{"id":245626,"date":"2023-10-09T12:00:59","date_gmt":"2023-10-09T11:00:59","guid":{"rendered":"https:\/\/www.transcend.org\/tms\/?p=245626"},"modified":"2025-01-10T15:03:38","modified_gmt":"2025-01-10T15:03:38","slug":"the-imf-and-world-bank-talk-good-governance-but-walk-with-corrupt-governments","status":"publish","type":"post","link":"https:\/\/www.transcend.org\/tms\/2023\/10\/the-imf-and-world-bank-talk-good-governance-but-walk-with-corrupt-governments\/","title":{"rendered":"The IMF and World Bank Talk \u201cGood Governance\u201d but Walk with Corrupt Governments"},"content":{"rendered":"
\n

There is a deeper reason for sustained corruption: Neoliberal ideology.<\/em><\/p>\n

4 Oct 2023 – <\/em>To some degree, next week\u2019s Annual Meetings of the Bretton Woods Institutions (BWIs) in Marrakech will be focused on the tragic earthquake and flooding damage in Morocco and Libya, respectively \u2013 in turn reflecting a lack of durable infrastructure, especially in the latter case after the state was crippled by NATO regime-change excesses in 2011 and Derna\u2019s fragile dams were not maintained. The reconstruction funding needs are enormous, but are the BWIs appropriate allies, given their record?<\/em><\/p><\/blockquote>\n

\"\"<\/a>

Tunisians demonstrate for peace, freedom of speech and for a secular state ahead of elections for a Constituent Assembly on 23 October 2011, following the Tunisian Revolution. Credit: European Parliament<\/p><\/div>\n

In late August, the BRICS+ gathering in Johannesburg, South Africa, raised near-universal concern (or even misplaced<\/a> hope<\/em>) that some of the world\u2019s most tyrannical regimes are uniting and potentially facing off against the \u2018West\u2019 in part because of the BWIs\u2019 heavy-handed loan conditionality<\/a>.<\/p>\n

Five of the six new members are from the Middle East and Horn of Africa, including<\/a> dangerously-indebted Egypt<\/a> and Ethiopia, while another new member, Argentina, is under Washington\u2019s austerity thumb<\/a>. And that perception will probably compel a more active reengagement of BRICS+ regimes by a new down-to-business World Bank President, Ajay Banga<\/strong>, and by International Monetary Fund (IMF) Managing Director Kristalina Georgieva,<\/strong> who reflect a long-standing global-apartheid policy<\/a> in which only U.S. and European citizens get Bank and IMF leadership, respectively.<\/p>\n

Banga\u2019s own decade-old history in Johannesburg\u2019s Soweto township featured<\/a> a Mastercard partnership with a Bank-owned \u2018financial inclusion\u2019 firm<\/a> (Cash Paymaster Services) that in 2020 was forced into receivership after failing to pay fines for extensive fraud against the state (via a corrupt welfare minister<\/a>) and millions of the society\u2019s poorest (see Observer<\/em> Summer 2023<\/a>).<\/p>\n

Likewise, Georgieva was a top World Bank official before moving to the Fund in 2019, and was mainly remembered for her alleged role in \u2018torturing data<\/a>\u2019 in the Bank\u2019s Doing Business<\/em> reports on behalf of China\u2019s Foreign Direct Investment programme. The alleged statistical fraud was so severe that she was nearly forced to resign<\/a> from IMF leadership in 2021. In the same spirit, her IMF managing director predecessors include Rodrigo Rato, who was jailed<\/a> for financial fraud in 2017, Christine Lagarde who was convicted<\/a> in a French political bribery<\/a> case in 2016, and Dominique Strauss-Kahn who resigned<\/a> after his sexual attack in a New York hotel in 2011 and was prosecuted (although the case was dropped, a civil claim by the victim, a hotel cleaner, was later settled out of court).<\/p>\n

“The World Bank and IMF] attempted to utilise the post 2011 moment to maintain the essential characteristics of past practice, while employing a language that professes a new course and sympathy with the social justice goals of the uprisings.”<\/em><\/strong><\/p>\n

— Adam Hanieh, political scientist<\/strong><\/p><\/blockquote>\n

What is it about Washington\u2019s hallowed international financial hallways that makes it so difficult for BWIs bureaucrats to break the pattern of intra-elite corruption? To be sure, the extreme pressure of geopolitics often suffocates financial ethics, for as establishment economist Rudiger Dornbusch remarked<\/a> in 1998, \u201cThe IMF is a toy of the United States to pursue its economic policy offshore,\u201d a problem that won\u2019t go away while Washington both retains veto power over Bank and Fund policies and projects, and props up favoured dictators (see Inside the Institutions, IMF and World Bank decision-making and governance<\/em><\/a>). The recent scandal<\/a> in which the US exercised its power at the IMF to fast-track a $2 billion loan to Pakistan, in exchange for the latter\u2019s $900 million urgent weapons supply to Ukraine, is only the latest case.<\/p>\n

