Relationships are a curious thing. Regardless of the agents involved, one thing usually holds true: relationships have the power to bring change; for better or for worse. Developing countries joined the International Monetary Fund (IMF), World Bank (WB) and World Trade Organization (WTO) about six decades ago with the hopes for sustainable development. The IMF and WB were established in 1944 at the United Nations Monetary and Financial Conference in Bretton Woods, New Hampshire. Appropriately named the Bretton Woods institutions, they were charged with reconstructing the global economic system after World War II. The General Agreement on Tariffs and Trade (GATT) was formed three years later with the aim of facilitating international trade, and was replaced by the WTO in 1995. Today, these institutions are three of the largest power houses when it comes to global affairs. And like it or not, their influence is so great that even the most remote areas of the world eventually experience the force of that influence.
The relationship between developing countries and the Bretton Woods institutions is often compared to that of a parent and child. After attaining independence and attempting to run their economies on their own, developing countries eventually succumbed to their need for development expertise and assistance, and the IMF, WB and WTO were all too happy to oblige. Like any parent-child relationship, there are house rules that developing countries have to follow in order to become the success stories their “parents” wish them to be. In the Bretton Woods household, becoming successful means imbibing neo-liberalism. By opening up one’s markets to global trade, limiting government regulation, and promoting the private sector as the engine of growth, a developing country has a shot at winning the most-coveted position of “the golden child.” Some countries have held that envious position at various times, and in true Bretton Woods’ fashion, there are many perks to being the golden child. During Argentina’s reign, she enjoyed extensive access to grants, loans, technical assistance and priority in signing up for new development initiatives. Much to the envy of her siblings, Argentina was constantly in the spotlight as the international paparazzi couldn’t have enough of her. While Argentina enjoyed the “good” life, her sister country Zimbabwe was being disciplined for being a recalcitrant child. By refusing to implement recommendations of the IMF and WB, Zimbabwe ignited the wrath of the Bretton Woods institutions. The final straw came when President Robert Mugabe of Zimbabwe labeled the West “stupid and foolish,” and told them to “go hang” as per a BBC article dated March 15, 2007. In response, the West imposed sanctions on Zimbabwe, which contributed to the galloping inflation and recent cholera outbreak in the country.
From the outside looking in, the dynamics of this relationship might seem simple enough. However, issues of exploitation and sovereignty have raised many an eyebrow and have led to the branding of the IMF, WB and WTO as “the Unholy Trinity” in numerous circles. The issue of representation is one of the key criticisms against the Unholy Trinity. While developing countries form the majority in these organizations, their voice is virtually non-existent, and they end up implementing “one size fits all” policies which do not take their respective needs into consideration. In Argentina’s case, this lack of dialogue led to an economic catastrophe in 2001 that stripped her of her golden child title. Others equate doing business with these institutions to making deals with the devil, since developing countries have to put aside their national objectives in order to satisfy the many conditions that come with receiving development assistance from the IMF and WB. Developing countries get so caught up in making sure they satisfy the endless conditions imposed on them by the Unholy Trinity, that they barely have enough time to actually address the concerns of their people. Consequently, they remain dependent on these institutions, and the vicious cycle of poverty and underdevelopment continues. Many have questioned the legitimacy of the Bretton Woods institutions, and have asked whether the Bretton Woods platform is the best place for advancing development concerns, given their reluctance to adopt alternative development policies alongside their trademark neo-liberal policies.
Every relationship has its ups and downs, and the Bretton Woods–developing countries relationship is no exception. Whether regarded as good or bad, this relationship is shaped by both parties. And like in any other relationship, the prospects for success or failure lie in the hands of all parties involved.
* This article was written by Jemila Abdulai and published in the April 16, 2009 edition of the MH News.
**Graphic by Ioulia Bespalova of the MH News
Jemila Abdulai is the creative director, editor and founder of the award-winning website Circumspecte.com. A media and international development professional and economist by training, she combines her business, communications and project management expertise with her strong passion for Africa. Besides writing and reading, she enjoys travel, global cuisine, movies, and good design.
my fav. article
This was an interesting read. Thanks for sharing!
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Hey, i love your piece. To me, the world bank/IMF are discredited institutions who the developing world must stop dealing with. the failure of the current global free market is a testament to this. but our leaders are so lazy and gullible they’d rather have the loans than work to produce. By the way you might be interested in some of the discussions at: http://worldopinionjournal.blogspot.com/
Well said. I think institutions like the IMF and World Bank keep Africans in perpetual poverty. They give aid but nothing improves and they gain in the long run as they set stringent conditions and the loans must be repaid . I guess there’s no free lunch.