On November 30, 2019 (fondly remembered on the Left as N30), we celebrated the twentieth anniversary of the iconic 1999 anti-World Trade Organization (WTO) protests in Seattle where many of today’s activists came of age politically. The movement has been heralded by many for popularizing the sort of decentralized direct action which has since characterized internet-era uprisings from Occupy to the Arab Spring.
But N30’s innovations were not just tactical. Described in its own day as the “anti-globalization” movement, N30 has since come to be understood as the origin point of a new Left internationalism suited for a post-Communist world. The students, trade unionists, environmentalists, and Global South activists who burst onto the political scene at N30 understood that all of the social, economic, political, and ecological crises we face both at home and abroad share the same root – a global economic system based on the exploitation of people and the planet.
What was even more remarkable about N30 was its chosen target. Most Americans, then as now, certainly didn’t have reason to experience the WTO’s presence in their day to day lives the way they might for labor and environmental concerns. By converging upon the WTO, N30 protests showed that challenging capitalist destruction even at a local scale requires targeting the pathways of capital’s global coordination. Thus, N30 explicitly connected capitalism in the Global North (e.g. the disappearance of manufacturing jobs in the U.S.) with neocolonialism in the Global South (e.g. the WTO’s push for deregulation of labor and nature in the Third World).
This attention to the institutions and structures that keep capital moving around the world did not begin or end in Seattle. As early as 1988 West Berlin saw a 20,000 strong protest against the World Bank and International Monetary Fund (IMF)’s “crimes against humanity” in the Global South, where demonstrators blocked limousine convoys and most of West Berlin’s taxi drivers went on strike as an expression of solidarity. Some 17,000 police officers – the greatest number of police since the Second World War – were deployed against the demonstrators. A decade later came London’s January 1999 “Carnival Against Capitalism,” Washington DC’s April 2000 and Prague’s September 2000 anti-IMF and World Bank protests. For a time, no global institution could convene without police protection, and all left clouds of tear gas and mass arrests in their wake.
Since the early 2000s, that energy has dissipated. This development has been interpreted in different ways. Some say that the energy was redirected to anti-war protests, while others say the movement actually succeeded, citing everything from the WTO’s poor health to the creation of World Social Forums to debt cancellation policies to Occupy to the rise of Bernie Sanders. While it may be true that the protests fueled the strengthening of a U.S. Left, we must admit that the focus on global institutions has declined sharply. Today, anti-IMF protests are unseen and many may well believe that “the World Bank is a global development cooperative” rather than an instrument of economic warfare. Even as social-democratic demands like universal healthcare and a wealth tax gain ground, global economic governance and institutions like the IMF and World Bank have once again retreated to the shadows, not only failing to evoke outrage in the Global North but falling out of the political frame altogether. Responding to a far right agenda of “Corporate America First,” the Left has tried to put “Working America First.” But it has not really interrogated what global equality and justice would look like beyond the occasional condemnation of a coup here or celebration of a protest there.
We must not fall into the trap of imagining that a global anti-capitalist movement can emerge on the strength of sloganeering (“workers of the world unite”) without learning about and fighting the specific history of U.S. and corporate economic imperialism abroad. With the historic candidacy of Bernie Sanders, the time is ripe to reassess the meaning of global Left solidarity and to ask not only which global struggles we must say we are in solidarity with but what structures and institutions we must go up against to fight for a substantive socialist internationalism worldwide.
The rest of this article lays out a brief history of the World Bank and the IMF (together known as the Bretton Woods institutions) as two key institutions of capitalist internationalism. I show that since their establishment in the mid-twentieth century, their pro-capitalist, pro-U.S. agenda has impoverished the vast majority of the planet’s most vulnerable inhabitants. After laying out this history, I discuss what an anti-Bretton Woods Left would look like, arguing that we must renew the global justice energy of Seattle and also back up the energy with specific understandings of what is wrong and how to fight it.
Who Is Global Economic Governance For?
