WORLD BANK
Bankers on
International Viewpoint #258 July 1994
Congress of the International Federation of Building and Wood Workers (IFBWW), the CMU submitted a resolution entitled "For a new democratic world socio-economic order", which was adopted unanimously. The resolution's concluding passage is a succinct summary not only of an alternative framework for day-to-day struggle around minimum demands and standards, but also for an alternative future.
### Resolution
"...the international trade union movement, in association with other democratic social forces, should address itself to the increasingly vital question of providing a way out for humanity from its present state of widespread poverty, unemployment and disease, with resulting social discontent and disorder, as manifested by the spread of organised crime, terrorism and armed conflict, as well as alcoholism and drug abuse, by bringing about the establishment of a new democratic world socio-economic order, in which the worlds resources may be controlled and utilised on a democratic basis, to Satisfy human and social needs and to guarantee all human rights, with proper protection of the environment, instead of these resources being appropriated and utilised for private profit."
Just fine words on paper? Given the long-standing predominance of classcollaboration as a way of life for much of the union bureaucracy,- such small victories should not be underestimated. Instead they must be built upon. *
U
2. See R Wood, Taming the new unions', International Viepoint, no. 249, gatober 1993
ODEG:
trial
IT IS time that the World Bank was placed on trial. For more than fifteen years this institution has been the pernicious instrument of a neo-liberalism which seeks to impose upon the planet its regressive social order, and contempt for human needs. MAXIME DURAND
H ANS Singer, one of the
pioneers of development economics, has best explained what happened at the beginning of the 1980s: "From the moment when it became clear that the debt lay at the heart of the Southern countries' instability, in other words from the moment when the financial question acquired the importance which it has today, the structure of interests altered and the relationship between the Bretton Woods institutions and the United Nations suffered the repercussions. (...) The creditors of the Third World have more power in the World Bank and in the IMF than they would in any UN organisation." Perhaps Singer has some illusions about the un but in any case his meaning is clear: there was a shift towards liberal economic policy in the World Bank at the beginning of the 1980s because the number one problem had become repayment of interest upon the debt. The structural adjustment programmes were set up as cover for a very simple project: the guaranteeing of repayment. The World Bank is therefore in reality a giant debt collection agency.
The shift largely came about due to change in personnel, as Singer clearly underlines: "I do not think that it can be said that economists have always been so favourable to neo-liberal ideas. The chief economists at the World Bank in 1981, in Macnamara's time, were Paul
Streeten, Hollis Chenery, and Mabbud Ul Haq - not one neo-liberal amongst them! They did not take up liberal ideas, but were replaced by people such as Anne Krueger, Deepak Lal, and Bela Balassa. It is the decision-making structure of the Bank which has taken a turn towards liberalism, not its economists."2 There being an almost unlimited number of economists ready to be paid comfortable salaries, the theoretical basis for adjustment programmes should not therefore be taken too seriously.
The theory only came later
Of course, it is still necessary to look at the programmes to show that they do not lay out the true route to development, there being a different objective behind the ideological window-dressing The first rule of structural adjustment is that the internal market must no longer be regarded as the motor for growth: its principal recommendations are all aimed at re-orienting productive capacity towards export. As all adjustment programmes are in the same mould, it is easy to examine their three mainsprings: devaluation, deregulation and privatisation.
Devaluation is the radical method of re-orienting an economy outside its borders. While at first it improves productivity, in lowering the price of exports, this has risks. In reality, devaluation is aimed mainly at smashing the internal market and making the export sector appear the only one which is dynamic. Deregulation, internal as well as external, is aimed at clearing away "rigidities", which means minimum wages, guaranteed prices or subsidies. This also contributes to the smashing of growth in the internal market. 1. Altematives economiques, February 1994 (France).
2. Ibid.
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International Viewpoint #258 July 1994
This is to satisfy demand; on the supply side, the opening of frontiers has put pressure upon agriculture and traditional industries, which have been brutally exposed to competition with those countries which are more advanced in terms of productivity. Entire sectors which are incapable of competing with goods from those countries may be eliminated, or abruptly suffocated by the abolition of subsidies.
Lastly, there is privatisation, which accompanies the shrinking of the public sector and permits the obtaining of fresh sources of capital.
When these orientations of political economy are viewed together, they are all consistent in that they allow countries to obtain maximum returns in terms both of currency and of repayment of the debt.
An entire neo-liberal theory has been constructed, with the end of better disguising the real function of the Bank by giving it a global language. However, none of the recommendations contradict the principal
An odious balance-sheet
After twelve years of adjustment programmes, it is possible to begin to draw up a balance-sheet of results. To quote Singer once more: "Neither the World Bank nor the IMF have reason to celebrate: the results of their policies known as structural adjustment have been poor, indeed negative. The social costs have been enormous (...) and they have been endured in vain: growth has not happened, the debt has not disappeared and investment has fallen. It is a balance-sheet hard to justify. To give one example,it is estimated that the failure rate of World Bank development projects is today almost 30%, as opposed to 10% a few years ago. This is largely due to (...) the priority taken by structural adjustment to the detriment of
The results of the most detailed survey cannot be reproduced by independent researchers and must therefore be treated cautiously. A study carried out on twentythe economy. In reducing their living standards, they are not looking below the surface. Improvements in balances are paid for by the dismantlement of those networks of solidarity which hold societies together, making them vulnerable to coups by the police or military. In thoughtlessly applying textbook formulas, the Bank missionaries are playing with fire. Witness the cynical report of two experts linked with the OECD: "We know how many bloody riots have broken out because subsidies on basic goods were suddenly abolished so to reduce the budget deficit; and how these riots have paralysed adjustment pro-
It was two World Bank economists who finally stated, in a most synthetic manner, the social effects of adjustment programmes, writing that "they have not had 'a human face"". . The poor have suffered disproportionately the effects of contraction. Cuts in public expenditure have affected programmes aimed at protecting the poor. The reforms have worsened inequalities in income." Of course, the two experts hasten to add that objective, and indeed The chief economists at the
World Bank in 1981 were
Streeten, Chenery, and Ul
Haq — not one neo-liberal amongst them!
