The Fate of the Planet Rests on Dethroning the IMF and World Bank

A Global Green New Deal could herald a new era of international cooperation to curb the climate crisis.

Johanna Bozuwa and Thomas M. Hanna February 21, 2020

A view of the World Bank building October 5, 2000 in Washington, DC. (Photo by Per-Anders Pettersson/ Getty Images)

Last Sep­tem­ber, 6 mil­lion peo­ple joined youth-led cli­mate protests all around the world, from New Zealand to Indone­sia, from Brazil to the Unit­ed States. Fed up with years of inter­na­tion­al inac­tion on the great­est threat to our civ­i­liza­tion, young peo­ple and their allies are again plan­ning to ral­ly in mas­sive num­bers this com­ing April, on the 50th anniver­sary of Earth Day. Unwill­ing to accept any­thing but unprece­dent­ed, mas­sive action on a plan­e­tary scale, many of these activists are call­ing for a Green New Deal to save our plan­et and our future: a sys­temic over­haul of the glob­al econ­o­my so that it works for all, not just the wealthy few.

What is needed is a Global Green New Deal based on genuine international solidarity and climate reparations.

This sort of inter­na­tion­al sol­i­dar­i­ty action hear­kens back to the anti-glob­al­iza­tion move­ment of 20 years ago, when unions, envi­ron­men­tal­ists and social move­ments came togeth­er to call atten­tion to the dev­as­tat­ing effects of glob­al­iza­tion and free trade” imposed by mul­ti­lat­er­al insti­tu­tions like World Trade Orga­ni­za­tion (WTO), the Inter­na­tion­al Mon­e­tary Fund (IMF) and the World Bank. The turn of the cen­tu­ry protests in Seat­tle and else­where put a spot­light on what is now often referred to as the Wash­ing­ton Con­sen­sus” — a decades-long, coor­di­nat­ed dri­ve to impose mar­ket-cen­tered eco­nom­ic and polit­i­cal strate­gies upon coun­tries everywhere.

The trans­for­ma­tive pow­er of the anti-glob­al­iza­tion move­ment lay in its demon­stra­tion of the inter­con­nec­tions of social, labor and envi­ron­men­tal strug­gles across bor­ders, and abil­i­ty to unite peo­ple in high-income coun­tries and low- and mid­dle-income coun­tries against a com­mon ene­my. How­ev­er, much of this ener­gy was sub­se­quent­ly divert­ed to oppos­ing the wars in Iraq and Afghanistan, sur­viv­ing the 2008 finan­cial cri­sis, and con­fronting white suprema­cy and fas­cism in the age of Don­ald Trump. Activist scruti­ny of the multi­na­tion­al insti­tu­tions that gov­ern the glob­al econ­o­my has waned. But now, as the glob­al cli­mate cri­sis esca­lates and calls for a Green New Deal grow stronger, there is an oppor­tu­ni­ty to revi­tal­ize this spir­it of inter­na­tion­al sol­i­dar­i­ty to devel­op a new inter­na­tion­al eco­nom­ic con­sen­sus — and new mul­ti­lat­er­al insti­tu­tions — based on eco­log­i­cal sus­tain­abil­i­ty, repar­a­tive jus­tice, and the com­mon good.

Invest­ing in disaster

In 1944, dur­ing the penul­ti­mate year of World War II, rep­re­sen­ta­tives from 44 coun­tries met at Bret­ton Woods, New Hamp­shire, to dis­cuss how to estab­lish glob­al peace and secu­ri­ty through inter­na­tion­al eco­nom­ic coop­er­a­tion. Out of this meet­ing, the IMF and World Bank were cre­at­ed, and the seeds of what was to become the WTO sys­tem sown. But with lead­er­ship and con­trol in the hands of the Unit­ed States and its close allies, these insti­tu­tions soon became tools in the larg­er geopo­lit­i­cal strug­gles of the Cold War. More­over, with the emer­gence of the Wash­ing­ton Con­sen­sus in the 1980s, they became weapons in an ide­o­log­i­cal­ly dri­ven effort to install free mar­ket eco­nom­ic poli­cies around the world: spread­ing eco­nom­ic lib­er­al­iza­tion, open­ing mas­sive new mar­kets for West­ern goods, shift­ing pub­lic assets and ser­vices into pri­vate hands, and deliv­er­ing pre­vi­ous­ly unat­tain­able nat­ur­al resources into the hands of large multi­na­tion­al cor­po­ra­tions. As Nobel Prize-win­ning econ­o­mist and for­mer Chief Econ­o­mist of the World Bank Joseph Stiglitz said in 2002, insti­tu­tions like the IMF had been thor­ough­ly over­run” by mar­ket fundamentalism.”

