The World Bank works under IMF guidelines, which are dictated by the US Treasury Department. Over the past three decades especially, the IMF and the World Bank have run a powerful “creditors’ cartel”. Developing countries that do not meet the IMF’s conditions will generally not get credit from the much larger World Bank. These conditions are: tighter monetary and fiscal policies, “independent” central banks, privatisation of state-owned enterprises, indiscriminate opening up to international trade and capital flows, and the abandonment of development strategies and policies generally.
These “reforms” have coincided with a sharp slowdown on major social indicators (life expectancy, infant and child mortality) in the vast majority of developing countries since 1980. The Bank’s credibility was fatally compromised when it forced school fees on students in Ghana in exchange for a loan; when it demanded that Tanzania privatise its water system; when it made telecom privatisation a condition of aid for Hurricane Mitch; when it demanded labour “flexibility” in Sri Lanka in the aftermath of the Asian tsunami; when it pushed for eliminating food subsidies in postinvasion Iraq. In 2005, the Bank withheld a promised $100m to Ecuador after the country dared to spend a portion of its oil revenues on health and education. The cartel also decided that countries in sub-Saharan Africa could not spend 70 percent of the aid money they received from 1999 to 2005.
Beginning in 1990, the World Bank led the charge for immediately imposing what it called “radical reform” on the former Soviet Union. After Yeltsin ordered army tanks to open fire on demonstrators in October 1993, killing hundreds and leaving the parliament building blackened by flames, the stage was set for the fire-sale privatisations of Russia’s most precious state assets to the so-called oligarchs. Charles Blitzer, the World Bank’s chief economist on Russia, told The Wall Street Journal: “I’ve never had so much fun in my life.” When Yeltsin left office, his family had become inexplicably wealthy, while several of his deputies were enmeshed in bribery scandals.