On the World Bank as an Agent of Economic Imperialism By Rebecca Eve Rolfe A thesis submitted in partial fulfillment of a Master of Arts degree in International Development Studies Saint Mary's University Halifax, NS © Rebecca Eve Rolfe, 2008 Submitted December 15, 2008 Examining Committee: Dr. Henry Veltmeyer (Supervisor) Dr. James Sacouman (First Reader) James Petras (External Examiner) Library and Bibliotheque et 1*1 Archives Canada Archives Canada Published Heritage Direction du Branch Patrimoine de I'edition 395 Wellington Street 395, rue Wellington Ottawa ON K1A0N4 Ottawa ON K1A0N4 Canada Canada Your file Votre reference ISBN: 978-0-494-50625-7 Our file Notre reference ISBN: 978-0-494-50625-7 NOTICE: AVIS: The author has granted a non­ L'auteur a accorde une licence non exclusive exclusive license allowing Library permettant a la Bibliotheque et Archives and Archives Canada to reproduce, Canada de reproduire, publier, archiver, publish, archive, preserve, conserve, sauvegarder, conserver, transmettre au public communicate to the public by par telecommunication ou par Plntemet, prefer, telecommunication or on the Internet, distribuer et vendre des theses partout dans loan, distribute and sell theses le monde, a des fins commerciales ou autres, worldwide, for commercial or non­ sur support microforme, papier, electronique commercial purposes, in microform, et/ou autres formats. paper, electronic and/or any other formats. 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Canada Contents Abstract v Acknowledgements vi INTRODUCTION 1 CHAPTER I: BIRTH OF A TRAGEDY 16 Political and Economic Conditions Preceding Bretton Woods 17 The United Nations Monetary and Financial Conference (1944) 19 The Structure and Agencies of the World Bank Group 22 The Changing Role of the World Bank from Reconstruction to 'Development' Financing 30 US Dollar Hegemony: The Global Economy as Force Multiplier 34 1980s Neoliberalism and Adjustment 37 Arming For War on Poverty 40 CHAPTER II: A MODEL FOR FAILURE? 44 Economic Growth and Development 48 Defining and Measuring Poverty 54 Development Aid for Poverty Reduction 63 A Pre-Mortem of 'Success' and 'Failure' of World Bank Development Aid 70 CHAPTER III: STRUCTURAL AND POLITICAL ECONOMY OF IMPERIALISM 77 The Economic Core of Imperialism 79 The Necessity of Imperialism 88 ii Imperialism and Globalization 91 The Centrality of the Imperial State 98 The American Empire 102 The Imperiled State 106 CHAPTER IV: ADVENTURES IN POVERTY FIGHTING - DEPLOYING 'WEAPONS OF MASS SALVATION' 123 The World Bank's 'War on Poverty': Evolution of a Crusade 129 North-South Aid Flows and the Current Status of the Millennium Development Goals 135 The Historical Paradox of 'Development': Aid, Adjustment, Debt and Debt Relief 140 Foreign Direct Investment and the Multinational Corporation 156 World Bank Adjustment, Agriculture and the Current Food Crisis 165 Privatizing Human Rights to Water in Ghana: Instruments of Dispossession 171 Iraq: Misadventures in Development 178 CHAPTER V: THE WORLD BANK AS AN AGENT OF US ECONOMIC IMPERIALISM 197 American Foreign Aid Doctrine and Motives 206 American Dominance at the World Bank Group 214 Tied Aid and Debt: Why the World Bank Matters to the United States 227 Reverse Aid: The Repatriation of Capital 237 Economic Imperialism and the War on Poverty: Structural Paradox and Perverse Deceptions 249 The Success of World Bank Development Aid 257 iii CONCLUSION 263 References 271 IV Abstract "On the World Bank as an Agent of Economic Imperialism" By Rebecca Eve Rolfe After more than 60 years of 'international cooperation for development' (foreign aid) the results have been negligible. Given this momentous and continued failure of the global war on poverty, led by the World Bank, this thesis raises and addresses serious questions about the dynamics of the World Bank-led campaigns aimed at redressing the problem. It is argued that the World Bank's stated agenda of fighting poverty is an ideological cover for its hidden agenda to advance powerful economic and geopolitical interests of the United States, that is, the World Bank in effect is organized as an agency of U.S. imperialism. This thesis explores the political economy of the World Bank's War on Poverty through the application of development aid and investment, and resulting debt and capital repatriation, with special focus on the nature of the imperial state. Evidence is provided to support the argument that the World Bank's 'war on poverty' is ineffective in reaching the targets set forth in the Millennium Development Goals precisely because poverty alleviation is not its main concern or real agenda. The policies that the World Bank has espoused in the name of 'globalization' and 'development', in the guise of 'international cooperation for development', have advanced the interests of powerful economic and political interests within the U.S. imperial state rather than the world's poor. It is argued that this is not incidental but rather a reflection of the imperialist agenda behind the World Bank's policies. December 15m, 2008 v Acknowledgements I thank Henry Veltmeyer, Jim Sacouman and James Petras for serving as my thesis committee. I also thank my family for their continued support and encouragement. Mom and Dad.. .1 guess I owe you a few dollars. vi Introduction After more than 60 years of development via enormous financial resources and economic growth-driven policies aimed at poverty reduction, the results have been negligible and it could even be argued that development aid (or Official Development Assistance) under conditions prevailing in the global economy has, if anything, perpetuated the conditions of poverty and inequality. For many advocates of development, aid delivered through prominent International Financial Institutions (IFIs), a necessary (but certainly nowhere near sufficient) condition for poverty reduction is engagement in the global market where the benefits from globalization and other free-market instruments purport to advance the process of redistribution. The problem with understanding how international or 'global' agencies and drivers of the international economy relate to the presumed goal of poverty reduction is that the actions and policies required for poverty reduction are generally in conflict with the national interests of the United States: the prevailing super-power on the global stage. The issue becomes how to reconcile the national interests (which the US state is bound to relentlessly pursue) and the concern in the global 'development community' to reduce the pervasiveness and disastrous conditions of global poverty. Often enough this presents somewhat of a paradox where the motives of aid donors and political directives are viewed as being inapplicable to effective poverty reduction within the historical and current contexts of American power. As a central agency of 'development', the World Bank claims to be an institution dedicated to serving as a catalyst for innovative market-based solutions for reducing poverty. However, extreme poverty and global inequalities persist now more than ever. In 1 the first years of the 21s Century "over half of the world's population (52.8% or 2.7 billion people) lived on less than US$2 a day" (World Bank, 2004a: 3). Despite the most favorable predictions for economic growth by the World Bank and others, they confess that 2.1 billion could remain trapped in extreme poverty by 2015 (World Bank, 2004b: 11); the same time frame given by the Millennium Development Goals to cut extreme poverty in half. Evaluating definitions, measures, programs and policies aimed at the reduction of pervasive global poverty in a globalizing economy must consider the power dynamics of domination over the 'development' paradigm. The World Bank continues to insist that economic growth is good for the poor, and other international financial institutions require the institutionalization of what are known as neoliberal economic policies which include liberalized financial markets, a reduced role of government with mass privatization of state institutions, and free trade as conditions in order for countries to meet eligibility for aid loans. These measures are typically part of what are called Structural Adjustment Programs (SAPs). But in spite of massive resources and the 'failure' of the World Bank's War on Poverty, the present work will get at the root of the false dialectic, where on the one hand, aid is intended to fight poverty, and on the other, the results of anti-poverty strategies suggest the opposite intent. With these considerations in mind, the problematic of this thesis is to "provoke serious questions not about the nature of the problem of poverty, which