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Are The World Bank and the IMF Global Loan Sharks?

Updated on December 9, 2012
World Bank logo
World Bank logo

Who are the World Bank and IMF?

The World Bank and the IMF – the International Monetary Fund - were set up in 1944, towards the end of World War II, initially to promote global economic stability.

Part of the original objective was to advance loans to member countries to allow them to balance their trade deficits. All good and above board at a time when many countries found themselves in debt and unable to balance their books, due to huge costings of troops and ammunition, coupled with internal infrastructure damage that had to be corrected.

All in all, the idea of an International Monetary Fund was good, and certainly useful to those countries ravaged by war.

The World Bank is financed my member countries. Each share costs $1, and the more shares bought gives a country a greater say.

Which is a little unfair because it has led to the imbalance of richer nations having more say and therefore power, than poorer nations.

Out of 184 registered nation members, the US, at present, has the controlling share of the IMF with 18%, with Germany, France, Japan and Great Britain not far behind, resulting in those 5 countries controlling 50% of the world’s finances.

World Bank HQ in Washington DC
World Bank HQ in Washington DC
loan sharks
loan sharks

IMF are no better than loan sharks

Even more tellingly, members of the IMF do not have to answer to voters, or even to governments, despite being funded by taxpayers money. Once they are placed in their position, everything they do and every decision they take is not open to public scrutiny. Unlike other government bodies, they do not have to listen to environmentalists or health or educational experts debates on important issues. They more or less have free rein to do what they like.

The IMF has become the loan shark of emerging nations. Loans sharks prey on the poor and the desperate, demanding exhorbitant interest rates in return for a tide-over loan.

The IMF does not demand exhorbitant interest rates, in fact they offer loans at lower rates than those countries could get from international banks.

Instead, they demand control of the state or country’s infrastructure, making their loan conditional on that country doing their bidding.

In effect, the IMF, which is made up of bankers, investors and the big corporations can demand (and get) practically anything they want from the poorer nations.

The similarity with loan sharks sticks. These guys demand high interest on their initial loan, and send the heavies round when you can’t pay.

Is what the IMF does with poorer countries any different?

The IMF and the World Bank rob poor nations

Some demands made of countries who borrowed money from the World Bank

Some of their demands are suicidal for the countries in question. In emerging nations, they demand cuts in worker’s basic pay, or rises in electricity costs, or other changes that affect every single person, making poverty greater and unemploymenthigher, but in each and every case the rich bankers and corporations who control the IMF get fatter.

After the Haiti earthquake, the IMF offered $100 million in loans to re-structure the devastated island, but with the proviso that the already impoverished workers wages were further cut, and that the price of electricity rose.

Tanzania applied for an IMF loan, only to be told that part of the loan condition would mean privatizing their water supply. Such was the savagery of cuts in public services to comply with conditions of the loan the country's death rate spiked sharply.

Bolivia got a loan of $138 million but had to agree to sell off itsoil and water.

Zimbabwe got their much needed loan but only after promising to sell off their stockpiled grain, while at the same time switching to growing tobacco for export instead of grain. Famine is not far away for their people.

India was awarded $400 million from the World Bank to develop their coal burning electricity stations, at a time when Global Warming and CO2 emissions were deeply worrying developed nations.

A $57 billion loan to South Korea had such stringent conditions attached that millions ended up unemployed.

The IMF and World Bank allow a few hundred to get richer while billions become poorer
The IMF and World Bank allow a few hundred to get richer while billions become poorer

Some demands shown to be made for private interests

In 1992, a memo by the World Bank’s chief economist Lawrence Summers was leaked. In it he proclaimed “The economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable, and we should face up to that.... I've always thought that underpopulated countries in Africa are vastly under-polluted”.

An IMF loan to Pakistan in 2008 came with the conditions that it raise both interest rates and electricity prices, leading to extreme poverty among many of Pakistan’s poorer people.

