After Saddam, an IMF/World Bank regime?

The people of Iraq, who have had the misfortune of having been visited by one calamity after another, now face the prospect of the World Bank and the IMF restructuring and supervising their economy along neo-liberal lines. The fact that these institutions have been assigned the role of being the guardian of Iraq’s economy is a reflection of their key role in the process of fully integrating formerly recalcitrant states into a US-led global market economy.

Soren Ambrose and Njoki Njoroge Njehu

AT the African Social Forum in January, we were approached by a Somali who has been working doggedly for the last 15 years to maintain a non-foreign civil society presence in Mogadishu.  He said to us, ‘Given our circumstances, ‘I haven’t spent much time learning about the IMF and World Bank, but I’ve decided to start, because I know that once we do have a government, they will be our next challenge.’

Alas, he is probably correct.  Misfortune is seldom visited upon a people in only one form.  In recent years, the World Bank, eager to try its hand at any task, has sought to project itself as the financial guardian of ‘post-conflict’ societies.  In Bosnia, Serbia, East Timor, Mozambique, Rwanda, and most recently Sri Lanka and Afghanistan, the World Bank has honed its approach to states that have endured destruction of infrastructure, large-scale killings, and mass migration.  Now it appears that the Bank will be thrust into the spotlight in Iraq, charged with putting back together what United Nations sanctions, authoritarian neglect, and US military action have broken.

Second thoughts

But while the Bank has been eager to jump into those other countries, Iraq seems to have made its top officials think twice about their role.  They are not accustomed to dealing with situations where their masters - the G7 governments - are seriously split.  The divisions between the US and UK on the one hand and France and Germany on the other over the war in Iraq have for once made the Bank nervous about becoming a central player.  World Bank president James Wolfensohn apparently sees no benefit in having the trans-Atlantic split play out on his Board of Directors; the potential for the Bank to become a punching-bag or scapegoat is great. 

The tussle over whether the World Bank and the IMF would get involved in Iraq before UN recognition of a successor regime was staged at the institutions’ just-concluded spring meetings (12-13 April), and by all accounts the US won everything it wanted.  While the weekend started with representatives of the G24 (developing countries) rejecting the idea and insisting that the UN was the only source of legitimacy in Iraq, by the end of the weekend, IMF and World Bank officials were assuring reporters that they would be taking on the Iraq challenge, and would leave the worrying about technical niceties like UN recognition to others. 

And that, apparently, was what the US wanted.  A European Union finance ministers’ meeting the previous weekend had elicited statements from both sides of the divide - Spain and Germany - calling for a significant role for the international financial institutions (IFIs) in Iraq.  A few days later, US Treasury Secretary John Snow was calling for World Bank involvement too, and staged a meeting on 11 April with his French counterpart at which the two made public their agreement on the matter.  Although the French continued to talk about UN leadership, attention began to shift to the World Bank’s role.

There seems to be little doubt now (at the end of April) that the US will govern Iraq, though the showdown at the Security Council has yet to take place.  By occupying a middleman position in a still-simmering high-stakes political feud, Mr Wolfensohn’s anxieties are no doubt still acute.  And they should be:  what he most fears, we suspect, is having the international spotlight shine on long-overdue questions of power, domination, and legitimacy at the World Bank and IMF.  While the confrontation between the US neo-imperialists and their rivals in Europe probably belongs in the Security Council, playing it out at the IFIs would have the salubrious effect of exposing the uses to which those institutions are put, and at whose behest.  

That the conflict was downplayed in Washington suggests, alas, that the IFIs may represent a comfortable compromise for both sides - ‘multilateral’ enough both to shield the US from the sharpest charges of outright colonialism while still ensuring US control, and to shield the French from charges of total capitulation to US power.  And as things go wrong, the IFIs can serve as handy scapegoats - for after all, diffusing responsibility is one of their core functions in service to the G7. 

The US in particular may be in the market for a scapegoat, as its pledges to make both Afghanistan and Iraq whole again fall victim to President Bush’s - and the rest of the US’s - short attention span.  At the spring meetings the US made the surprise, though not very consequential, announcement that it would contribute an extra $100 million to the International Development Agency (IDA), the World Bank department that makes low-interest loans to the poorest governments.  Do not be surprised if, as Iraqi reconstruction or political recovery falters, President Bush points to support for the work of the World Bank as evidence of the US’s good faith.

The US has already tried to make a case for the cancellation of the debt burden accumulated during the Ba’athist regime in Iraq.  The stunning hypocrisy required to make this claim - we should recall that the US did not protest when the IMF greeted the downfall of Mobutu by suggesting that whatever new government was established should get working on its $14 billion external debt  -  should not blind us to the fact that the Iraqi people indeed should not be forced to pay that illegitimate debt.  Even if this gambit by Treasury Secretary Snow and Assistant Secretary of Defense Paul Wolfowitz was motivated more by spite toward Iraq’s biggest creditors (Russia, Germany, and France) than by a recognition that the US’s task as conqueror of restoring Iraq to economic health would be greatly hampered by the debt, the precedent established would be sufficient to make the demand for cancellation of illegitimate debt around the world unopposable. 

