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Impoverishing a Continent: the World Bank and the IMF in Africa

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Impoverishing a Continent: the World Bank and the IMF in Africa Impoverishing a Continent: The World Bank and the IMF in Africa By Asad Ismi ISBN 0-88627-373-0 July 2004 Impoverishing a Continent: The World Bank and IMF in Africa 1 Impoverishing a Continent: The World Bank and the IMF in Africa By Asad Ismi ISBN 0-88627-373-0 July 2004 $10.00 About the author Asad Ismi is a writer on international politics specializing in U.S. policy towards the Third World and the role of Canadian corporations there. The author of 90 articles, seven reports and a book, he has been published in 21 magazines including CCPA Monitor, Z Magazine, Covert Action Quarterly,, Briarpatch, and This Magazine. He has written reports for the Canadian Auto Workers, Canadian Labour Congress, Communications, Energy and Paper Workers Union, MiningWatch Canada, the Halifax Initiative Coa- lition and the NGO Working Group on the EDC. His reports include the ground-breaking Profiting from Repression: Canadian Investment in and Trade with Colombia. He is winner of a 2003 Project Cen- sored Award for his article “The Ravaging of Africa” (Monitor, October 2002) which was partly ex- cerpted from this report. For his publications visit www.asadismi.ws This report was commissioned by the Halifax Initiative Coalition (www.halifaxinitiative.org ) but does not necessarily reflect its views. 2 Canadian Centre for Policy Alternatives Contents Introduction................................................................................................................................................... 5 The World Bank and the IMF.................................................................................................................... 7 The U.S. Connection ............................................................................................................................. 8 Structural Adjustment ........................................................................................................................... 8 LIC-FLIC.................................................................................................................................................. 10 Adjusting Africa........................................................................................................................................... 11 Impacts of Adjustment ....................................................................................................................... 11 Zimbabwe.................................................................................................................................................... 14 Ghana ........................................................................................................................................................... 16 Cote d’Ivoire................................................................................................................................................ 19 Conclusion: Alternative Strategies.......................................................................................................... 21 Endnotes...................................................................................................................................................... 24 Appendix...................................................................................................................................................... 27 Impoverishing a Continent: The World Bank and IMF in Africa 3 4 Canadian Centre for Policy Alternatives Introduction Just between you and me, shouldn’t the World Bank be encouraging more migration of the dirty indus- tries to the LDCs [less-developed countries]?... I think the economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable and we should face up to that...I’ve always thought that underpopulated countries in Africa are vastly under-polluted, their air quality is probably vastly inefficiently low compared to Los Angeles or Mexico City...The concern over an agent that causes a one in a million change in the odds of prostrate cancer is obviously going to be much higher in a country where people survive to get prostrate cancer than in a country where under 5 mortality is 200 per thousand...The problem with the arguments against all of these proposals for more pollution in LDCs (intrinsic rights to certain goods, moral reasons, social concerns, lack of adequate markets, etc.) could be turned around and used more or less effectively against every Bank proposal for liberalization. – Lawrence H. Summers, chief economist of the World Bank, in an internal memo dated De- cember 12, 1991. Summers went on to become the U.S. Treasury Secretary in the Clinton Ad- ministration as well as president of Harvard University. (See Appendix). The World Bank and the International Mon- tural Adjustment Programs (SAPs). SAPs require etary Fund (IMF) are the two most powerful in- governments to: cut public spending,(including stitutions in global trade and finance.1 Since 1980, eliminating subsidies for food, medical care and the United States government which dominates education); raise interest rates, thus reducing ac- both bodies has used them to economically subju- cess to credit; privatize state enterprises; increase gate the developing world. The World Bank and exports; and reduce barriers to trade and foreign the IMF have forced Third World countries to open investment such as tariffs and import duties. These their economies to Western penetration and in- measures are supposed to generate export-led crease exports of primary goods to wealthy nations. growth that will attract foreign direct investment These steps amongst others have multiplied prof- and can be used to reduce debt and poverty. 2 its for Western multinational corporations while According to a three-year, multi-country (in- subjecting Third World countries to horrendous cluding three African countries) study released in levels of poverty, unemployment, malnutrition, April 2002 by the Structural Adjustment Partici- illiteracy and economic decline. The region worst patory Review International Network (SAPRIN), affected has been Africa. which was prepared in collaboration with the For two decades the World Bank and the IMF World Bank, national governments and civil soci- have forced developing countries to create condi- ety, SAPs have been “expanding poverty, inequal- tions that benefit Western corporations and gov- ity and insecurity around the world. [They have] ernments. These conditions are known as Struc- torn at the heart of economies and the social Impoverishing a Continent: The World Bank and IMF in Africa 5 fabric...increasing tensions among different social vatization of major national assets and essential strata, fueling extremist movements and services has also allowed multinational corporations delegitimizing democratic political systems. Their to remove resources and profits from countries as effects, particularly on the poor are so profound well as increase rates for water and electricity which and pervasive that no amount of targeted social has hit the poor the hardest. Fourthly, the cutting investments can begin to address the social crises of health and education spending under SAPs and that they have engendered.”3 the introduction of user fees for these services, SAPRIN explains this damning indictment by when combined with higher utility rates, has re- identifying four ways in which reforms under SAPs sulted in “a severe increase in the number of poor have impoverished people and increased economic as well as a deepening of poverty.” 4 inequality. Firstly, trade and financial sector reforms In the following sections we look at the ef- have destroyed domestic manufacturing leading to fects of conditions imposed by the World Bank massive unemployment of workers and small pro- and the IMF’s SAPs, on Africa generally and on ducers. Secondly, agricultural, trade and mining three African countries, Zimbabwe, Ghana and reforms have reduced the incomes of small farms Cote d’Ivoire, in particular. But first an overview and poor rural communities as well as their food of the World Bank, the IMF and structural adjust- security. Thirdly, labour market flexibilization ment. measures and privatizations have caused mass lay- offs of workers and resulted in lower wages, less secure employment, fewer benefits and “an ero- sion of workers rights and bargaining power.” Pri- 6 Canadian Centre for Policy Alternatives The World Bank and the IMF THE WORLD BANK or the International Bank for Reconstruction and Development (IBRD) and the International Monetary Fund (IMF) were created in 1944 by leaders of the 44 nations at the Bretton Woods Conference. The Bank was responsible for financing long- term productive investment in member countries while the IMF was to provide loans to overcome short-term balance of payments deficits. Western leaders feared an unregulated world market would mean a return to depression, poverty and another world war. 5 At Bretton Woods (located in New Hampshire, development assistance to middle-income and U.S.), “the decisive factor was the reality of Ameri- creditworthy poor countries; International Devel- can power.” With much of Europe destroyed by opment Association (IDA), the Bank’s concessional the Second World War, the U.S. was economically lending arm, focused on the poorest countries to the world’s most powerful country; thus a U.S. which it provides near zero-interest loans. Inter- vision prevailed at the conference and the World national Finance Corporation (IFC) which fi- Bank and the IMF were
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