Globalization & Third World Development Jan. 27th, 2004

The World Bank -- Functions International Bank for Reconstruction and Development (IBRD)  ensures access for middle-income and credit-worthy poor countries to low-cost borrowing in capital markets  funds are raised on the international capital markets  $11.5 billion (2002), $371 billion cumulative International Development Association (IDA)  long-term (35-40 year) interest free loans  aimed at poorest countries  funds are raised by contributions from richer member countries  $8.1 billiion (2002), $135 billion cumulative

The World Bank -- Structure corporation-style institution  owned by 184 member countries  corporate structure CEO, Board of Directors, shareholders  President – American  US is single largest shareholder  executive directors  top five shareholder countries appointed  rest by election  votes by number of shares

World Bank, Votes by Country, 2002

The IMF -- Function functions – to promote...  international monetary cooperation  expansion of trade  exchange rate ($$) stability  allow member countries to correct maladjustments in balance of payments  balance of payments=exports-imports  to allow countries to continue paying for imports without imposing import controls  provides short-term loans at market-related rate of interest lower interest rates for poor countries (as of mid-1980s) –requires structural adjustment plan

The IMF -- Structure all loan arrangements must be approved by Executive Board fund is based on quotas on members  based on the relative size of their economies in the world economy votes based on size of quota contribution

IMF, Votes by Country, 2002

The Washington Consensus principles underlying the policies of World Bank and IMF new model of neo-liberal economic development  market liberalization  privatization  economic stabilization  deregulation World Bank and IMF structural adjustment policies (SAPs)  argument that loans were ineffective in fostering development without changes to ensure a healthy economy  countries had to be able to pay loans back  countries had “to get the basics right”  SAPs -- conditional loans issued to countries to pursue policy reforms in keeping with 4 goals above

The World Bank, IMF and Structural Adjustment the critique  “In who’s interest? Just ask...who set it up?” former Jamaican President, Michael Manley  World Bank  allows rich western industrialized countries to dictate the path of development in their own interests  project their preferred model of development on the domestic policies of developing countries  wield imperialistic power over developing countries through the mechanism of debt  IMF  as above, plus...  allows rich western industrialized countries to expand their markets  ensures that debts of developing countries (to interests in developed countries) are paid

The World Bank, IMF and Structural Adjustment the defense  capital (necessary for development) would not otherwise be available on the open market  however, cannot simply give money away...  countries must be able to show that they will be able to pay it back  best way to do so is to “get the basics right” – create conditions for economic development  basic problems of poverty and underdevelopment are not created by World Bank and IMF