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World Bank / IMF / WTO Trio
by Eric Toussaint
8 March 2004

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 and the IMF 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 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) 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. 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 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 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 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.

Footnotes :

[1J. Stiglitz in Globalization and its Discontents attempts unconvincingly to separate the respective roles of the World Bank and the IMF. He criticises the IMF roundly while treating the Bank more kindly.

[4Some would use the example of China to refute this argument. China maintains a good positive trade balance. It exports more to Triad countries (with the USA in the lead) and the rest of the world than it imports. Its external debt is relatively modest considering the size of the economy, and all things being equal, is not really a serious problem, since the country has a very large savings reserve mainly in dollars. China and Japan are, relatively speaking, the main holders of US Treasury Bonds. In other words, the USA is indebted to China. China’s external public debt is roughly equivalent to the credits it holds on the USA in the form of Treasury Bonds. According to the Union of Swiss Banks and the OECD, in June 2003, China, Japan, Hongkong and South Korea together held 696 billion dollars’ worth of US Treasury Bonds. The example of China does not contradict the author’s arguments, as China’s insertion in the global market is of a very particular kind. It maintains considerable protectionist measures with regard to the global market and its domestic market is enormous. The danger for China would be if its authorities were to give in to the demands of the World Bank / IMF / WTO trio, abandoning control over capital movements, making the currency convertible, liberalising investment controls and removing tariff barriers. All these measures are demanded by the EU, the USA, Japan and relayed by the trio. Time will tell if the present process of capitalist restoration in China will go as far as the application of the Washington Consensus. If it does, the negative effects of neo-liberal policies - already perceptible - will take on dramatic proportions for the majority of the population.

Eric Toussaint

is a historian and political scientist who completed his Ph.D. at the universities of Paris VIII and Liège, is the spokesperson of the CADTM International, and sits on the Scientific Council of ATTAC France.
He is the author of Debt System (Haymarket books, Chicago, 2019), Bankocracy (2015); The Life and Crimes of an Exemplary Man (2014); Glance in the Rear View Mirror. Neoliberal Ideology From its Origins to the Present, Haymarket books, Chicago, 2012 (see here), etc.
See his bibliography:
He co-authored World debt figures 2015 with Pierre Gottiniaux, Daniel Munevar and Antonio Sanabria (2015); and with Damien Millet Debt, the IMF, and the World Bank: Sixty Questions, Sixty Answers, Monthly Review Books, New York, 2010. He was the scientific coordinator of the Greek Truth Commission on Public Debt from April 2015 to November 2015.