Committee for the Abolition of Illegitimate Debt

David Malpass, the 13^th President of the World Bank, like his predecessors: he is an American citizen with ties to big financial capital.

David Malpass, the 13^th President of the World Bank 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.

, like his predecessors: he is an American citizen with ties to big financial capital.

Washington has so far succeeded in imposing a precedence that is totally contrary to the spirit of the United Nations and to democracy: the post of President of the World Bank is reserved for an American appointed by the President of the United States.

Like most previous World Bank presidents [1], David Malpass has ties to big finance: after working for the US Treasury dealing with international affairs during the terms of Ronald Reagan and George H. W. Bush, David Malpass became chief economist of Bear Stearns, a large investment bank that failed in 2008, while he was still in office. In August 2007, Malpass published an opinion piece in the Wall Street Journal, in which he urged his readers not to worry about the state of the financial markets, going so far as to say that ’the housing and debt markets are not a significant part of the U.S. economy or job creation” [2].

David Malpass then joined Donald Trump’s team, as Under Secretary of the Treasury for International Affairs, before becoming President of the World Bank in 2019. Like Donald Trump, David Malpass is a climate sceptic. In October 2022, at a roundtable discussion organised by the New York Times, he refused to take a position on the role of fossil fuels in global warming, arguing that he was ’not a scientist’ [3].

At a time of ecological and climate emergency when all economies should be geared towards protecting natural resources, reducing air pollution and fighting inequality [4], the president of the World Bank - an institution that distributes loans, that finances projects in the so-called ’South’ - was not convinced by the role of fossil fuels in global warming... This is extremely serious.

Nor did David Malpass question the World Bank’s scandalous voting system, which effectively gives the US a veto on every major decision. The US has 15.47% of the voting rights for every decision taken by the IBRD [5]. For a decision to be adopted, it must receive 85% of the votes. No decision can be adopted without the agreement of the United States. No decision of the World Bank (or 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.

http://imf.org ) can be contrary to the interests of the United States.

This system puts the World Bank and the IMF institutions at the service of an international oligarchy composed of ’great powers’ and multinational companies whose interests are almost systematically defended by Western governments. The decisions taken by these two international institutions since their creation have proven this. They have:

• supported and financed the development of a productivist and extractivist policy that is destructive to nature and peoples
• put in place policies that encourage speculation and land and water grabbing, of which the populations of the South are the main victims
• reinforced patriarchal domination, particularly through support for micro-credit, which is a real burden for those targeted, the majority of whom are women
• actively supported many dictatorships
• imposed 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/ policies in the form of conditionalities favourable to creditors in exchange for the loans they distribute (privatisations, reforms of the Labour and mining and forestry codes, opening up of economies to foreign capital, specialisation of economies in export monocultures, etc.)
• sabotaged democratic and progressive experiments (Mohammed Mossadegh in Iran in 1953, Jacobo Arbenz in Guatemala in 1944, Joao Goulart in Brazil in 1964, Salvador Allende in 1973 in Chile and more recently supporting Sisi dictatorship in Egypt) by closing access to funds and then financing the dictatorships that were imposed with Washington’s support.

As the US has a veto over any meaningful decision, these institutions will not change from within. They will continue to grant loans in exchange for imposed conditionalities that reinforce and deregulate capitalism, increase social and gender inequalities and worsen the climate and ecological crisis. The CADTM International network therefore calls for:

• the strengthening of actions and mobilisations against the Bretton Woods institutions, towards a united front of the countries of the South against the repayment of illegitimate debts, towards the abolition of these institutions and of the capitalist, patriarchal and extractivist system
• a counter-summit of social movements to the IMF-WB Annual Meetings to be held in Marrakech from 9 to 15 October 2023
• the cancellation of debts to the IMF and the World Bank
• the prosecution of World Bank directors
• the establishment of a new international financial architecture.
• The replacement of the current World Bank by regionalised Banks that would distribute loans at very low or zero 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. to finance projects that respect social and environmental standards and fundamental human rights. This new World Bank structure must be the instrument of an exit from the capitalist system, which is harmful to the countries of the ’South’, promotes patriarchal structures, attacks the living conditions of the majority of the world’s populations who must exit from extractivism and effectuate an urgent ecological bifurcation.