But there is a deeper reason for sustained corruption: Neoliberal ideology.<\/em> From North Africa to South Africa, financial deal-making with explicitly-corrupt governments is hard-wired into the Bank and IMF, even while the BRICS\u2019 own \u2018alternative\u2019 institution, the New Development Bank, appears to have exactly the same problem in relation to its dozen South African portfolio<\/a> credits. Additionally, the (still-notional) BRICS Contingent Reserve Arrangement empowers the IMF because if a country wants to borrow more than 30 per cent of its quota, it must first sign up for a structural adjustment programme \u2013 designed at 18th & H Streets NW in Washington DC. The BRICS institutions are not actually alternatives after all, but amplifiers of malgovernance, given the political pressure to conform to both borrower desires \u2013 e.g. Vladimir Putin<\/strong>\u2019s crony capitalism<\/a> or South African parastatal agencies\u2019 service<\/a> to the minerals-energy complex \u2013 and the inevitable New York credit rating agency squeeze (see Observer<\/em> Summer 2020<\/a>). That, in turn, ironically compelled the New Development Bank to join<\/a> Western financial sanctions against its own 18 per cent-shareholder in Moscow immediately after the February 2022 invasion of Ukraine, and maintain them even under the 2023 Bank presidency of Putin\u2019s ally<\/a>, Dilma Rousseff.<\/strong><\/p>\n

Lessons of the Arab Spring Unlearned in Washington<\/b><\/h2>\n

A dozen years ago, IMF and Bank back-scratching patronage appeared on the verge of collapse in North Africa. In 2011, millions of pro-democracy protesters in Tunisia, Egypt, Libya and Algeria ran up against brutality inflicted by tyrannical, ultra-corrupt regimes. Behind the scenes in each case were World Bank and IMF officials who supported (and often financed) economic injustice, even as austerity put unbearable pressure on society. Most notorious was Strauss-Kahn<\/strong>, who in 2008 was feted by Tunisian tyrant Zine El Abidine Ben Ali<\/strong>. The IMF head was given the Order of the Tunisian Republic<\/a> for his \u201ccontribution to the reinforcement of economic development at the global level.\u201d Strauss-Kahn was effusive in return, terming<\/a> Ben Ali\u2019s economic policy \u201cthe best model for many emerging countries\u2026.Tunisia is making impressive progress in its reform agenda and its prospects are favorable.\u201d<\/p>\n

Codifying Strauss-Kahn\u2019s praise for Ben Ali, two of his economists \u2013 Jo\u00ebl Toujas-Bernate and Rina Bhattacharya \u2013 enthused<\/a> in IMF Survey Magazine<\/em> in 2010 how Tunisia\u2019s dictator had promoted \u201cwide-ranging structural reforms aimed at enhancing its business environment and improving the competitiveness of its economy.\u201d They praised his \u201cprudent macroeconomic management,\u201d an \u201cexport promotion strategy,\u201d various free trade agreements and, in finance, moves toward liberalisation that would \u201ctransform Tunisia into a banking services hub and a regional financial market.\u201d<\/p>\n

In social policy, Toujas-Bernate and Bhattacharya applauded the Tunis authorities for \u201creforms to labor market policies, the educational system, and public employment services that will serve to facilitate labor mobility and reduce mismatches between demand and supply in the labor market. The implementation of these reforms will be supported by several World Bank Development Policy Loans<\/a>\u201d. In \u201creforming the social security system\u201d (i.e. cuts that might \u201cbuttress the pension system\u2019s financial sustainability\u201d) and attempting to cut \u201csubsidies of food and fuel products,\u201d Ben Ali won praise for \u201cundertaking reforms to make the tax regime more business friendly\u201d including commitments \u201cto reduce tax rates on businesses and to offset those reductions by increasing the standard Value Added Tax (VAT) rate,\u201d i.e., a profoundly regressive approach to taxation<\/a>.<\/p>\n