From 1981 to 2017, the number of the world’s poor rose by one billion people. This rise in global poverty has been discussed by scholars such as Sanjay Reddy, Camelia Minoiu, Arjun Jayadev, and Rahul Lahoti, in addition to being thoroughly documented in Jason Hickel’s compelling new book The Divide. But it is not a fact that we would never even learn if we relied on numbers produced by the UN or other global bodies. This is because the very same institutions which want to claim the end of poverty have long been responsible for reproducing it. While claiming to prioritize development aid to the Global South, global economic institutions have engineered a world where the net flow of money is from poor to rich countries. For every dollar of aid poor countries receive, they send $24 back to rich countries in net outflows. Poor countries have been “developing” rich ones year after year, not the other way around.
The World Bank and IMF, both of which turned 75 in 2019, are tremendously important to this story. The Bank alone has a staff of 10,587 people. In 2017, it made loans and investments of $59 billion across the world. Since its founding it has lent about $1 trillion. Any debt is always the establishment of a power relationship and this is the case with the Bank as well. Its loans buy it influence over the economic policy of debtor countries, especially since no country is able to borrow from the World Bank without becoming susceptible to IMF conditions on and management of its economic performance. With the Bank as “good cop” and IMF as “bad cop,” we have reached a situation where, according to the UN, the richest fifth of the world’s population earned some 80 times more than the poorest.
One way to understand the power of the Bretton Woods institutions is to juxtapose an early case of their lending with a later one to understand how their power has grown since they were established in July 1944. In 1947, the Bank’s second president, John McCloy, approved a post-war reconstruction loan to France on the condition that it balance its budget, increase taxes, and cut luxury imports under U.S. supervision. France protested this as an infringement of sovereignty but acceded to all the conditions, including implicit ones like the removal of Communist leaders from Cabinet under the orders of the U.S. State Department. By contrast, in 1989 Jordan stopped making payments on its bilateral loans and approached the Bretton Woods institutions to reschedule its debt payments. In return for a five year plan to cut subsidies and privatize public goods, the IMF gave Jordan $125 million and the World Bank gave it $100 million. The price of fuel, bread, rice, milk, and sugar skyrocketed and protests broke out which cost many lives.
We can note four salient changes between 1947 and 1989. First, when the U.S. government and its key allies gathered at the Bretton Woods conference in New Hampshire, their aim was the economic restoration of war-torn Europe. The IMF provided short-term loans to offset balance of payments deficits and the Bank provided long term, lower-interest loans for rebuilding destroyed infrastructure. As a 1979 Senate Committee report readily acknowledges: “No arguments were made that these agencies would have a beneficial impact on economic development and growth in poor countries, and indeed [they] were not originally designed for that purpose.”
Second, in the early years Bretton Woods institutions were very cautious and risk-averse about lending and only lent when they felt assured of full and timely repayment. In contrast, by the 1980s their lending practices were rather profligate. This was because investors’ profits no longer came from the total repayment of debt but rather from the interest accrued during endless debt refinancing.
Third, the early history of Bretton Woods institutions had nothing to do with the thing for which they are now best known: poverty alleviation. Until the 1960s, lending went almost exclusively to capital projects – white elephants like dams and highways which were sure to yield safe returns. By contrast, since the1980s, an increasingly risk-immune World Bank and IMF have lent freely toward (privatizing) social sectors like health and education in addition to more profitable sectors like energy.
Finally, the early Bretton Woods institutions were concerned with keeping government spending up so as to avoid a depression, an agenda which has been totally reversed as the push to reduce all government spending took over in the 1980s.
All these significant changes in how they profit must be understood in context of the Bretton Woods institutions’ remarkable consistency in who they profit and whose interests they serve. As the third president of the World Bank (and former Chase bank executive) Eugene Black openly acknowledged:
Our foreign aid programs constitute a distinct benefit to American business…foreign aid provides a substantial and immediate market for United States goods and services… [it] orients national economies toward a free enterprise system in which United States’ firms can prosper.
