I remember doing a long research paper on the World Bank and IMF around 2000. They're the equivalent of "pay day loans" for 3rd world countries. It's predatory lending at its finest. For those unfamiliar, they generally only give money if countries cut spending on the people (education, health, etc) and open up natural resources for exploitation by foreign corporations.
The countries the World Bank lends to are typically spending at unsustainable levels. It's not a choice between IFC loans and high social spending. It's defaulting on lenders, who may be allies or the domestic population, cutting social spending due to not having money and/or running the presses to hyperinflation.
Yes and there's a reason why they are spending so much. It's encouraged. The developing country's elites get a big kickback, their nation gets saddled with a horrible loan, while their raw resources leave the country.
The Dictator's Handbook references more reliable and comprehensive research showing the anti-democratic effects of foreign aid. That said, the counterfactual (watching and waiting) risks anarchy. The World Bank was set up, in part, from the lessons of the Weimar Republic. It's a difficult debate that escapes easy answers.
Do you know how much it costs to get your water and electricity turned back on? Not to mention that you have to toss any food you have saved and you have to find some way to live without access to toilets, etc for the duration.
Compared to that, a payday loan is cheap. Yeah being in that situation is shitty in the extreme, and no none of your options are good, so you are trading very bad for worse.
But of course the underlying forces that create the necessary conditions for payday loans (and the World Bank) aren't necessarily beyond critique.
Both critics and advocates of the World Bank claim that it's just one component of a larger international order. If that order is manufacturing the need for WB/payday loans then the WB/payday loaners could be worthy of modest praise but also extreme condemnation.
IMO the debate over the relative merits of WB/IMF is really inseparable from a larger debate about the post-WWII western political/financial system. And, unsurprisingly, I imagine ground truth isn't easily compressible into any one coherent narrative -- especially an ideological one.
The payday loan analogy is admittedly weak. I just meant to indicate that it's a crap deal. It is actually worse than payday loans. See, with payday loans, you just pay ridiculous interest. With WB/IMF loans, it's more like "we'll loan you money to keep the lights on, but you're going to have to stop taking your blood pressure meds, and one of our friends is going to stop by and eat some of your dinner every night".
I just get tired of people constantly harping on payday loans without considering the alternatives available. Also I was kinda shocked how much an effect it had when a collegue got his power turned of (he forgot the pay his bills).
This characterization misses the bigger picture. Governments know what they are getting when they ask for these loans, and they want it! They are in financial trouble and need to cut spending on education, health, gas and bread subsidies, etc., but politically this is impossible. Their solution: Blame the big bad bank. The government gets what it wants and the bank agrees to play the bad guy.
There is likely corruption throughout these governments too. They're getting loans at the expense of their citizens, often hurting the poorest the most. I'm not saying it's all the WB/IMF's fault, but helpful loans shouldn't carry conditions like these:
- Cutting expenditures, also known as austerity.
- Focusing economic output on direct export and resource extraction,
- Devaluation of currencies,
- Trade liberalisation, or lifting import and export restrictions,
- Increasing the stability of investment (by supplementing foreign direct investment with the opening of domestic stock markets),
- Balancing budgets and not overspending,
- Removing price controls and state subsidies,
- Privatization, or divestiture of all or part of state-owned enterprises,
- Enhancing the rights of foreign investors vis-a-vis national laws,
As I said in another comment, the IMF and world bank were created after ww2 when european colonial powers decided to "band together" rather than fight each other.
The IMF and World Bank are neocolonial institutions. The brits, dutch, french, etc decided to pool their resources together to exploit the world rather than fighting each other to exploit the world.
It's just colonization 2.0. Instead of invading nations, they destabilize them via economic warfare and then "buy/exploit" these nations. It's far more cost effective and effective.