One of the key meth­ods deployed by the World Bank and IMF in par­tic­u­lar were the infa­mous Struc­tur­al Adjust­ment Pro­grams” (SAPs). These pro­grams con­di­tioned inter­na­tion­al eco­nom­ic assis­tance on deep struc­tur­al changes to a client country’s polit­i­cal and eco­nom­ic sys­tem — specif­i­cal­ly dereg­u­la­tion, pri­va­ti­za­tion and cuts in pub­lic spend­ing. All too often the eco­nom­ic devel­op­ment and growth promised by the insti­tu­tions failed to mate­ri­al­ize, leav­ing many coun­tries impov­er­ished, embit­tered and indebt­ed to West­ern interests.

A cen­ter­piece of these struc­tur­al adjust­ment pro­grams was the pri­va­ti­za­tion of pub­licly owned assets and infra­struc­ture. Accord­ing to author Sharon Bed­er, loans con­di­tioned on pri­va­ti­za­tion jumped from 13% in the 1980s to 70% in 2000. This was espe­cial­ly true in the ener­gy and util­i­ty sec­tors, which con­sti­tute core pub­lic goods and inte­gral points of inter­ven­tion to tack­le the cli­mate cri­sis. For instance, dur­ing the 1990s both the World Bank and the Asian Devel­op­ment Bank (a region­al mul­ti­lat­er­al devel­op­ment bank) pro­mot­ed ener­gy sec­tor pri­va­ti­za­tion. Between 1998 and 2005, over half of the 115 so-called devel­op­ing” coun­tries had either pri­va­tized or cor­po­ra­tized their state-owned util­i­ty, and more than a third had opened up mar­kets to inde­pen­dent pow­er producers.

The impli­ca­tions for the envi­ron­ment and the cli­mate have been pro­found. Bolivia is a cau­tion­ary exam­ple. Dur­ing the 1980s and 1990s, the World Bank, IMF and Inter-Amer­i­can Devel­op­ment Bank played a promi­nent role in spon­sor­ing eco­nom­ic restruc­tur­ing and lib­er­al­iza­tion of the country’s ener­gy sec­tor. This includ­ed par­tial pri­va­ti­za­tion of the Boli­vian state-owned oil com­pa­ny — shares of which were bought by inter­na­tion­al ener­gy cor­po­ra­tions, includ­ing Shell and Enron — as well as legal, reg­u­la­to­ry, and admin­is­tra­tive shifts that enabled mas­sive for­eign direct invest­ment into the country’s ener­gy and util­i­ty sector.

This result­ed in the sig­nif­i­cant growth of oil and gas explo­ration and extrac­tion oper­a­tions, and the con­struc­tion and ren­o­va­tion of numer­ous hydro­car­bon export pipelines — all of which dev­as­tat­ed local com­mu­ni­ties and region­al envi­ron­ments, like the Chiq­ui­tano for­est. As researcher Der­rick Hin­dery wrote in 2004, con­trary to neolib­er­al rhetoric that these would boost the econ­o­my and deep­en democ­ra­cy … eco­nom­ic and polit­i­cal restruc­tur­ing led to a reduc­tion in state rev­enues, mas­sive social unrest, and eased [multi­na­tion­al cor­po­ra­tions’] access to nat­ur­al resources.” Resis­tance to struc­tur­al adjust­ment, includ­ing mass protests against the World Bank-direct­ed attempt to pri­va­tize the city of Cochabamba’s water util­i­ty, was one of the caus­es of Evo Morales’ land­slide pres­i­den­tial elec­tion vic­to­ry in 2005.

