The World Bank and International Monetary Fund (IMF) have wielded great power over developing countries for the past three decades. Yet it is now widely acknowledged that the neoliberal policies forced on the global South by these two institutions were responsible for increasing poverty and causing economic stagnation across the developing world during the 1980s and 1990s - the two 'lost decades' of development. The Bank and Fund have tried a public relations makeover, rebranding themselves as fellow combatants in the 21st century fight against global poverty. Yet mired in scandal and with their policies largely unchanged, the two institutions now face a crisis of legitimacy.
The World Bank and IMF have attracted intense criticism for the damage caused by their policy prescriptions to developing countries. The World Bank's own internal evaluations have acknowledged the failures of these policies over the 1980s and 1990s. In country after country, the privatization and trade liberalization programmes of the Bank and Fund led to structural dislocation and economic stagnation, with dramatic increases in poverty as a result.
Yet even today the Bank and Fund continue to force these same failed policies on developing countries as a condition of receiving their loans or debt relief. Despite suggesting that they have changed their approach to allow for greater participation by civil society groups in the South, both institutions continue to impose damaging economic conditions on developing countries, including the privatisation of public services. The World Bank's private sector arm, the International Finance Corporation, also continues to promote an unreconstructed privatization programmed, despite all the evidence against it.
The World Bank and IMF also face a crisis of legitimacy in respect of their own anti-democratic governance procedures. Set up at the Bretton Woods conference in 1944, both institutions provide rich countries with in-built control over their programmes. As a result of their 'one dollar, one vote' system, the US, Japan and EU dictate the terms of development to developing countries which rely on finance from the Bank and Fund. Similarly, a long-standing pact allows the US to choose each new head of the World Bank and the EU to appoint each head of the IMF, without any reference to the wishes of the broader membership. Following the scandal surrounding the appointment and subsequent resignation of Paul Wolfowitz as president of the Bank, an international outcry demanded fairer procedures for future appointments. Yet the EU and US refuse to countenance any democratic reforms which might see a challenge to their power.
In frustration at this continuing travesty, developing countries are now trying to break free from the Bank and Fund so as to be able to determine for themselves the development policies best suited to their own needs. Several Latin American states have chosen to sever links with the IMF and World Bank, and some have announced the creation of a rival development bank - the Bank of the South - which would be run on democratic principles. Even developed countries have begun to voice their discontent with the Bank and Fund's approach to development, with the UK government withholding funds in protest and others withdrawing their support from key World Bank projects. In the face of such unprecedented challenge, the World Bank and IMF have a genuine crisis on their hands.
The World Bank and IMF have attracted intense criticism for the damage caused by their policy prescriptions to developing countries. The World Bank's own internal evaluations have acknowledged the failures of these policies over the 1980s and 1990s. In country after country, the privatization and trade liberalization programmes of the Bank and Fund led to structural dislocation and economic stagnation, with dramatic increases in poverty as a result.
Yet even today the Bank and Fund continue to force these same failed policies on developing countries as a condition of receiving their loans or debt relief. Despite suggesting that they have changed their approach to allow for greater participation by civil society groups in the South, both institutions continue to impose damaging economic conditions on developing countries, including the privatisation of public services. The World Bank's private sector arm, the International Finance Corporation, also continues to promote an unreconstructed privatization programmed, despite all the evidence against it.
The World Bank and IMF also face a crisis of legitimacy in respect of their own anti-democratic governance procedures. Set up at the Bretton Woods conference in 1944, both institutions provide rich countries with in-built control over their programmes. As a result of their 'one dollar, one vote' system, the US, Japan and EU dictate the terms of development to developing countries which rely on finance from the Bank and Fund. Similarly, a long-standing pact allows the US to choose each new head of the World Bank and the EU to appoint each head of the IMF, without any reference to the wishes of the broader membership. Following the scandal surrounding the appointment and subsequent resignation of Paul Wolfowitz as president of the Bank, an international outcry demanded fairer procedures for future appointments. Yet the EU and US refuse to countenance any democratic reforms which might see a challenge to their power.
In frustration at this continuing travesty, developing countries are now trying to break free from the Bank and Fund so as to be able to determine for themselves the development policies best suited to their own needs. Several Latin American states have chosen to sever links with the IMF and World Bank, and some have announced the creation of a rival development bank - the Bank of the South - which would be run on democratic principles. Even developed countries have begun to voice their discontent with the Bank and Fund's approach to development, with the UK government withholding funds in protest and others withdrawing their support from key World Bank projects. In the face of such unprecedented challenge, the World Bank and IMF have a genuine crisis on their hands.
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