The importance of these goals hasn’t changed, only intensified. Today’s Bretton Woods institutions remain committed to opening markets for big U.S. business and to defending U.S. lenders and investors abroad. They also remain tied to U.S. military and strategic interests, rewarding allies and punishing detractors.
The Silent Subprime Crisis: 1968-2020
Profiting off of Third World debt is a relatively new phase in the operations of the World Bank and IMF, and one that merits a closer look. The roots of this crisis, like the roots of the global neoliberal turn, lie in the 1970s. In the U.S., that decade opened in with falling rates of corporate profit, a Treasury strained by an unwinnable war in Vietnam, and intense social upheaval at home. When the OPEC cartel’s oil price hike was added to this explosive mix, things escalated very quickly. As Damien Millet and Eric Toussaint explain in their book Who Owes Who, “From 1973, the increase in oil prices…brought in comfortable revenues to the oil-producing countries which in turn placed them in Western banks. The banks offered to lend these ‘petrodollars’ to the countries of the South, with the incentive of low rates of interest.” Western banks’ investment motives dovetailed with Western governments’ desire to export more of their overproduced goods to the developing world, which it could only afford to buy with debt. Thus began the era of “go go banking,” where banks like Citibank and Chase would fly agents around the world to push loans onto Third World leaders, increasingly without much regard to their ability to repay.
The architect of this early subprime debt market was none other than Robert McNamara, former Ford Motor executive and the Secretary of Defense responsible for the U.S. invasion of Vietnam. Once appointed World Bank president from 1968 to 1981, McNamara was no less war-like in his approach to development lending. As Michael Goldman has shown, in his book Imperial Nature, McNamara was the president responsible for aggressively expanding the Bank’s lending portfolio. He did so ingeniously. McNamara turned to financial markets (e.g. European pension funds) to fund all new lending without requiring any paid-in capital from the U.S. and other economic powers. He managed to do this thanks to the rising hunger of investors for new venues of assured profit, thus insulating the World Bank from U.S. government funding and associated critics who worried about the viability of the Bank’s new “soft” portfolio of Third World poverty alleviation loans. Lending now became less cautious and less restricted to capital heavy projects, spreading to “risky” sectors like agriculture. McNamara expanded the Bank’s personnel by 120% and assessed his staff for promotions based solely on the size and turnover rate of their loan portfolio. As a result of his extraordinary efforts, the Bank granted more loans in his first year term than during its first 22 years combined. Right alongside their private go-go banker counterparts, World Bank staff got busy inventing, justifying, and selling new projects to poor countries.
A deeply indebted Third World thus came into being by the beginning of 1980. While interest rates were low, loan repayment continued. But in the early 1980s the Volcker shock changed everything. Paul Volcker’s tight-fisted monetary policy aimed at reducing inflation at all costs, causing interest rates in the U.S. to soar from 4-5% in 1970s to over 19% in 1981. This not only caused a severe recession at home but had devastating effects abroad. The low-interest loans that McNamara and his banker friends had pushed onto the Global South ballooned to unpayable proportions. Between 1968 and 1982, debts multiplied by a factor of 12, going from $50 billion to $612 billion. Debt stocks quadrupled, going from $400 billion in 1970 to more than $1.6 trillion in 1982. In many developing countries, debt levels rose to over 50% of GDP and to over 80% of tax revenues. In August 1982, Mexico reached the brink of default, precipitating the next and perhaps most deadly phase of the debt crisis.
“If we go back to the 1820s, the 1870s, and the 1930s,” Patrick Bond points out, “it is obvious that the periodic build-up of foreign debt required mass defaults, typically involving a third of all borrowing countries.” Against this backdrop, what happened in the debt crisis of the 1980s was truly extraordinary, as Bond explains:
The World Bank and the IMF have effectively centralized creditor power since the early 1980s. During earlier mass defaults, no such centralizing device existed, so individual sovereign debt-bondholders in London, Paris and New York took the hit. During the 1980s-90s, in contrast, Washington ensured the creditors were repaid, no matter how odious or foolish their loans, and the hit was taken by the people of developing nations.
