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Regarding the political system, are the Lebanese citizens capable of real and absolute change? Not Likely 50.0% Probably 34.4% Not Sure 15.6% Total Votes: 96

IMF/World Bank: A Safe Haven for Profits and Decimator of Economic Independence
By Yousef Salama, Staff Writer

Toronto, Canada − The issue of equality comes into question when discussing the impact of the IMF (International Monetary Fund) and World Bank imparts upon the dependent nations to which it supposedly caters. By the end of the 1990s, the IMF and World Bank took in $77 billion more than they lent out1. This massive fiscal imbalance has forced dependent governments to adopt structural adjustment policies (SAPs), which force them to cut essential social services and divert from their own interests to pay off their debts, eliminating their ability to run a democratic system. Because the IMF and World Bank do not function democratically themselves, and their owners are essentially elitist Western governments, the countries they have usurped have become increasingly dependent for financial assistance. Furthermore, local financial markets run the risk of capital flight as the majority of global funds are funneled towards paper assets as opposed to physical investments. As a result of these speculative investments, the markets have become inherently unstable, while also forcing dependent countries to adhere to the Western investors. Without a major overhaul in its current structure and policy making decisions, both the IMF and World Bank will continue to drive developing nations further into debt and away from any form of real democracy.

The current structure of the IMF and World Bank is set up to benefit their Western investors (United States and the European Union) rather than the developing countries for which they were originally intended. The size of a country’s economy determines how many votes it has in IMF deliberations. Basically, this means that the wealthy control the decision making bodies at the IMF and World Bank and will seek to fulfill their own self-interests above those developing countries they support. This is evident in the fact that dependent countries are being forced to focus on debt payment rather than essential policies. African governments spend almost four times more in debt payments to Western creditors than they do towards health and education. Moreover, developing countries are forced to exploit environmental collateral to generate revenues, destroying natural resources which would otherwise provide future economic growth potential. Obviously, in not being able to utilize their own natural resources, nor fund basic human needs, the priorities of the IMF and World Bank towards dependent nations become secondary, and the institutions which fund them gain increasing power as a result of this lopsided transfer of wealth.  

With transfer of wealth comes transfer of power, and it is evident that where SAPs have been formalized, a concurrent financial liberalization has occurred, freeing capital inflows and outflows that were once in place. The dwindling future of developing nations has become clear: since wealthy Western countries imply almost absolute power in the aforementioned policy making process, they also threaten local financial markets. In general, their policies open the market to speculative investments, thereby destabilizing economies and disabling local governmental powers. In turn, this creates an environment in which capital changes hands almost instantaneously from those institutions that control it. The true nature of this capital trade is horrifying: within one business day, an unimaginable $1.5 trillion is exchanged in foreign currency markets. Because the inflows and outflows of capital face no restrictions, they are not tied down to the local economies in any sense, thus removing any commitment to any sort of concrete development in the country. When the markets reverse and investors bail out in their own self interests, these developing countries suffer severe consequences. Just as quickly as money flowed into the Asian economies between 1996 and 1997, it dissipated in 1998, and the results were devastating. In Indonesia, 20 million workers faced layoffs and over 100 million Indonesians were living in poverty, 250,000 clinics were closed, and infant mortality jumped 30% due to the loss of funds accessible for social programs. It is not a coincidence that the Asian crisis mentioned above was rooted in IMF and World Bank involvement: other crises have taken place in countries that have similarly adopted SAPs, including Mexico, Brazil, and Argentina. Clearly, the free-flow of capital in developing countries is neither economically nor socially beneficial to local governments; rather, it only feeds more power and wealth to its self-interested investors.

In order to reduce the inequalities within the current structure of the IMF and World Bank, new alternatives need to be established. Changes need to take place. Firstly, rather than allocating power to the few elite who control the IMF and World Bank, power should be distributed democratically to those countries who are most effected by the funds’ operations. Secondly, conditions must be removed from the aid provided—that is, the IMF and World Bank should not have control over governmental policies. In this way, developing countries should have the opportunity and time to rebuild their social infrastructures from within, while not having interference or pressure to pay off debts. Finally, in order to prevent another financial crisis like the one that happened in Asia, the threat of capital flight must be diminished. A good solution is the “Tobin tax” which imposes a tariff on all foreign exchange transactions − equating to a mere 0.1% to 0.25% of the trade. In an interview given to Der Spiegel on 2001, James Tobin stated the validity of his proposal:

“The idea is very simple: at each exchange of a currency into another a small tax would be levied - let's say, 0.1% of the volume of the transaction. This dissuades speculators as many investors invest their money in foreign exchange on a very short-term basis. If this money is suddenly withdrawn, countries have to drastically increase interest rates for their currency to still be attractive. But high interest is often disastrous for a national economy, as the nineties' crises in Mexico, South East Asia and Russia have proven. My tax would return some margin of maneuver to issuing banks in small countries and would be a measure of opposition to the dictate of the financial markets.”2

If implemented, the Tobin tax would eliminate incentive for speculative investments and potentially generate $150-300 billion annually for developing countries − ultimately wiping out the worst forms of poverty and maintain stability in the economic systems of the developing world. Unexpected support for the Tobin tax has even come from the multi-billionaire speculator George Soros, who stated that, “while the tax goes against his personal interests, he thinks that its introduction could have positive effects on the world economy”3.

Essentially, if any of these reforms were implemented, they would go a long way in helping to eliminate dependency on the West, while redistributing power, democracy (both economically and socially) and freedom to the developing world.  

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