international monetary fund.

What is the World Bank?
Created at the Bretton Woods Conference in 1944, the World Bank Group is comprised of five agencies that make loans or guarantee credit to 177 member countries. It states its aims are to help countries reduce poverty by making long-term loans to governments for projects such as dams or bridges, or to back economic reform programmes. The World Bank also produces many influential research reports and has affiliates which back private companies investing in poor countries.

What is the IMF?
Also created at the Bretton Woods Conference, the International Monetary Fund seeks to maintain an orderly balance of international trade and payments by regularly assessing economies and making short-term loans to those with balance of payments difficulties. Countries wanting to join the World Bank must first become members of the IMF.

Why are they so important?
The two agencies determine whether developing countries get access to aid money and how it is spent. Northern governments use them to carry out certain foreign and commercial policy objectives, but as multilateral (international) institutions they have the potential to foster cooperative international approaches on key issues such as environmental change.

What are Poverty Reduction Strategy ‘s (PRS)?
Poverty Reduction Strategy ‘s are a set of economic policies required by the World Bank and the IMF as a condition of loans these institutions make to developing countries. These programs often include "austerity measures" such as high interest rates and reduced access to credit, which result in slower economic growth as well as increased poverty and unemployment. Other adjustment policies include cuts in government spending on health care and education, increases in the cost of food, health care and other basic necessities, mandates to open markets to foreign trade and investment, and privatization of state-run enterprises.

Are Poverty Reduction Strategy’s working?
No, PRS has exacerbated poverty in most countries where it has been applied, contributing to the suffering of millions and causing widespread environmental degradation. And since the 1980s, adjustment has helped create a net outflow of wealth from the developing world, which has paid out five times as much capital to the industrialized countries of the North as it has received.

There are a lot of ‘qualified’ people at the World Bank and IMF who are experts in economics and other fields. If structural adjustment doesn't work, then why are they promoting it?

The wealthy Northern countries which control the World Bank and IMF dictate the agendas of these institutions, and their interests are best served by defending the status quo. Furthermore, the Bank's staff is currently dominated by economists who have spent their careers defending the validity of neoclassical economics, the foundation of the World Bank model of development. This orthodox view holds sacred the efficiency of free markets and private producers and the benefits of international trade and competition. Given the lack of accountability to outside parties, there is little incentive for the Bank and IMF to alter the design of structural adjustment, even when faced with mounting evidence attesting to the failure of these programs.

Who makes the decisions?
Decisions at the World Bank and IMF are made by a vote of the Board of Executive Directors, which represents member countries. Unlike the United Nations, where each member nation has an equal vote, voting power at the World Bank and IMF is determined by the level of a nation's financial contribution. Therefore, the United States has roughly 17% of the vote, with the seven largest industrialized countries (G-7) holding a total of 45%. Because of the scale of its contribution, the United States has always h ad a dominant voice and has at all times exercised an effective veto. At the same time, developing countries have relatively little power within the institution, which, through the programs and policies they decide to finance, have tremendous impact throughout local economies and societies. Furthermore, the President of the World Bank is by tradition an American, and the IMF President is a European.

How is it that U.S. business and other companies benefit from the lending programs at the World Bank?
Development projects undertaken with World Bank financing typically include money to pay for materials and consulting services provided by Northern countries. U.S. Treasury Department officials calculate that for every U.S.$1 the United States contributes to international development banks, U.S. exporters win more than U.S.$2 in bank-financed procurement contracts.

Why is this bad?
Given this self-interest, the Bank tends to finance bigger, more expensive projects - which almost always require the materials and technical expertise of Northern contractors - and ignores smaller-scale, locally appropriate alternatives. The mission of the World Bank is theoretically to alleviate poverty, not provide business for U.S. contractors. Unfortunately, this is what the World Bank and the IMF do in reality.

What can I do?
International Financial institutions are running scared at the moment, because of the massive vocal public protests that have taken place world-wide over the last decade. There are many things that you can do to join the growing global movement against institutions like the World Bank and IMF, the most important thing is to get active.

You Can Make a Difference!

    * you can join or start a group that actively opposes such institutions, like Friends of the Earth
    * you can organise or join a protest or action against them
    * you can write articles, or hold a public forum or talk on the issues
    * you can write to your local paper’s letters to the editor page

This fact sheet was created with modified information provided by;

Friends of the Earth International:
http://www.foei.org

Peoples Global Action:
http://www.agp.org

Corpwatch:
http://www.corpwatch.org

Global Exchange:
http://www.globalexchange.org