The IMF did indeed launch a full-blown creditor advocacy campaign. It gave out new loans with which debtor countries could repay their private creditors, always insisting upon continual interest payments. Even speculative private investors, who were often the cause of economic volatility in developing countries, were to be repaid in full. Loans taken out by private entities in developing countries likewise had to be repaid, either by private borrowers or, incredibly, by their governments. Not only did the IMF refinance odious private loans to developing countries, it paved the way for new ones. IMF loans given to defaulting countries often did not cover the entire amount needed, thus merely acting as a “seal of approval,” a sort of insurance policy for additional private loans which were guaranteed repayment at all costs. Twenty-one of the largest U.S. banks took advantage of the free insurance, lending over $5 billion to Brazil and Mexico each to hedge against prior defaults. The World Bank soon joined in the fun of funneling more odious loans into developing countries while extracting interest payments for Western bondholders. Against all this collective action on the part of creditors, it was made very clear that debtors’ demands (or more appropriately, entreaties) would only be entertained on a case by case basis.
But this was not all. Not only did the Bank and IMF bail out private lenders and perpetuate a debt cycle, they also began the draconian Structural Adjustment Programs (SAPs) under which loan refinancing could only be obtained in exchange for market-fundamentalist reforms. A non-exhaustive list of such reforms includes privatizing basic services & introducing user fees for them; removing subsidies on everyday foodstuffs; removing tariff and customs protections; freezing government employee salaries and cutting down public sector jobs; devaluing currency; creating an export-oriented economy dependent on volatile markets; increasing foreign corporations’ market-shares; liberalizing banking, insurance & even defense sectors; removing labor protections; taxing the poor and middle class, not the rich; keeping high interest rates to attract private capital, impoverish local borrowers, and maintain the value of foreign debt, and more. Additionally, all of these measures were to be adopted without any input from citizens of borrower countries, which amounted to the Bretton Woods institutions undemocratically rewriting legislation, restructuring agencies, and reforming national budgets, all so they could pump out new loans used to repay already-unjust old loans.
Despite all these “adjustments,” which were ostensibly meant to reduce sovereign indebtedness, the debt crisis only got worse. As of 2006, Third World debt stands at $3.2 trillion. By most estimations, the debt has already been repaid several times over. For every $1 owed in 1980, poor countries have repaid $7.5 and still owe $4. Global South countries have paid $4.2 trillion in interest payments since 1980. By 1997, daily debt-service payments reached $717 million. In most indebted countries, up to a third of GDP has been sent off to service debts.
Meanwhile, citizens in over a hundred countries have faced devastating human consequences. The economist Robert Pollin estimates that Global South countries lost some $480 billion in GDP per year from 1980- to 2000 thanks to SAPs. Agrarian studies scholar Raj Patel and sociologist Philip McMichael point out that 146 food riots took place between 1976 and 1982, peaking between 1983 and 1985 as a result of SAPs. As sociologist Sarah Babb notes, between 1988 and 1994 the governments of the poorest countries transferred more than 3000 entities from public to private hands. Anthropologist Jason Hickel points out that the World Bank alone privatized more than $2 trillion of assets in developing countries between 1984 and 2012.
What this means is that many countries now spend more on debt servicing than on providing basic services to citizens. The historian Vijay Prashad notes in his book The Darker Nations that sub-Saharan African nations spent four times more on interest payments than on healthcare, and the New Economy Foundation observes that countries like Lebanon are spending more of their government budgets on debt service than on health and education combined. As a result of this SAPed world, universal basic services have withered away; small farmers and unorganized workers have lost assets, wages, jobs, and access to food and shelter; and already precarious groups like women and minorities are faring worse than ever. While national elites enrich themselves with commissions from selling off state services and corporations get rich from new profit streams, the poor barely survive. From time to time, everyday people rise up in fury and overthrow governments, but the international austerity machine behind it all, and the loans it continues to use as weapons, remain untouched.
