Bad Samaritans: The myth of the IMF and the World Bank

May 8, 2018 Africa , Opinion , OPINION/NEWS

Stephen Jaffe photo

 

By

Isaac Abban

 

 

“Not to know what has been transacted in former times is to be always a child” – Cicero

 

 

The developing countries we see today have suffered and continue to suffer in the quagmire of exploitation and dependency as a result of many poor economic decisions they were cowed into by the International Monetary Fund (IMF) and World Bank. This is not to say that the poverty of Africa and other poor countries in the world can be solely attributed to the IMF and World Bank. However, a chunk of macroeconomic policies championed by most developing countries is based on the conditions tied to loans we receive from these Bretton Woods institutions. It is always good to learn from the past, as Cicero, the Roman politician and philosopher remarked. That he who does not know what has been transacted in former times is always a child.

 

The World Bank and the IMF have been viewed by others as good Samaritans, they have been viewed as one that comes in to salvage the economies of poor countries from being in shambles, however the reverse is rather the case. They have been major tools for exploitation and dependency used by the West, particularly the United States in aggravating poverty in developing countries. One must not lose sight of the fact that the IMF and World Bank, though not puppets of the rich countries like the U.S., the rich countries control these institutions and hence subject to the dictates of the rich countries (Chang, 2007). Chang (2007) also notes that much of what happens in the global economy is determined by the rich countries, without even trying. They account for 80% of world output, conduct 70% of international trade and make 70–90% (depending on the year) of all foreign direct investments. This means that their national policies can strongly influence the world economy.

 

The IMF and the World Bank were originally set up in 1944 at a conference between the Allied forces (essentially the US and Britain), in a conference at the New Hampshire resort of Bretton Woods, so these agencies are sometimes collectively called the Bretton Woods Institutions (BWIs). The IMF was set up to lend money to countries in balance of payments crises so that they can reduce their balance of payments deficits without having to resort to deflation. The World Bank was set up to help the reconstruction of war torn countries in Europe and the economic development of the post-colonial societies that were about to emerge, which is why it is officially called the International Bank for Reconstruction and Development. This was supposed to be done by financing projects in infrastructure development like roads, bridges and dams.

 

However, following the Third World debt crisis of 1982, the roles of both the IMF and the World Bank changed dramatically. They started to exert a much stronger policy influence on developing countries through their joint operation of so called Structural Adjustment Programmes (SAPs) aimed at draining the economies of most African countries and this explains why Nkrumah opined in 1964, “Africa is a paradox which highlights and illustrates neo colonialism. Her earth is rich, yet the products that come from above and below her soil continue to enrich not Africans predominantly but groups and individuals who operate to Africa’s impoverishment.”

 

It is interesting to note that many African countries pursued a policy of import substitution and industrialisation after independence; countries like Ghana, Tanzania, Nigeria, and Madagascar all wanted to use the raw materials they had to feed their industries and become economically self sufficient. In Ghana for example, we could boast of rice farms that were started in the northern part of the country aimed at reducing the importation of rice and providing employment, however it was stopped as government was advised on subsidies given to farmers. In addition, similar projects undertaken by other countries like Tanzania, Kenya and Guinea, all aimed at economic independence were halted and by the late 1980’s, most of Africa were in the hands of the exploiters. In most instances loans given to African countries were tied with malicious conditions such as reduction of subsidies given to farmers, the growing of cash crops instead of food crops, a cut in government expenditure in infrastructure and retrenchment of workers and to the extent that industries that were set up were privatised.

 

It is interesting to note today that most developing countries including Ghana continue to pay debts to the Bretton Wood institutions and show no signs that the payments of these debts will be exhausted. In addition, the IMF and World Bank crippled African countries by making sure that they continue to remain overly dependent on the rich countries so that the supply of raw materials will not be curtailed. As it stands, most African countries, including Ghana have little say in international trade as we have been conditioned, as a result of the IMF and World Bank policies to continue the supply of raw materials other than manufactured goods. Furthermore, an inventory into most African countries would reveal to one that most of Africa is less industrialised as a result of poor economic actions in the past and until we have learnt our lessons from these exploitative institutions, we shall never develop.

 

What is even more annoying is the fact that some poor countries, with respect to Ghana, despite their level of impoverishment were bestowed upon the status of a lower middle income country in 2009 and one must note that most African governments accepted this label to the neglect of confronting the real issues of fighting the poverty engulfing its citizens. What is even more cunning in recent times is that the IMF now calls the Structural Adjustment Programme the Poverty Reduction and Growth Facility Programme, used in order to show that it cares about poverty issues, though the contents of the programme have hardly changed from before and until African countries get rid of this complex web of economic exploitation their problems will continue to grow in geometric progression.

 

As I have always said, we need strong leaders who can help find African solutions to African problems by taking measures to rid themselves of the pressures of the Bretton Woods institutions, industrialising the continent and above all building strong institutions that will help clamp down on corruption and mismanagement. And until that is done that we will always have to go to the IMF and their ghost will continue to harm us to our economic disadvantage.

 

 

 

 

isaac-abban

Isaac Abban

I’m Isaac Abban, a 24 year old man and a final year student studying Geography and Sociology at the University of Cape Coast, Ghana. I hail from Cape Coast in the central region of Ghana and have a keen interest in seeing to it that my generation and generations yet unborn in Africa are set free from the perils of illiteracy, ignorance and poverty. As an astute writer I believe that through writing the world can be made a better place.

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