Debt, the IMF, and the World Bank: Sixty Questions, Sixty Answers

by Éric Toussaint, Damien Millet

Mainstream economists tell us that developing countries will replicate the economic achievements of the rich countries if they implement the correct “free-market”policies. But scholars and activists Toussaint and Millet demonstrate that this is patently false. Drawing on a wealth of detailed evidence, they explain how developed economies have systematically and deliberately exploited the less-developed economies by forcing them into unequal trade and political relationships. Integral to this arrangement are the international economic institutions ostensibly created to safeguard the stability of the global economy—the International Monetary Fund (IMF) and the World Bank—and the imposition of massive foreign debt on poor countries. The authors explain in simple language, and ample use of graphics, the multiple contours of this exploitative system, its history, and how it continues to function in the present day.
Ultimately, Toussaint and Millet advocate cancellation of all foreign debt for developing countries and provide arguments from a number of perspectives—legal, economic, moral. Presented in an accessible and easily-referenced question and answer format, Debt, the IMF, and the World Bank is an essential tool for the global justice movement.

Genres: Economics, Nonfiction, History

304 pages, Paperback

First published September 1, 2010

Reviews

[Catherine · Rating 4 out of 5]

Keeping in mind that the book's authors are part of CADTM, the Committee for the Abolition of Third World Debt, which informs their analysis, I found the book extremely clear and informative. Its question-answer format makes the information easy to navigate. Be prepared to find a lot of what you read infuriating.

The one drawback is that the majority of the data used in the book comes from 2007-2008, so as time goes by, it is becoming increasingly out of date. Yet, the arguments the data supports are largely principled arguments anyway, so the book is still valid. I would like to see if today's data further supports what they have argued.

[Suryashekhar Biswas · Rating 4 out of 5]

Helpful primer on debt as a tool for neocolonial control of the backward countries, including India. If we lose sight of how this tool is weaponised by the handful of powerful nations, we tend to lose sight of the fact that India, too, is a neocolonially oppressed nations, the ideological forebodings notwithstanding.

Need to revisit certain sections.

[Alexander Ruchti · Rating 1 out of 5]

Instead of “Sixty Questions, Sixty Answers”, a more accurate subtitle might be “Sixty Questions, Sixty Biased Opinions.”

The authors see behind every stone another neo-colonial ploy by the Western powers. The mental gymnastic that the two of them do is sometimes on the level of the circe du soleil. At one point, they argue that one defining reason for the US to raise interest rates in the 1979-81 period was to make investments in the US more attractive, thereby leading to capital flows towards the US and consequently making developing nations worse off. However, when Volcker raised rates in the US, he was doing so to combat galloping levels of inflation. The raising of interest rates plunged the US straight into a recession, with a clear uptick in US unemployment rates. Volcker felt it necessary to do to get inflation under control, even at the cost of bankruptcies and higher unemployment rates.
The authors also put the blame concerning non-sustainable debt purely on the lenders and barely address the fact that there is no lending without a borrower agreeing to the terms of the lending agreement.

As a side note, Joseph Stiglitz’s book “Globalisation and Its Discontents” is quoted so often, at least ten times, that I wish that I would have read Stiglitz’s book instead.

Lastly, the book is now also more than ten years old and it shows. Organisation’s like the “Green Climate Fund” aren’t mentioned. It therefore doesn’t even serve all that well as historical account on where we stand today when it comes to the debt landscape.

[Jon · Rating 5 out of 5]

Eric Toussaint is a historial and political scientist who seems to be largely focused on economic history, particularly around credit and debt. His is also a founding member and president of this rather amazing organization out of Belgium, CADTM (Committee for the Abolition of Illegitimate Debt), which focuses on debt cancellation, particularly in the so-called developing nations. And since 1990, the year it was founded, it has had some successes, all of which are detailed in this work.

Debt, The IMF, and the World Bank is a quick read and easy to digest. It is layed out as answers to sixty questions, such as What are the different kinds of debt for developing countries? or How does the World Bank work? or How ar ethe debt-related finacial flows directed? Overall what it describes is how the international debt system works (both public and private), why it works the way it does (in other words its history), and why debt cancellation is the right path forward.

On the realities of global of debt:

The relationship between debt and human development needs to be made clear. The debt mechanism enables the international financial institutions, the states of the North, and the multinationals to exert control over the economies of the developing countries and, for a derisory sum, lay hands on their resources and wealth, to the detriment of the local population. It is a new form of colonialism regulated by the implementation of Structural Adjustment Programs (see Q17 and Q18). Decisions concerning the South are not made by the South but in Washington (in the U.S. Treasury or at the head office of the World Bank or the IMF), in Paris (at the head office of the Paris Club—the group of creditor states of the North (see Q20) or in the London Club (which represents the big banks of the North—and does not always hold its meetings in London). This is why the fulfillment of basic human rights is not given priority. The priority is to satisfy economic, financial, and geopolitical criteria, such as debt repayment, opening up borders to capital and merchandise, and privileged treatment for countries allied to the great powers.

