The World Bank, the IMF and the Anti-Globalization Movement

There’s been a lot of excitement here as we welcome over 15,000 foreigners to Singapore for this year’s IMF/World Bank meetings from 12 to 20 September. The IMF and World Bank are two of the four most powerful international organizations that deal with development issues – the other two being the United Nations (UN) and the World Trade Organization (WTO). The World Bank job scope is loans for the development of developing countries while the IMF deals with the stabalization of the international monetary system and the world’s currencies.

I’ve decided not to touch on controversies surrounding Singapore’s ban on outdoor protests because, simply put, international issues are infinitely more interesting than local ones =) These meetings aren’t about Singapore, but about the World Bank and the IMF. And if we should be discussing about anything, it’s about them and how their policies have affected the developing countries. And so I’ll share my thoughts about this below, which will also reflect where I am in terms of my views on various development issues:

Let me start by saying that I began getting interested in international development issues in around 2000 or 2001. From 2002 to 2005, I studied in Australia (University of New South Wales) and Canada (University of Toronto) and worked some time in Colombia in South America. I graduated with an Arts degree with majors in both Development Studies and Politics & International Relations. Most of my courses focused on development theory and development economics, which are really about international politics and economics, which are really about many things related to globalization. So all these have been my interest for years.

And very early on in this journey, I adopted a more leftist and radical viewpoint. Within the first few weeks of the start of my university life, I attended a socialist conference. I attended many other meetings and events by the socialist groups there. The anti-globalization movement was more vibrant then than it is now. And back then, I considered myself part of the anti-globalization movement. To me, free trade was close to being evil and those who promoted it only had the interests of the rich in mind. I even wrote some letters to The Straits Times defending the movement. Most of my professors too were very leftist. Some were more moderate, but I don’t recall any of right-wing persuasion. So during these early years of my encounters with development issues, I was firmly rooted in the anti-globalization camp.

However, as I started to delve more and more into the issues, I started to realize that globalization (free trade, foreign direct investment, etc.) has its pros and cons. I started to realize that things weren’t so simple after all. All these issues were more complex than I had thought or than the anti-globalization movement had made it up to be. Indeed, one thing I’ve come to realize in life is that things are seldom simple or straight forward. There are reasons for different viewpoints of an issue and it’s important to understand both sides well before taking a strong position. That’s one thing I learnt in my journey as a Christian and that’s one thing I have come to learn in this journey too.

So where am I now? I would consider myself more moderate right now. I would describe my political persuasion as centre-left. I still hold quite leftist views, though I also understand why others may hold a more right-wing view. I do not simplistically think that those who believe strongly in market forces only do so because it benefits them (the rich). I may not agree with the right-wing view but at least I do understand where they are coming from.

As I’m critical of the right-wing placing too much emphasis on the magic of the market, so I’m critical of many in the left-wing who overreact in the opposite manner by demonizing the market. Another thing I’ve learnt in life: we overreact. Things normally happens like this: Group A starts to underemphasize a particular area. People start to realize this underemphasis and come together to address the problem. They become group B. In reaction to the lack of emphasis by group A in that particular area, group B overreacts and so places too much emphasis on that particular area.

After the Second World War, the Dependency Theory (left-wing) school of thought which emphasized the importance of the role of the state and government reigned. Eventually, inefficiency and corruption became prevalent due to strong government intervention. From the 1970s and especially from the 1980s onwards, the reaction to what was perceived as an over-emphasis on the state and an underemphasis on the markets took place. The right-wing conservative economic ideology (you can call it the Washington Consensus, neoliberalism, market fundamentalism, etc.) started to become more dominant. This wasn’t just a reaction. It was an over-reaction. Whereas before the left-wing thought that a strong state would cure poverty, the right-wing now started to push the idea that unfettered free markets were the way to go.

The anti-globalization movement is a movement against this free market ideology. It has done much good in pointing out the faults of a pervasive free market economy. But alas, I believe it still is a movement that has overreacted – at least the majority in it has overreacted. Seeing hardly any positives in markets is just as bad as seeing hardly any positives in state intervention. Both views hardly do any good for poor countries.

I believe nowadays the consensus (mainstream, at least) is quite clear: both the market and the government have a role to play. It’s not about either the market or the government. It’s both/and. It may be surprising for many in the anti-globalization movement to know that the World Bank nowadays does not hold to an extreme pro-free market view. They do not hold to an extreme Washington Consensus / market fundamentalism / neoliberal economic view. They actually realize that a balance is needed between market and state. It is common to hear people criticizing the World Bank and IMF about their imposition of Structural Adjustment Programs on developing countries and how that has exacerbated poverty. While I have no doubt that all this is true, a lot of this probably has to do more with the past than the present. These two organizations have realized their mistakes. They have learnt from them. Organizations do learn. If they stay stagnant, they die. I think we need to realize too that the World Bank and IMF, while they still have got to reform in a lot of ways, have changed their thinking over the years. For example, in a great paper (totally worth a thorough read through) co-authored by the World Bank’s former President James Wolfensohn, he acknowledges that

The development community has also adopted more pragmatic means of achieving development, moving toward country specificity and flexible analysis and away from the twin dogmas of pervasive state control (1960s-1970s) and unregulated markets (1980s-early 1990s).

