The conditions attached to IMF and World Bank assistance continue to mandate increase market liberalisation and a reduced role for government. Yet, history has proven that these initiatives are by no means certain to raise living standards and achieve long-term development objectives.
The economic policies implemented by the IMF and World Bank frequently impose themselves as conditions attached to loans or financial aid. The majority of economic reforms imposed on developing countries include large-scale privatisation mandates. For example, when Bangladesh received a large credit line from the World Bank in 2005, 18 of 53 conditions attached to the loan required that Bangladesh (where 50% of the population lives below the poverty line) privatize its banks, electricity and telecommunication sectors— despite the fact that such conditions can make matters worse within poorer countries.
The World Bank is also known to impose conditions of trade liberalisation upon poorer nations. When Singapore was expelled from Malaysia in 1965 and thrust into an unwanted independence, it was a typical Third World country. Its per capita income of $500 was the same as Ghana’s at the time. Singapore’s per capita income has shot from $500 to $55,000 today, the largest increase any newly independent nation has enjoyed— meanwhile Ghana remains aid-dependant. Structural Adjustment Programs imposed on Ghana required the liberalisation of trade policies, largely causing the country to remain dependent on the export of raw materials at market prices— hindering the development of its own industries. Many of the conditions imposed upon African countries have actually become focused on lowering government social spending and diverting funds towards market liberalization. The World Bank and IMF essentially compel governments to drop spending on basic human necessities – which takes the form of eliminating food subsidies and reducing health and education spending. In such cases this financial ‘aid’ reveals its true nature as mere profit-seeking investment, with social progress being a secondary concern. The results of these conditions are lower wages, impoverishment for Africans and cheaper raw materials for multinational corporations.
Argentina provides another ideal case study for the effects of IMF and World Bank policies. In 1967, a military coup saw Argentina realign itself with the IMF after the previous government had terminated its relationship with the organisation. In 1969, the IMF proclaimed a successful stabilisation effort in Argentina based on an increase in its GDP and a reduction in inflation. While these economic indicators may have validated the IMF’s policies— they failed to improve the living conditions of the Argentinian people who had seen their wages fall by 11% in 1968. After a further decline in real wages in 1978, just 10% of the population had the economic means to afford the government’s shopping basket of basic goods and services. Figures in the 1980s reveal a blatant refusal by the IMF to balance the human cost of economic stabilization with the benefits of achieving economic targets. It is vital to bear in mind that such targets do not necessarily reflect the living standards of the average person— with a study in 1985 revealing 1/3rd of employed workers did not earn enough to feed a family of four. By 1998, massive ‘anti-IMF riots’ had broken out, sparked by conditional changes applied to the social-security system.
The lack of coherence between loan conditionality and development objectives is said to be a result of the IMF and World Bank’s governance structures, which enable dominant shareholders to utilize conditionality as a means to further their own economic and political interests. The actions taken by the IMF and World Bank have given support to the growing belief that these institutions systematically act in the interests of creditors and wealthy elites, at the expense of workers, peasants and the poor in general.