Imposition of market economy

There is still some wrangling to be done over whose multinational corporations get to carry out the reconstruction of Iraq, though it appears clear that the US will defend its right to make the final decisions.  What is not in dispute is what kind of economic future awaits Iraq.  Neither the French nor the US, nor the Russians, nor the South Koreans for that matter, are likely to have any hesitation about entrusting the imposition of a market economy on Iraq to the IMF and World Bank.  They have performed ably in other post-conflict countries and in the ‘transition’ countries of the former Soviet bloc, giving advice to inexperienced governments grappling with the cascade of choices and plans that must be made as they re-make their countries and confront the challenges of devastated infrastructure and lives.  Vulnerable governments are easier to coerce into accepting the full menu of neo-liberal economic measures, and none of the G7 countries have had occasion to complain about the creation of market economies open to exploitation by their multinationals and investors.  The people in Russia, Romania, Bosnia, East Timor, Mozambique, and other beneficiaries of the IFIs’ generosity may have complaints, but as the IFIs will gladly point out, they do not appreciate how much worse things might have been had the IMF and World Bank not been there to help.

Revolution, civil war, enduring invasion and conquest, or, in the unintentionally ironic phrase used by the US military to describe one of their operations, ‘enduring democracy’ (whether the fall of undemocratic governments or the imposition from outside of a more ‘democratic’ one):  none of these will purchase a country’s exit from today’s universal economic standard: neo-liberalism - freedom redefined as the freedom to consume and the freedom to be exploited by foreigners.

Instruments of homogenisation

The notion that the IMF and World Bank have for decades served as the modern-day instruments of imperialism, or neo-colonialism, is not new. But in each instance where a country, by persuasion or force, turns away from politics or economic policy that fails to submit to the US-led global market economy, it is always these institutions that serve as the instruments of homogenisation, yawning gaps between rich and poor, decapitated public sectors, and the sanctification of the profit motive. 

The example of Sri Lanka is instructive.  Although a brutal civil war has raged for nearly 20 years there, the country has been relatively lucky in that the infrastructure of all but the conflict zones has been relatively unscathed.  It has a functioning democracy (complete with a two-party system that offers choices as undifferentiated - and as unsavoury - as those in the US) and a well-established civil society sector.  It is, in other words, not as devastated, on the whole, as most ‘post-conflict societies.’ And yet the eagerness of its government and people to make good on the apparent success of the peace process has left it vulnerable to the agenda of the IFIs.  Of the 20 or so countries that have gone through the IFIs’ new ‘participatory’ process of designing a ‘poverty reduction and growth’ programme, Sri Lanka’s has been the most egregiously flawed.  None of the required civil society consultation took place, and World Bank officials have simply lied in a lame attempt to cover up the fact.  Once the programme was published, the Sri Lankan parliament was asked to approve 36 separate pieces of legislation in two months in order to demonstrate the country’s eagerness to comply with IMF/World Bank recommendations on privatisation, land titling, urbanisation, mining, and much more. 

Fortunately civil society organisations in Sri Lanka were able to stall over half of the legislation, and stir up a political debate about the conditions.  Afghanistan and Iraq, with no civil society experienced in interpreting IFI documents or in advocacy, are likely to be far more vulnerable than even Sri Lanka. 

Privatisation has become the highest priority for the IMF and the World Bank over the last few years - a development that is both natural for the institutions and a reflection of US policy.  The reconstruction of Iraq, with most of the work being decided on by a US military government without Iraqi involvement, will be carried out by companies chosen by the US and paid at rates determined by the US, at least some of which the US intends to recoup from Iraq’s oil profits in the future.  While to some the US-dominated reconstruction project after the US-led war may seem like rewarding the window-replacement company that sends out people by night to break windows, the reconstruction of Iraq, managed by President Bush’s and Vice President Cheney’s old comrades at Bechtel, Halliburton, and other multinationals, may well emerge as the leading example of privatised development yet seen.  The transition to an economy open to, and probably largely controlled by, foreign private companies, may start to seem natural. The World Bank will likely be left with three tasks after the US ships out: 1) overseeing, with the IMF, the adherence of a new Iraqi government to the neo-liberal conditions they will have signed onto; 2) managing, with non-profit organisations or others, the provision of services not deemed profitable by private interests; and 3) guaranteeing the re-development of oil production, a specialty of the World Bank, which funds a significant portion of the developing world’s fossil fuel production.

Increased resistance

The conquest of Iraq and its impending turn-over to the IFIs takes place against a backdrop of increased resistance to IMF/World Bank policies, particularly in Latin America.  Brazil has elected an anti-IMF president (though Lula, so far at least, has had to pander to the IMF); Argentina, having endured perhaps the most extreme IMF-caused crisis of any country, has a population determined to break with neo-liberal policies; Paraguay, El Salvador, and Peru have seen mass protests against privatisation resulting in significant victories; Bolivia’s anti-privatisation movement has generated broader anti-neo-liberal uprisings, and threatened to overthrow the government, much as the indigenous-led movements in Ecuador did a few years ago, before the election of an anti-IMF president there.  The people of South America, the first to be plunged full force into structural adjustment and neo-liberalism, have recognised after 20 years that it does not work, that its promised ‘short-term pain for long-term gain’  is actually just long-term pain.  Employment levels, prices, wages, and living conditions have all tightened. It seems the sad fate of the Iraqi people to emerge from one authoritarian dictatorship only to face the imposition of another, more amorphous one.  Perhaps, however, the more egregiously imperialistic process that has led Iraq to this point will help spur Iraqis and others around the world to reject a system that will turn a recent conquest into a source of cheap oil and cheap labour, and the site of hopes of ‘liberation’ dashed on the sharp edges of poverty and disenfranchisement.                         

Soren Ambrose and Njoki Njoroge Njehu are respectively Senior Policy Analyst and Director of 50 Years Is Enough: US Network for Global Economic Justice <www.50years.org>, a US-based coalition of over 200 organisations committed to the fundamental transformation of the IMF and World Bank.