impose the application of ever more 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 and liberally advises countries subjected to IMF therapy when providing direct funding of these reforms through its specific loans.

 The growing influence of national and international development banks

Beside the World Bank there are other multilateral development institutions such as the China Development Bank (CDB) or the Brazilian Development Bank (BNDES), which is a national social and economic development bank. Their influence is not to be neglected as they are now doing more lending than the World Bank.

Between 2005 and 2013 the CDB granted more than $78 billion to Latin American countries alone. In 2007, the total of CDB outstanding loans reached the gigantic sum of $1427 billion. The total for BNDES was $175 billion. [9]

Just like World Bank loans, these loans are also most questionable. CDB loans have higher interest rates than World Bank loans, they come with aid conditions and payments in commodities Commodities The goods exchanged on the commodities market, traditionally raw materials such as metals and fuels, and cereals. . A majority of BNDES assisted projects have caused population movements and have had a negative impact on the environment. These institutions have no regard for Human Rights either.

Not forgetting the BRICS bank that was created as an alternative to the World Bank and the IMF.

 Regional Development Banks are aligned with the World Bank

Numerous regional banks exist: the African Development Bank (AfDB); the Asian Development Bank (AsDB); [10] the Inter-American development Bank and also the European Investment Bank (EIB). These banks are in no way alternatives to the World Bank. They are aligned to the same policies with the same criteria and their results are alike.

This article was researched and written by: Maud Bailly, Milan Rivié, Éric Toussaint

More information:

  • Éric Toussaint, “1944-2019, 75 ans d’intervention de la Banque mondiale et du FMI” (adapted from Banque mondiale : Le coup d’état permanent, 2006) :
  • Eric Toussaint, « The IMF and the World Bank: It’s time to replace them
  • Éric Toussaint, Doctoral thesis at Liege University and Paris VIII ’Enjeux politiques de l’action de la Banque mondiale et du Fonds monétaire international envers le tiers-monde’ (in French)


[1To become members of the IBRD, countries first have to be members of the IMF.

[4That is, including the voting rights of the UK up to 31st December 2019.

[5See, the threat of a coalition between Belgium, the Netherlands, Switzerland and Norway in June 2005,

[6For a detailed analysis of the weight of the United State on the World Bank see Éric Toussaint, World Bank: a never ending coup d’etat, 2006, chapters 5 to 9.

[7India must be added to these 77 countries; it is no longer eligible for IDA support since the end of exercise 14 but will receive exceptional transitional support for the period covered by IDA 17 (2015-2016-2017).

[8See « The World Bank Group A to Z » :

[9Strengthening the Foundations? Alternative Institutions for Finance and Development - Kring - 2019 - Development and Change - Wiley Online Library

[10The African Development Bank and the Asian Development Bank have both the same acronym they are distinguished by a small f and a small s.

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