The 17 December 2010 suicide-by-immolation of an immensely frustrated informal trader, Mohamed Bouazizi<\/strong> \u2013 after his fruit and vegetable stand was confiscated, reflecting Washington\u2019s instructions to squeeze tax receipts from the poor \u2013 catalysed the Arab Spring revolt that pushed Ben Ali out just a month later. WikiLeaks revealed how even the US State Department was appalled by the families of Ben Ali and his wife Leila Trabelsi, who controlled half the national economy and who, as Rob Prince put it<\/a>, were \u201cdominating the IMF-pressured privatisations that have marked the country\u2019s economic transition.\u201d In July 2019, Tunisia\u2019s Truth and Dignity Commission sent memoranda to the World Bank and the IMF, as well as to France, seeking reparations for Tunisian victims of human rights violations, claiming that the IMF and World Bank bear \u201ca share of responsibility\u201d<\/a> in social unrest linked to structural adjustment policies.<\/p>\n

As for Muammar Gaddafi\u2019<\/strong>s reign in Libya, the IMF in October 2010 celebrated<\/a> the regime for \u201creducing civil service employment\u201d by a planned 340,000 workers, while recommending \u201cthat the retrenchment program be accelerated.\u201d In February 2011, the IMF promoted<\/a> \u201can ambitious program to privatize banks\u201d and \u201ccommended the authorities for their ambitious reform agenda, and looked forward to the effective implementation of the many important laws passed in the last year, complemented by policies aimed at adapting the labor force to the economic transformation.\u201d<\/p>\n

New York Times<\/em> reporters Pierre Briancon and John Foley observed<\/a> how, \u201cThe fund\u2019s mission to Tripoli had somehow omitted to check whether the \u2018ambitious\u2019 reform agenda was based on any kind of popular support. Libya is not an isolated case. And the IMF doesn\u2019t look good after it gave glowing reviews to many of the countries shaken by popular revolts in recent weeks,\u201d including Bahrain, Algeria and Egypt. The Times\u00a0<\/em>journalists\u2019 worry was that \u201cthe toppling of unpopular regimes will make it difficult for their successors to adopt the same policies. In the future, the IMF might want to add another box to check on its list of criteria: democratic support\u201d.<\/p>\n

But because that concept was utterly foreign, neither the IMF nor the Bank seemed to have any idea that promoting neoliberalism in corrupt regimes so openly would generate political instability. A February 2011 World Bank report, Africa\u2019s future and the World Bank\u2019s support to it<\/em>, claimed<\/a> that both Tunisia and Libya were \u2018low risk\u2019 in a map of \u201cfragile and conflict affected states\u201d, even after Ben Ali was ousted by popular demand and Libya was breaking apart.<\/p>\n

And in Egypt, where Hosni Mubarak\u2019<\/strong>s dictatorship and military-capitalist regime was borrowing heavily, the IMF\u2019s Article IV Consultation praised<\/a>\u00a0Cairo in 2010 for \u201ckey fiscal reforms \u2013 introducing the property tax, broadening the VAT, and phasing out energy subsidies.\u201d Mubarak\u2019s \u201cfiscal and monetary policies of the past year have been in line with staff\u2019s advice. The authorities remain committed to resuming fiscal consolidation broadly in keeping with past advice to address fiscal vulnerabilities.\u201d There was still need, the IMF argued, for \u201cdecisive action\u201d in, \u201cresuming privatisation and increasing the role of carefully structured and appropriately priced Public Private Partnerships.\u201d<\/p>\n

From 25 January to 11 February 2011, millions of angry citizens went to the streets and Tahrir Square, forcing Mubarak to resign. He was then repeatedly<\/a> convicted and jailed for blatant \u201cpresidential palaces\u201d embezzlement of state funds, which somehow had gone unnoticed by the IMF and Bank.<\/p>\n

But because of counter-revolutionary processes in the subsequent months and years, none of the countries being praised by the IMF and Bank in 2010 witnessed durable democratisation. And while a G8 Deauville Partnership declaration \u201cpledged support for \u2018reforms that promote transparency, accountability, and good governance\u2019 in the Arab world,\u201d as leading political scientist Adam Hanieh reported<\/a> in 2015, the World Bank and IMF \u201cattempted to utilise the post 2011 moment to maintain the essential characteristics of past practice, while employing a language that professes a new course and sympathy with the social justice goals of the uprisings.\u201d<\/p>\n