complementary objectives. Take for example the importance placed upon the elimination of internal budget deficits: stress is placed upon the need for monetary stability, the dangers of runaway inflation should the internal debt soar, and so on. But this strictness can also be viewed as applying to external debt. Consequently, because it is a question of public debt, the interest paid, whether on internal or external debt, come from State budgets. In other words, all reduction in internal budget deficits lessens the weight of internal debt and increases proportionately countries' ability to repay external debt. 16 four African countries led to very negative conclusions: it would take too long to set them out in detail, but basically local private sectors have disappeared and institutional structures have failed. The critique also applies to those Eastern European countries cal policies have been all the programmes rest on the implicit principle that private initiative, once unleashed, will instantly fill the space opened up by State withdrawal and by privatisations. There is unwillingness to understand the social roots of economic efficiency: this results from a technocratic and idealised vision of capitalism — the common approach of adjusters throughout the world.
Things are turning out otherwise. In Africa, adjustment has resulted in reductions in public spending on salaries, the number of State employees, the elimination of unprofitable public industries and a squeeze on subsidies. Even if it is admitted that an excessive State is an important factor in misdevelopment, hatchet programmes are not the best way to proceed. The so-called "experts" completely ignore the importance of State employees' salaries, which support things would have been even worse without adjustment; but at least doubt has been expressed. Towards adjustment with a human face?
The 1987 UNICEF report on "adjustment with a human face" played an important rôle in placing the World Bank on the defensive. It was forced to remodel its approach, as seen in its reports upon poverty (1990), development (1991), the environment (1992) and health (1993). Faced with the poverty which, on its calculations, affects more than 1.1 billion people (those who earn less than US$1 per day, since its 1991 Bangkok (Thailand) conference, the World Bank has advocated a "system of transfers and safety nets." While it has imposed drastic reductions on budget expenditure, it today recommends to the developing countries that they should "increase their public expenditure upon health."]
3. Alternatives economiques, February 1994.
4. Moshin Khan, The macro-economic effects of Fundsupported Adjustment Programs', IMF Staff Papers no. 2, June 1990.
5. François Bourguignon and Christian Morrisson, "Adjustment and equity', Le Monde, 26 January 1993.
6. Lawrence Summers and Lant Pritchett, 'The Structural-Adjustment Debate', American Economic Review, May 1993.
7. World Bank, 'Investing in health', Report 1993.
International Viewpoint #258 July 1994
In a further recent report, on Latin America, the World Bank places emphasis on the increases in inequality and poverty, and it is paradoxical that the Bank has now discovered that a fairer distribution of the fruits of growth is "perhaps more important" than growth itself. This has not prevented the Bank from defining poverty so narrowly that it appears to apply to very few. On their definition there would be the same proportion in the United States of America as in Latin America!
Nor is the Bank prevented from holding to its distinctive criteria for aid. As was underlined in a UNDP (United Nations' Development Programme) report, donors seem "to prefer authoritarian regimes, taking the view (without blinking an eyelid), that these regimes favour political stability and are better at managing the economy. When Bangladesh and the Philippines put an end to martial law, their share of total World Bank loans diminished."9 The burden of military expenditure no longer seems to be taken into account: it seems that it "scarcely makes a difference to the redistribution of multinational capital, for example that of the World Bank."10
An agent of imperialism
In a general way, the structural adjustment policies mirror exactly how capitalism operates today. The offensive against the State as a purveyor of public services, and against systems of social protection — but in favour of private initiative, the law of the market, and the forcing into competition on the world market without protection or rules — is not just reserved for the Third World nor even for the countries of Eastern Europe. It is a universal approach, which is leading to the splitting-up of the world economy, through a capitalism based on exclusion. The infernal World Bank-IMF partnership plays an important rôle in the installation of this model of world economic organisation: it is able to impose its views, as shown by the recent devaluation of the Central African Franc.!
This is why projects aimed at "democratising the Bank", such as the idea floated by Susan George, 12 are, properly speaking, utopian and return to the idea that it should really be for the service of development. Conversely, critiques of the Bank should not found a new form of Third-worldism which would lead to the bourgeoisies in the South being let off the hook. Certainly, neo-liberal formulas are imposed in well-known forms: loans, whether from the Bank or the IMF, are packaged with the view of putting in place modernisation programmes which conform to the new orthodoxy. These plans are in connivance with the interests of the local ruling classes which find in them a way of restructuring relationships between internal forces to their advantage, as well as a pretext for doing so. We have still never seen a government call on its people to resist the demands of the IMF. The demands made by structural adjustment fulfil almost the same function as the rules on competition in Europe: they are restrictions imposed deliberately by the bourgeoisies, which shelter behind the pretext of greater demands and external constraints. As never before, the struggle for human development is undergoing an anti-imperialism which implies a double rupture: both in its relationship with the world market, and also with local bourgeoisies. *
US Trade Rep.,
Micky Kantor, and EU
Commissioner,
Leon Brittain, shaking hands and looking
Smug
8. World bank, 'Latin America and the Caribbean - A decade after the debt crisis, Report 1993.
9. UNDP, Report 1994, p.80
10. Ibid.
11. Claude Gabriel, 'The crisis in the CFA franc",
Inprecor, no. 378, March 1994.
12. Susan George, Democratising the Bank', CADTM
Bulletin, no. 11, 1994 (Belgium).
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