Morales deci­sive­ly broke with the IMF and the World Bank, reassert­ed pub­lic con­trol over key eco­nom­ic sec­tors and deci­sions, includ­ing its ener­gy util­i­ties, and presided over an unprece­dent­ed peri­od of eco­nom­ic growth, inequal­i­ty reduc­tion and improved liv­ing stan­dards. How­ev­er, the Boli­vian econ­o­my large­ly remained reliant on the extrac­tion and exploita­tion of oil, gas and min­er­als. Last year, Morales was over­thrown by a right-wing coup, rais­ing the prospect of a return to mar­ket fun­da­men­tal­ism and cor­po­rate con­trol over strate­gic resources that could cat­alyze fur­ther envi­ron­men­tal destruc­tion. This is espe­cial­ly con­cern­ing giv­en that Bolivia holds some of the world’s largest reserves of lithi­um, instru­men­tal to build­ing the bat­ter­ies need­ed for elec­tric cars and elec­tric­i­ty stor­age — an indus­try Morales had plans to devel­op for the ben­e­fit of Boli­vians, as opposed to West­ern corporations.

The World Bank and IMF’s actions have led to sig­nif­i­cant social unrest in many oth­er coun­tries. In 2000, the gov­ern­ment of Ecuador agreed to pri­va­tize 18 dis­tri­b­u­tion util­i­ties in exchange for IMF fund­ing, but pub­lic out­cry suc­cess­ful­ly stopped the pri­va­ti­za­tions. Sim­i­lar­ly, in Guatemala, the pri­va­ti­za­tion of elec­tric util­i­ties in the 1990s has led to poor ser­vice, high prices, and repeat­ed bouts of protests. In India and Indone­sia, cor­rup­tion in new pri­vate pow­er mar­kets formed in the 1990s has also sparked wide­spread unrest. And in Cos­ta Rica, an IMF sup­port­ed attempt to pri­va­tize the country’s pop­u­lar elec­tric and tele­coms util­i­ty was defeat­ed in 2000 due to major protests and upheaval. Today, Cos­ta Rica’s pub­licly-owned elec­tric sys­tem — a net­work that includes a nation­al pub­lic util­i­ty work­ing in coor­di­na­tion with local, coop­er­a­tive and munic­i­pal util­i­ties — is the only one in the world to run an entire coun­try on vir­tu­al­ly 100 per­cent renew­able ener­gy. What’s more, any rev­enue from Cos­ta Rica’s nation­al util­i­ty is used to sup­port oth­er social services.

In recent years, the World Bank IMF and WTO have osten­si­bly begun to change their tune. They are increas­ing­ly pro­fess­ing con­cern about cli­mate change, as well as eco­nom­ic and social inequal­i­ty. For instance, the World Bank claims to have imple­ment­ed an insti­tu­tion-wide effort to main­stream cli­mate con­sid­er­a­tions into all devel­op­ment projects.” Sens­ing the chang­ing polit­i­cal and eco­nom­ic winds post finan­cial cri­sis — and stung by crit­i­cisms from the anti-glob­al­iza­tion move­ment and their own man­i­fest fail­ures — these orga­ni­za­tions are eager to claim that the Wash­ing­ton Con­sen­sus era is firm­ly in the past.

How­ev­er, as many observers have not­ed, the actions of these insti­tu­tions fall far short of their rhetoric. Despite express­ing con­cern over cli­mate change, the WTO has done almost noth­ing to chal­lenge fos­sil fuel sub­si­dies on unfair trade grounds, despite being asked to do so by twelve mem­ber nations in 2017. In fact, recent research has found that while sev­er­al cas­es of sub­si­dies for renew­able ener­gy devel­op­ment had been chal­lenged at the WTO lev­el in the past decade, no fos­sil fuel sub­si­dies have. The World Bank’s fos­sil fuel exclu­sion pol­i­cy has already fall­en far behind those of its peers, such as the Euro­pean Invest­ment Bank, which has exclud­ed near­ly all fos­sil fuel finance.