Adherence to neoliberal dogma meant that in the year that democratically-elected Egyptian president Mohamed Morsi<\/strong> served (2012-2013) before a military coup, the IMF was back to demanding<\/a> that Cairo drop food and fuel subsidies in exchange for a $4.8 billion loan. Morsi realised if he took such a step it would risk a reboot of the Arab Spring. Even his coup-installed successor, General Abdel Fattah El-Sisi<\/strong> (who in 2018 was later formally elected), received three bailout<\/a> loans from the IMF. In 2023, the $3 billion requested by the tyrant from the IMF was contingent<\/a> upon further<\/a> privatisation and exchange control deregulation.<\/p>\n

The story was initially similar in Tunisia, where after Lagarde sweet-talked<\/a> its new leaders in 2012, IMF conditionality<\/a> was imposed on loans in 2013 ($1.7 billion) and 2016 ($2.8 billion). But in 2023, as trade unionists opposed<\/a> the IMF-mandated restructuring of 100 state companies and cuts in social subsidies, the dictatorial President Kais Saied (who in 2021 dissolved parliament and ruled by decree) ultimately rejected<\/a> another $2 billion IMF bailout due to loss of sovereignty. But Saied\u2019s securocrat regime is appreciated by European Union officials, who doled out generous aid in order to bridge the gap<\/a> to IMF lending, so as to slow African migrant passage through Tunisia.<\/p>\n

South Africa\u2019s Corruption Continues, with More IMF and Bank Funding Than Ever<\/b><\/h2>\n

At the southern end of Africa, the IMF and Bank were extremely generous lenders<\/a> to the apartheid regime \u2013 with proceeds advancing white South African and multinational corporate mining interests \u2013 and in 1993, an $850 million Fund loan locked<\/a> in neoliberal policies that decisively shifted Nelson Mandela\u2019<\/strong>s government away from its 1994 democratic mandate<\/a>. World Bank economists were crucial in authoring<\/a> Mandela\u2019s 1996 homegrown structural adjustment programme, as well as biased subsequent research<\/a> aiming to cover up the resulting inequality<\/a>, the world\u2019s worst.<\/p>\n

In 2010, the Bank\u2019s $3.75 billion Eskom loan for a 4800 MW coal-fired power plant allowed the crucial funding<\/a> of manufacturer Hitachi\u2019s state-capture<\/a> of the ruling party, although the Bank\u2019s 2007-2012 President Robert Zoellick<\/a><\/strong> was fully aware<\/a> of that corruption (which was by late 2007 already a scandal) and citizen lobbying<\/a> against the loan was unprecedented<\/a>. When Hitachi was successfully prosecuted<\/a> in 2015 under the Foreign Corrupt Practices Act by the US Securities and Exchange Commission, the Bank\u2019s Vice President for Integrity Leonard McCarthy<\/strong> (a controversial South African) illogically claimed<\/a> that no Bank funds were affected. Moreover, as extreme structural corruption was being unveiled<\/a>\u00a0within the South African state \u2013 including its fraud-riddled health ministry<\/a> \u2013 the IMF and Bank offered major loans in 2020-2022 ostensibly for Covid-19 relief, drawing protest<\/a> at the Bank\u2019s Johannesburg office.<\/p>\n

Ironically, it was a quarter century ago when the World Bank began regularly fretting<\/a> over state capture, particularly based on the disastrous Eastern European political transitions. In 2006, then-President Paul Wolfowitz \u2013 himself deposed a year later due to malgovernance \u2013 gave vocal Bank support to the Extractive Industries Transparency Initiative<\/a>. And yet, conditions prevailing among some of its most wretched borrowers \u2013 especially in Africa \u2013 mean that in the course of dogmatically promoting hard neoliberal \u2018reforms,\u2019 the Bank and IMF have regularly elided the obvious correlation between state shrinkage and crony empowerment.<\/p>\n

At the April 2011 IMF Spring Meetings, during Strauss-Kahn\u2019s last press conference<\/a>, a journalist asked about the North African uprising: \u201cDo you have any fears that there is perhaps a far left movement coming through these revolutions?\u201d A smug Strauss-Kahn remarked, \u201cGood question. There\u2019s always this risk, but I\u2019m not sure it will materialise.\u201d<\/p>\n

Until it does, the system appears impervious to genuine reform.<\/p>\n

__________________________________________________<\/p>\n

\"\"<\/a>Patrick Bond is Distinguished Professor at the University of Johannesburg Department of Sociology, where he directs the Centre for Social Change. Bond\u2019s work is primarily on the political economy of Africa, international finance, eco-social development and political ecology, and development issues in contemporary South Africa. He has launched strong critiques against neoliberal governance regimes in South Africa and beyond, and the failures of capitalist states to address social justice and environmental degradation.
\n<\/span><\/em><\/p>\n

Go to Original – brettonwoodsproject.org<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

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