And not that the creditors of the collective west don't know this. Here are the findings of a commission set up by Congress in the year 2000:

The G7 governments, particularly the United States, use the IMF as a vehicle to achieve their political ends. Numerous studies of the effects of IMF lending have failed to find any significant link between IMF involvement and increases in wealth or income. IMF-assisted bailouts of creditors in recent crises have had especially harmful and harsh effects on developing countries. People who have worked hard to struggle out of poverty have seen their achievements destroyed, their wealth and savings lost, and their small businesses bankrupted. Workers lost their jobs, often without any safety net to cushion the loss. Domestic and foreign owners of real assets suffered large losses, while foreign creditor banks were protected. These banks received compensation for bearing risk, in the form of high interest rates, but did not have to bear the full (and at times any) losses associated with high-risk lending. The assistance that helped foreign bankers also protected politically influential domestic debtors, encouraged large borrowing and extraordinary ratios of debt to equity.

- International Financial Institution Advisory (or Meltzer) Commission

and here is the UN's UNCTAD in 2006:

The UNCTAD notes that far-reaching reforms undertaken by most developing countries in the 1980s and '90s, often at the behest of international financial organizations and lenders, did not deliver as promised. The reforms emphasized greater macroeconomic stability, greater reliance on market forces, and a rapid opening up to international competition. But in many cases private investment did not rise as predicted; many economies stagnated or even retracted; and many developing nations already struggling with high levels of poverty found that these steps toward liberalized economies increased rather than decreased inequality.

- UNCTAD (United Nations Conference on Trade and Development)

Once it can be seen the effects of strutural adjustment programs are well known and have been for decades, it becomes clear the debt is simple and naked lever of control.

The debt was invented by the devil. Go for a walk in Africa and ask where the debt is! No one knows where the debt we are being made to pay comes from. The debt is worse than AIDS. At least with AIDS there is hope for the future, whereas with the debt... Future generations are condemned to pay for it, not just the debt stock, but interests, too. I don't talk about the debt because I know we can't get rid of it. They mess about, they reschedule, they throw a few crumbs—it's like giving aspirin to a cancer patient.

- Abdoulaye Wade, president of Senegal, 2002

It also becomes clear why debt cancellation is an imperative:

Repaying the debt is an essential obstacle to satisfying basic human needs, such as access to clean water, decent food, basic health care, primary education, decent accommodation, and satisfactory infrastructures. Without any doubt, the satisfaction of basic human needs must take priority over all other considerations, be they geopolitical or financial. From a moral point of view, the rights of creditors, shareholders, or speculators are insignificant in comparison with the fundamental rights of five billion citizens.

The issue of the moral responsibility of the creditors was particularly apparent in the case of Cold War loans. When the IMF and the World Bank lent money to the Democratic Republic of the Congo's notorious ruler Mobutu, they knew (or should have known) that most of the money would not go to help that country's poor people, but rather would be used to enrich Mobutu. It was money paid to ensure that this corrupt leader would keep his country aligned with the West. To many, it doesn't seem fair for ordinary taxpayers in countries with corrupt governments to have to repay loans that were made to leaders who did not represent them.

- Joseph Stiglitz, 2002

[Maggie · Rating 5 out of 5]

Such a full and accessible breakdown/analysis of how the IMF, World Bank and World Trade Organization collaborate in the perpetuation and strengthening of debt as colonial weaponry and domination of Global South countries. I audibly gasped severally while reading this book:

"To date, the public authorities of developing countries have repaid their 1970 debt ninety-four times over, while at the same time the debt has multiplied by twenty-nine"

It is the immorality and plunder and slow violence and deaths of it all.

The authors discuss radical alternatives and historical precedents to this form of debt peonage, such as debt cancellation, Tobin tax, South-South bartering systems, Banks of/for Global South countries (along with examples of where/how these have been implemented/tried/failed and why they must be resuscitated, strengthened etc).

There was a palpable and necessary urgency and fire in this book.

[Nathan Paul · Rating 5 out of 5]

Great book for understanding international institutions and the debt crisis that has plagued the Global South since the 1970's. I really learned a lot from reading this book and would definitely recommend it to anyone interested in macroeconomics, international politics, human rights, or poverty. Great read!

[Mckinley · Rating 4 out of 5]

Helpful - short sections answering specific questions