What Global Justice Needs to Mean if it’s to be Global
Why does all this matter to a U.S. socialists today? It matters because the Bretton Woods institutions are a machinery of war on the world’s poor and working classes run by U.S. elites. The World Bank and IMF are headquartered in Washington, DC. Their membership includes 189 countries but they practice a “one dollar, one vote” model so the U.S., with the biggest GDP and 15% of votes, retains effective veto power over all decisions. Presidents of the World Bank are always American and Presidents of the IMF are always from Western Europe. The World Bank presidency is a prime example of the revolving door between Bretton Woods institutions and big banks, corporations, and the U.S. military, with presidents almost always coming from long careers in big business, Wall Street, and U.S. security services. As if this were not enough, until 2018 the Bretton Woods institutions enjoyed immunity from all lawsuits under the 1945 International Organizations Act. In 2018 the U.S. Supreme Court ruled that the World Bank’s private sector arm was not subject to this immunity, but the ramifications for the rest of the Bank and for the IMF are not clear.
By far the most important form of immunity that the World Bank and IMF enjoy is from U.S.voters, on whose behalf they supposedly “develop” poor countries. No Congress or Senate votes are necessary to approve loans backed by these institutions, nor are any votes necessary for imposing austerity measures on other countries. As an arm of the U.S. Treasury Department, Bretton Woods institutions sit safely in the executive branch, insulated from all democratic scrutiny and accountability. Indeed, the Bank’s habit of never having its power questioned is starkly visible in the anecdote below, told by the authors of the book Reinventing the World Bank:
When we contacted the Bank to invite the people we felt could best engage the issues we wanted to examine, we were referred to the Public Relations office, which expressed considerable surprise and dismay that a conference had been organized on the Bank without involving the institution from the start. “It’s like having all your neighbors gather to talk about what’s going on in your house,” a senior staff member in the office complained. “Perhaps so,” we responded, “with the small difference that all your neighbors pay your mortgage.”
No fight for socialism is complete without fighting this shadow government apparatus which has determined the fates of the majority of the world’s people for generations. Nor is this an abstract struggle -many practical measures can be implemented to rein in their power. The U.S. Left must demand that the government bring these institutions under the scrutiny of democratically elected, and especially local, officials in the U.S., and eventually in Global South countries. The institutions, if they are to continue existing, must be thoroughly democratized, with representatives voted in especially by vulnerable constituents from all member countries. All structural adjustment conditionalities must be suspended with immediate effect. All sovereign debts must be taken off bond markets, made untradeable and non-interest bearing, and then cancelled in their entirety.
These are not new suggestions. Organizations like Jubilee and CADTM have been agitating for these demands for decades and all democratic socialists must join their struggle. Alongside anti-debt agitations, we must join organizations like Justice is Global in demanding a global minimum wage and a global corporate and wealth tax, because only when the global race to the bottom ends can the effects of decades of austerity be counteracted. Reparations can then flow in the form of taxed wealth from large corporations, investment banks, and hedge funds towards local, elected governments in the South for the purpose of rebuilding public infrastructures and undoing the erosion of worker and commons protections.
Let’s conclude by returning to 2000 to see how what we’ve now learned changes things. In the aftermath of N30, an anti-Bretton Woods protest was planned for September 26, 2000 (S26). In the lead-up to S26, Czech President Vaclav Havel offered to broker talks between then-World Bank president James Wolfensohn and protestors. However, no talks ever materialized, in large part because despite targeting a World Bank meeting, most protestors had no coherent notion of what they’d say to or demand from the World Bank. Had an anti-debt organization like Jubilee was invited, demands would have been clear and straightforward. As such, this was an opportunity for real solidarity wasted because protestors didn’t know how to use their spotlight to challenge or expose the actual institutional mechanisms of capitalist imperialism. We must organize so that this time around when spotlight returns to Left internationalism, we can do better, for our sakes and for all those on whom the spotlight never shines.