Sri Lanka was awarded a massive $2.6 billion from the IMF on 2009, despite opposition from many nations including the UK, France, US, Germany and Argentina over Sri Lanka’s poor record of Human Rights. Indeed, the only reason the country got into debt was because they overspent on armaments for an ongoing war of their own making.

Many of the poorest nations on the planet have found themselves in even greater debt after applying the conditions demanded of the IMF.

"From the onset of the debt crisis in 1982, until 1990, debtor countries paid creditors in the North $6,500 million [$6.5 billion] per month in interest alone," reports the British magazine New Scientist. "Yet in 1991 those countries were 61 percent more indebted than they were in 1982."

BBC Newsnight - World Bank and IMF creating poverty

IMF trap countries in debt
IMF trap countries in debt

Never-ending debt for some countries, thanks to IMF policies

Governmentswho refuse to follow the advice and demands set out by the World Bank find themselves effectively cut off from all international lending, as the international banks follow advice made by IMF and cut off all lending to indebted countries.

The demands made of these countries have been designed to pull that country and their people down into a never-ending spiral of debt from which they can never break free.

Africa, Asia and Latin America have fared particularly badly. The demands made of them as conditions for their loans from the IMF include cutting subsidies, devaluing their own currency, while freezing wages and reducing public service employment.

Those demands have led to higher unemployment, greater poverty and high food prices in the shops.

starving children in under-developed nations
starving children in under-developed nations

World Trade more important that population feeding

Another demand frequently made by the IMF is that they switch their domestic agriculture to exporting crops.

Davison Budhoo, an economist who resigned from the IMF in protest, contends that the agency's approach has "led to the devastation of traditional agriculture, and to the emergence of hordes of landless farmers in virtually every country where the World Bank and IMF operate." And, he adds, "Food security has declined dramatically in all Third World regions, but in Africa in particular."

At a time when environmentalists are worried about saving the planet and sustainable agriculture, it seems that every time the IMF make loan conditions, it is to the detriment of those ideals, and to the benefit of the fat economists in the West.

Haiti use to subsidize their own farmers to produce affordable rice for its own people. The IMF forced them to open their imported rice market, where local farmers then had to compete with highly subsidized rice from the US, while at the same time the IMF forced Haiti to stop their own subsidies.

As a result, Haiti now imports 70% of its rice from the US, while its own farmers face poverty and starvation because they can't sell their produce.

The World Bank and the IMF have over-stepped the mark, creating a rich elite who will one day have control of all of the world's resources, if they are not regulated now.

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    • profile image

      John Lindsay 

      4 years ago

      The IMF should forgive loans to poor countries.

      Many nations on the continent of Africa, for example, have already been severely exploited of their natural and human resources by European and American powers.

      ENOUGH IS ENOUGH.

    • IzzyM profile imageAUTHOR

      IzzyM 

      7 years ago from UK

      Yes, I'm scratching my head wondering why I asked the question! Of course they are :)

    • nextstopjupiter profile image

      nextstopjupiter 

      7 years ago from here, there and everywhere

      Thanks for this hub, my answer is YES!

    • IzzyM profile imageAUTHOR

      IzzyM 

      7 years ago from UK

      More and more countries have been privatising their banks, and therefore losing state control, and this has been a direct result of demands from the IMF. Yet when in recent years all those banks were found to be heavily in debt because of unviable share tradings and the making of high loans to people who could never hope to repay, it has been the individual governments, and therefore the taxpayers directly, who have had to step in and bail them out. The IMF have a lot to answer for.

    • Amanda Severn profile image

      Amanda Severn 

      7 years ago from UK

      I've never previously considered the demands of the IMF, but now that I see it spelt out, I'm beginning to understand how the world is steadily sliding into a quagmire of debt. I've frequently seen the concept of 'trickle down' wealth expounded on HubPages and elsewhere, but the fact is that wealth doesn't trickle down. It is sucked up.

    • platinumOwl4 profile image

      platinumOwl4 

      7 years ago

      To use a phrase from one of Spike lee's movies, "We have been bamboozled" up to this point now we know better. So, the question become how do we eradicate these parasites?

