New York, New York (TFC) – US officials are currently in an uproar over the United Kingdom’s decision to become a founding member of the new Asian Infrastructure Investment Bank. This is a decision that forecasts a massive change in the world economy.
The Asian Infrastructure Investment Bank is setting itself up to be direct competition to the World Bank and IMF. These two little known institutions truly cement the West as the dominant powers in the world. The policies of the new bank will be in direct opposition to those of the World Bank.
To understand why, it is important to understand what these institutions do in theory and in practice. In theory, the World Bank and the International Monetary Fund (IMF) are wonderful institutions that are designed to help poor nations. The reality of the situation is very different.
The World Bank and the IMF are two heads of the same snake. They were founded at the same time at a conference in Bretton Woods, and are often called the Bretton Woods Agencies or Banks. According to the IMF’s website, they are “twin intergovernmental pillars.” The institutions were created following World War II as a method of financing reconstruction in Western Europe after World War II. The World Bank’s formal name is the International Bank for Reconstruction and Development. However, once the Western Powers were taken care of, the bank took on a new mission: loaning money to poor nations. The IMF, on the other hand, is designed to oversee its members’ economic activity and national currency exchanges.
The organizations are controlled by voting. That seems like it would ensure that the banks benefit every nation. However, votes are quite literally bought and paid for. The more money a nation gives one of the banks, the more votes it has. In the World Bank, for example, the US controls about 16% of the votes even though there are more than 100 member nations. Other wealthy nations play the same game, and give money to the bank in order to control its activities. A handful of nations that have shared economic interests maintain a majority of the votes. The US, Japan, Australia, Switzerland, Belgium, Spain, the Netherlands, Italy, Canada, the United Kingdom, France and Germany control 52.85% of the votes. So even if the more than 90 other countries voted to stop a particular practice, the controlling nations would still have a majority.
The two institutions are used to keep the wealthy nations wealthy and keep the poor nations poor. Sounds diabolical and something fit for a conspiracy theory spouted by a person wearing a hat made of tin foil, right? Consider this quote:
“The IMF is not, however, primarily a lending institution as is the Bank. It is first and foremost an overseer of its members’ monetary and exchange rate policies and a guardian of the code of conduct. Philosophically committed to the orderly and stable growth of the world economy, the IMF is an enemy of surprise.”
The orderly and stable growth of the world economy keeps the status quo. The voting nations make certain that the economic policies benefit them at a detriment to the developing world. The standard of living can rise in the developing world, so long as the standard of living rises in the wealthy nations by as much or more. The quote continues:
“The IMF is convinced that a fundamental condition for international prosperity is an orderly monetary system that will encourage trade, create jobs, expand economic activity, and raise living standards throughout the world. By its constitution the IMF is required to oversee and maintain this system, no more and no less.”
When what is really being said is understood, it’s chilling. By the way, the quotes come directly from the IMF’s website.
The loans given out by the two banks are backed by the reserves of the larger wealthier nations, which means the World Bank can offer poor nations lines of credit that they would be unable to receive through commercial banking establishments. This gives the World Bank a huge amount of discretion when it comes to forcing a developing nation to adopt policies its primary voters (the wealthy nations) would like to see put into place. The conditions are called Structural Adjustment Programs (SAPs). This allows the US and its economic allies to force policies on other governments that hurt the people of the poorer nations so large corporations can benefit. In essence, the World Bank allows the US and its allies to engage in colonialism without planting a flag or conducting an occupation. If the US can control a country’s economic policies, there is no need to invade.
According to the United Nations’ WHO, an organization that takes issue with the loans because the conditions attached to them impact the health of the local population:
“SAPs policies include currency devaluation, managed balance of payments, reduction of government services through public spending cuts/budget deficit cuts, reducing tax on high earners, reducing inflation, wage suppression, privatization, lower tariffs on imports and tighter monetary policy, increased free trade, cuts in social spending, and business deregulation. Governments are also encouraged or forced to reduce their role in the economy by privatizing state-owned industries, including the health sector, and opening up their economies to foreign competition.”
So, the “twin intergovernmental pillars” force workers to be paid less, cuts taxes for the rich, cut social spending, privatize state-owned industries, allow cheap imports, and countries to open the local economies up to foreign corporations. There can’t honestly be a person on the planet that believes lowering the wages of workers helps to bring them out of poverty. Once they are paid less, their social benefits are cut (such as healthcare). Then taxes on the wealthy are cut, so the poor shoulder more of the burden of the services they are no longer receiving. The local economy then takes a hit as cheap imports flood the country because of reduced tariffs. State-owned industries are privatized, and the new owners take loans from Western banks for capital, and finally foreign corporations move in to establish factories where they can pay people slave wages. This is how sweatshops are born.
It’s easy to read this, but an example is clearer.
Argentina: The IMF benevolently gave the country a very small bailout in the amount of $8 billion, but only once the country agreed to cut wages, pensions, and employment services. The $8 billion dollars was like putting a band-aid on a bullet wound and the country spent the money after cutting wages. When Argentina needed more cash because the policies designed to bring it out of poverty only sent it further into poverty, the US Secretary of the Treasury, dropping all pretense that the IMF was anything but an extension of US foreign policy stated that the IMF wouldn’t provide any more money and allowed the country to plummet even further into poverty. Eventually the country defaulted on more loans and had to restructure and refinance them. Of course, the IMF got paid back and now foreign corporations run the country. Forbes recently said:
“Paradise for international companies appears to be in Argentina”
In a perfect explanation of how the banks harm workers, globalexchange.org states:
“The IMF and World Bank frequently advise countries to attract foreign investors by weakening their labor laws — eliminating collective bargaining laws and suppressing wages, for example. The IMF’s mantra of “labor flexibility” permits corporations to fire at whim and move where wages are cheapest. According to the 1995 UN Trade and Development Report, employers are using this extra “flexibility” in labor laws to shed workers rather than create jobs. In Haiti, the government was told to eliminate a statute in their labor code that mandated increases in the minimum wage when inflation exceeded 10 percent. By the end of 1997, Haiti’s minimum wage was only $2.40 a day. Workers in the U.S. are also hurt by IMF policies because they have to compete with cheap, exploited labor. The IMF’s mismanagement of the Asian financial crisis plunged South Korea, Indonesia, Thailand and other countries into deep depression that created 200 million “newly poor.” The IMF advised countries to “export their way out of the crisis.” Consequently, more than US 12,000 steelworkers were laid off when Asian steel was dumped in the US.”
The World Bank and the IMF are known for destroying countries they say they are trying to help. Now that China is backing the new Asian Infrastructure Investment Bank, developing nations are more likely to elect to borrow funds from the Chinese-backed bank than from banks that in more than 70 years of operations have failed to bring one single nation out of poverty. The Chinese will likely exploit the countries in much the same manner, but now China will be calling the shots and it will be Chinese companies that move into the nations to pillage and plunder. This spells disaster for the US economy, which is frankly built on pillaging and plundering the poor.