…With the dogmas of the state-market debate came an insistence on “monocausal” explanations of development. This led to one-size-fits-all policy approaches, as the general models left little room for actual conditions. When mainstream development thinking discarded one model in favor of another, the result was too often major changes in policy recommendations without room for nuance. The most recent (though certainly not most simplistic) manifestation of this was the Washington Consensus at the beginning of the 1990s. Its list of preconditions for growth encapsulated many neoliberal precepts in what was often interpreted as a neat recipe for development. Perhaps unfairly, that Consensus came to stand for a package of measures aimed largely at getting the government out of the economy – and it was applied with excessive uniformity across countries.

Common sense tells us that no one approach will work everywhere, since the binding constraints to development are unlikley to be the same across countries.

To be sure, saying one believes in one thing is very different from actually practicing it. However, I doubt what Wolfensohn wrote was merely for political correctness. I do believe that the World Bank as an organization endorses the above call to 1) recognize the complementarity of states and markets and 2) recognize that the country context is crucial when going from general theory to specific policy. But one ought also to note that it takes time for theory to get to the ground. Many countries may still be suffering from policies World Bank imposed years back when it still leaned strongly towards a market-fundamentalism view of economics.

What all these shows is that the World Bank is not ignorant of its failures. It is not ignorant of what critics of Structural Adjustment and neoliberalism say. It is aware and it has responded by an evolution of its policies. This is not to say that the World Bank and the IMF have got it all right now or that there is no need for protests and criticisms when their policies fail. However, it is to say that the World Bank isn’t filled with people who are out to do evil. The economists there aren’t out to create more poverty, but to eradicate it. If they have failed, it’s just that: they have failed. Yes, if they have failed, they ought to be criticized. Indeed, it’s a big thing to fail in what they do as many lives are at stake. And yes, they do need to be more careful in future. But there is simply no need to demonize the World Bank as if they are out to make the rich richer and the poor poorer. I’m sure the World Bank economists have good hearts and genuinely desire to see poverty eradicated. It is also good to remember that the World Bank isn’t one person. The institution isn’t autocratically run and I’m sure not all economists there agree with each other.

All in all, I think while there is no doubt that the World Bank and IMF had put its weight behind the neoliberal economic ideology of unfettered free markets for many years, things have been changing and they have been learning from past mistakes.

However, I do think that such changes could not have taken place without the pressures by civil society groups throughout the world. The anti-globalization movement has thus had a good effect upon these institutions. Without such pressures, the institutions may not have learnt or changed and people may not have realized the detrimental effects neoliberal economic policies have had in the developing countries. So full credit to the protests of the movement. Full credit to civil society organizations. My hope, however, is that protesters start to wise up and be more familiar with the issues. Protesters should not just make a lot of noise; they should also make the right kind of noise. They should criticize the right thing and fight for the right kind of change. For the sake of the poor and the integrity of the movement, it behooves them to be more acute in their analysis and understanding of the issues. They need to be moved less by rhetoric and guided more by accurate reasoning.

—–

I think it is very important for anti-globalization activists and the public to know that there are nuances in the views of those within the anti-globalization movement. There are more radical voices as well as more moderate ones within the movement. Different NGOs disagree with each other on issues like trade and the future of International Organizations like the IMF, World Bank and the WTO.

A more moderate voice in the movement is that of Oxfam, one of the most well-known International NGOs dedicated to development. Their Make Trade Fair campaign calls for fairer trade rules in the world (i.e. trade justice) that would benefit the developing countries. Their position on globalization and trade is reflected in their famous Rigged Rules and Double Standards report. However, many other well-known International NGOs disagree with Oxfam’s position on trade.

At the more radical end are voices calling for localization and thus limited (not merely fair) trade. Such groups are against too much trade because trading harms the environment and prevents participatory democracy (as people are affected by decisions made far away). Most of these groups would also advocate the abolition of the three International Organizations mentioned above, rather than merely reforming them.

Therefore, the anti-globalization movement contains varied positions on important issues. Not many people realize this. In fact, my guess is that most people who protest are not that familiar with the issues. Most are probably also not sure what they believe in. No doubt, they probably know what they are against. However, it’s more important to know what they are for, what the solutions are. More people in the movement thus ought to think through the issues a bit more.

—–

To end, I want to state a challenge to the people of the World Bank, the IMF and the Anti-Globalization Movement. My challenge is:

Live your lifestyle consistent with your beliefs.

By this I mean that every decision we make in our lives ought to be as consistent as possible with our claims to want to eradicate poverty. If not, we’re being hypocritical.

We need to make every decision in life count and every decision in life reflect our heart’s desire. An economist in the World Bank or IMF who earns big bucks (and they normally do) and spends his money lavishly – without much consideration to giving to aid the poor – is living a lifestyle inconsistent to his beliefs. So is the development consultant who accepts up to US$1,000 a day pay while helping those who earn less than US$1 a day. And also the anti-globalization activist who travels extensively to attend this and that protest or this or that event without due consideration to the sufferings of the earth (that result from his travel) and the fact that his money could be more wisely spent in helping the poor.

I’m much less upset when rich World Bank/IMF economists spend unnecessarily. It’s really the people who fight passionately for the poor and yet do not think twice about how their personal lifestyle decisions contradict their belief in helping the poor that greatly disappointment me.

Yes, we’re not perfect and all of us are hypocrites. I’ll be the first to admit this. I hope we all don’t shy away from admitting our hypocrisy. That’s the first step to challenging ourselves to live a more consistent lifestyle. Such would only draw more people to our cause (nobody is going to be won over by the activist who lives a hypocritical lifestyle) and the poor and the environment will ultimately benefit from our decision to live it out.