Committee for the Abolition of Illegitimate Debt

Eric Toussaint is a historian and political scientist, president of CADTM (Committee for the Abolition of Third World Debt), member of the International Council of the World Social Forum, and of the scientific committee of ATTAC in France. He is the author of Your Money or Your Life. The Tyranny of Global Finance. He is coauthor with Damien Millet of The Debt Scam. IMF, World Bank and the Third World Debt, VAK publication, Mumbai, 2003, 150 pages.

The outbreak of the debt crisis in 1982 gave 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.

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.

http://imf.org a chance to develop their combined actions regarding the indebted countries of the Periphery. The World Bank and the IMF formed a duo that took upon itself both to impose neo-liberal discipline on the indebted countries (via 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/ plans - SAP) and to ensure the continuity of debt repayments. The duo had endless internal rivalries but, if we look at it from a historical perspective, what counts is the coherence of their involvement within the context of the Washington Consensus [1].

From the start, the SAP were intended to open up the economies of the indebted countries a maximum to the multinational corporations (MNC) of the highly industrialised countries and to the strategic interests of the Triad countries. The two usually converge. The close alliance between public creditors (the Bretton Woods institutions and the Paris Club Paris Club This group of lender States was founded in 1956 and specializes in dealing with non-payment by developing countries.

) enabled them to bring the countries of the Periphery back into a cycle of increased dependency. The position of the MNC of the Centre in the markets of the Periphery was strongly reinforced, not only in terms of market shares but also in controlling the strategic levers of economic activity and natural resources.

The control mechanism was reinforced with the creation of the World Trade Organisation WTO
World Trade Organisation The WTO, founded on 1^st January 1995, replaced the General Agreement on Trade and Tariffs (GATT). The main innovation is that the WTO enjoys the status of an international organization. Its role is to ensure that no member States adopt any kind of protectionism whatsoever, in order to accelerate the liberalization global trading and to facilitate the strategies of the multinationals. It has an international court (the Dispute Settlement Body) which judges any alleged violations of its founding text drawn up in Marrakesh.

. From 1995, when the WTO came into action, the directors of the three multilateral institutions co-ordinated their efforts to push ahead with neo-liberal globalisation. The World Bank, the IMF and the WTO had become a trio.

Article 3, clause 5 of the Marrakesh Accords, from which the WTO emerged, explicitly mentions the collaboration between the three institutions. “With a view to greater coherence in the economic policies applied on a global level, the WTO will co-operate, in appropriate ways, with the IMF and the World Bank”.

In a fact sheet published by the IMF on its web site in September 2003, we read “The IMF and the WTO work together on many levels, with the aim of ensuring greater coherence in global economic policymaking”. Further on, we learn that the IMF, the World Bank and the WTO have elaborated for the Least Developed Countries Least Developed Countries
LDC A notion defined by the UN on the following criteria: low per capita income, poor human resources and little diversification in the economy. The list includes 49 countries at present, the most recent addition being Senegal in July 2000. 30 years ago there were only 25 LDC. an “Integrated Framework [which] seeks to ensure that trade matters are incorporated into the Poverty Reduction and Strategy Papers (PRSPs) prepared by countries in consultation with the IMF, World Bank, and other development partners.” [2].

At a meeting of the WTO General Council in Geneva in May 2003 to prepare the WTO inter-ministerial summit planned at Cancun for September 2003, Supachai Panitchpakdi, Director General of the WTO, Horst Kölher, Director General of the IMF, and James Wolfensohn, President of the World Bank, made a joint declaration calling on the leaders of the G8 G8 Group composed of the most powerful countries of the planet: Canada, France, Germany, Italy, Japan, the UK and the USA, with Russia a full member since June 2002. Their heads of state meet annually, usually in June or July. countries to take political leadership in the negotiations to ensure the success of Cancun. They added, “The WTO, the IMF and the World Bank are co-operating to support the full engagement of developing countries in global trade negotiations to produce an outcome that favours the expansion of their trade” [3].
They then reiterated the neo-liberal dogma according to which maximum insertion in international trade increases development possibilities of developing countries: “Trade is vital not only for the direct benefits it brings, but also for increasing the flows of financial and real investment resources to developing countries, which generate the increased growth and job opportunities that help raise people out of poverty and make economies more resistant to shocks” (ibid.).

Finally they added, “The G8 will help maintain the momentum of structural economic reform over the longer term in the developed and developing countries alike”.

It is essential to recognise the coherence of the policies recommended by the World Bank / IMF / WTO trio. The IMF and the World Bank use their status as privileged creditors to make loans to the governments of the Periphery conditional upon the implementation of economic reforms that open up the markets of the indebted countries to the global market dominated by the highly industrialised countries and the MNC that are mainly based in those countries. Strengthening the connection between the economies of the countries of the Periphery and the global market, with its present stratification, is detrimental to their local producers, their domestic markets and to the chances of forging stronger intra-Periphery (South-South) links.

Contrary to the claims of neo-liberal dogma, greater opening up and stronger connections with the global market constitute an obstacle to development for the countries of the Periphery. The complete insertion of a country of the Periphery in the global market generates a structural deficit in the balance Balance End of year statement of a company’s assets (what the company possesses) and liabilities (what it owes). In other words, the assets provide information about how the funds collected by the company have been used; and the liabilities, about the origins of those funds. of trade, i.e. imports grow faster than exports. The deficit tends to be compensated by external loans, which increase indebtedness [4]. A vicious circle is set in motion. The policies of the World Bank / IMF / WTO trio traps the countries of the Periphery in an infernal spiral of indebtedness and dependency.