    • IzzyM profile imageAUTHOR

      IzzyM 

      7 years ago from UK

      It seems that a lot of people are gaining the knowledge that they don't want us to know. Many thanks to all the commenters above. Anyone any ideas on what to do about this? Maybe pressure from us, the common people, will one day make a difference.

    • A Dane in Spain profile image

      Dorte Holm Jensen 

      7 years ago from Torrox, Malaga. Spain

      Brilliant Hub, IzzyM! Sad but true...and yes indeed; what are we going to do about it?

    • justmesuzanne profile image

      justmesuzanne 

      7 years ago from Texas

      Yeah, you are right about that, Stephen. We are really just a cash crop for the "powers that be". People don't want to face that fact because it is too terrifying. That's what allows the situation to exist. We are too easily pacified by PR after each crisis. If a group of people has a roof over its head, food in its stomachs and something to watch on TV, it's hard to convince them that hundreds of thousands of people starving to death or being massacred elsewhere didn't bring their fate on themselves.

    • profile image

      Stephen J 

      7 years ago

      Anyone interested in a further examination of the dysfunctionality inhrent in the broader 'International Aid' arena would do well to read "Lords Of Poverty', written by Gordon Hancock and published in 1989.

      Even though published more than 20 years ago, the myriad ways in which large format international aid organizations so often do more harm that good, and the terible dynamic that typically prioritizes the criteria for providing such aid more around rewards to the provider organizations and countries than to the ostensible beneficiaries of the aid; none of that has changed one bit in the intervening years.

    • PETER LUMETTA profile image

      PETER LUMETTA 

      7 years ago from KENAI, ALAKSA

      Izzy, they are part of the shadow world that controls the planet with money. In all countries the super rich and the mega corporations live in the shadows of our monetary and political systems allowing us to think we have some power, but we don't. The US Gov't is bought and paid for by the rich so you can imagine the third world countries are totally controlled by them. A good record of what they do and how they do it through the IMF and WB. Thanks for the info, Peter

    • Dolores Monet profile image

      Dolores Monet 

      7 years ago from East Coast, United States

      It sure seems as if the rich and powerful are amassing more wealth and power off the backs of the world poor. Sometimes I think about the future, about people 150 or 200 years from now, looking back at us and how we operate. What will they think of us?

      And people shake their heads at the protesters at IMF and World Bank conferences. I understand that one of them will hold a conference in Chicago in 2012.

    • justmesuzanne profile image

      justmesuzanne 

      7 years ago from Texas

      Excellent article, Izzy! The privatization of water and the private control of all food are topics that are of the utmost importance for all people, everywhere, and yet we seem unable to grasp the fact that there are entities who are dead-set on obtaining this power. Very good reportage on this nefarious goal of the World Bank! Voted up & awesome & shared! :)

    • IzzyM profile imageAUTHOR

      IzzyM 

      7 years ago from UK

      what are we going to do about them? They have the power but we are gaining the knowledge.

    • Paradise7 profile image

      Paradise7 

      7 years ago from Upstate New York

      The World Bank and the International Monetary Fund are basically corporate raiders in the corporate globalization scenario. The Battle in Seattle stopped the talks--temporarily. But they march on, with an economic stranglehold over the whole world. Great hub, definitely voted up. This information is true, devastatingly true.

    • IzzyM profile imageAUTHOR

      IzzyM 

      7 years ago from UK

      Yes thanks to the internet we are all becoming more aware of just who the IMF and the World Bank are, and they are extremely dangerous entities that we are paying for. I'm not even sure that they are two entities, despite being constantly described as such, but they seem to me to be one and the same thing. The power they hold is horrendous.

    • Tom Cornett profile image

      Tom Cornett 

      7 years ago from Ohio

      Any single entity with total financial control is extermely dangerous to the entire human race. They can enforce their agenda at will with debt as an iron fist. If the people don't regulate their power....they will regulate and finally, destroy ours.

      It is time to remove their thumbs from the purse.

      Great Hub, Izzy....thanks for posting it. :)

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