Committee for the Abolition of Illegitimate Debt

Two hours ago, President Bush announced his nomination of Paul Wolfowitz, currently Assistant Secretary of Defense, to be the next 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.

. The U.S., by tradition, nominates the World Bank President. Although the Bank’s Board of Governors must approve it, no nomination has ever been rejected.

“Paul Wolfowitz is the most controversial choice Bush could have made,” said Njoki Njoroge Njehu, Director of the 50 Years Is Enough Network. “As the most prominent advocate of imposing the U.S.’s will on the world - the architect of the disastrous invasion and occupation of Iraq - this appointment signals to developing countries that the U.S. is just as serious about imposing its will on borrowers from the World Bank as on the countries of the Middle East. Coming on the heels of the nomination of John Bolton as Ambassador to the U.N., it reveals the contempt this Administration has for the international community.”

“The 50 Years Is Enough Network opposes this nomination,” Njehu continued, “and urges people around the world, and especially in Europe, to contact their government officials to insist that the nomination be defeated. Once again, just as with Iraq, President Bush may be proving his campaign promise to be ‘a uniter, not a divider’: the world will unite against this choice. The ball really is in the Europeans’ court now.”

Reliable reports from Europe suggest that the World Bank Executive Directors from that region and some government officials are very opposed to Wolfowitz’s nomination. When rumors of the choice first arose two weeks ago, most World Bank watchers concluded that they must be mischievous jokes, and some European officials may have concluded likewise.

The European countries together form a substantial enough bloc to reject the U.S. action. Doing so, however, would spotlight the absurdly anti-democratic way in which the heads of the international financial institutions are chosen. While the institutions insist that borrowers institute “good governance,” the President of the World Bank is chosen in a secret process by the U.S. and the Managing Director of 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.

http://imf.org (IMF) is chosen in a messier, largely secret process by the countries of Western Europe. The U.S. was careful not to interfere with the choice of Rodrigo Rato of Spain as head of the IMF last year, and likely expects the same deference from the Europeans now.

“The Bright Side”

If Wolfowitz does become President of the World Bank, it could have some positive effects. Soren Ambrose, Senior Policy Analyst with the 50 Years Is Enough Network noted, “If confirm, we would no longer have to work so hard to convince people that the World Bank is an instrument of U.S. foreign and economic policy. Wolfowitz has no experience in development, just a fierce ideological dedication to hard-core neo-liberal economics and U.S. domination. With Wolfowitz in place, the Bank’s masterful spinners of noble rhetoric will be unable to persuade anyone that the institution is really working for the benefit of the poor. We’ll finally be able to use the word ‘imperialism’ about Bank policy without raising eyebrows.”

“In other words,” said Ambrose, ”between exposing the true dangers of the lack of democracy at the World Bank and putting the most visible symbol of U.S. imperialism in the most prominent position in international development, President Bush will accomplish more in de-legitimizing the World Bank than any other single action ever could.”

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50 Years Is Enough: U.S. Network for Global Economic Justice http://www.50years.org