More gen­er­al­ly, the cli­mate cri­sis is insep­a­ra­ble from the free-mar­ket eco­nom­ic poli­cies and his­to­ry of impe­ri­al­ism that con­tin­ue to under­pin the World Bank and IMF’s out­look on inter­na­tion­al devel­op­ment. Pres­i­dent Barack Obama’s Pow­er Africa” pro­gram (which the World Bank helped fund) is an instruc­tive exam­ple. Nom­i­nal­ly intend­ed to expand ener­gy access in sub-Saha­ran Africa, it ulti­mate­ly oper­at­ed as a way for U.S. com­pa­nies like Gen­er­al Elec­tric to cap­ture the African ener­gy mar­ket by sell­ing gas tur­bines and grid infra­struc­ture. These com­pa­nies heav­i­ly lob­bied the U.S. gov­ern­ment and mul­ti­lat­er­al devel­op­ment banks to shy away from renew­able tech­nolo­gies and direct close to $7 bil­lion of financ­ing to Amer­i­can cor­po­ra­tions. Not only does such behav­ior great­ly expand strand­ed fos­sil fuel assets in the Glob­al South which must be retired before the end of their intend­ed lives, but the rev­enues from the bil­lions invest­ed are large­ly retained by multi­na­tion­al cor­po­ra­tions, not the coun­tries the pro­gram was sup­posed to benefit. 

Fur­ther­more, a recent sur­vey of loans made to 26 coun­tries in 2016 – 2017 found that the IMF con­tin­ues to con­di­tion bor­row­ing on fis­cal con­sol­i­da­tion (cut­ting spend­ing and or rais­ing tax­es) and the pri­va­ti­za­tion of pub­lic goods or ser­vices. In 2018, the UN’s Spe­cial Rap­por­teur on extreme pover­ty and human rights, Philip Alston, blast­ed both the IMF and World Bank for con­tin­u­ing to aggres­sive­ly pro­mote pri­va­ti­za­tion despite ample evi­dence that it involves the sys­tem­at­ic elim­i­na­tion of human rights pro­tec­tions and fur­ther mar­gin­al­iza­tion of the inter­ests of low-income earn­ers and those liv­ing in poverty.” 

A New Bret­ton Woods

Just as with World War II, today we face a glob­al cri­sis — the moral equiv­a­lent of war.” With­out rapid and trans­for­ma­tive changes to our ener­gy, trans­porta­tion and agri­cul­tur­al sys­tems (among oth­ers), the world is on track to eclipse warm­ing of 1.5 degrees Cel­sius (2.7 degrees Fahren­heit) with­in the decade, blow­ing past col­lec­tive­ly agreed cli­mate tar­gets. At the cur­rent pace, esti­mates sug­gest as much as 6 degrees Fahren­heit of warm­ing by 2100. Sim­ply put, this lev­el of warm­ing would be cat­a­stroph­ic for human civ­i­liza­tion and the planet.

In the Unit­ed States and Europe, plans for a Green New Deal” are the sub­ject of increas­ing polit­i­cal dis­cus­sion. While nation­al and region­al action is extreme­ly impor­tant, cli­mate change is a glob­al threat, and what is ulti­mate­ly need­ed is an effec­tive glob­al response — one that exist­ing inter­na­tion­al insti­tu­tions, agree­ments and approach­es have demon­strat­ed them­selves woe­ful­ly inca­pable of deliv­er­ing. What is need­ed is a Glob­al Green New Deal based on gen­uine inter­na­tion­al sol­i­dar­i­ty and cli­mate repa­ra­tions. West­ern-imposed free mar­ket solu­tions must be replaced with respect for local and Indige­nous strate­gies; whole­sale pri­va­ti­za­tion ditched in favor of demo­c­ra­t­ic forms of pub­lic and com­mu­ni­ty own­er­ship; West­ern-led extrac­tion exchanged for repar­a­tive pay­back for dam­ages to the Glob­al South and open access to tech­nolo­gies; and lead­er­ship” by those respon­si­ble for the cri­sis sup­plant­ed with con­trol and pow­er exer­cised by those most affect­ed by it.

To address ris­ing inequal­i­ty and begin to rec­ti­fy decades of destruc­tive neolib­er­al­ism, the Glob­al Green New Deal must be not only effec­tive, but also equi­table. It must rec­og­nize the out­sized role Glob­al North coun­tries played in caus­ing the cli­mate cri­sis, both in their own actions and in impos­ing social­ly and eco­log­i­cal­ly destruc­tive mar­ket fun­da­men­tal­ism around the world. A major tenet of this Glob­al Green New Deal needs to be the cre­ation of a new inter­na­tion­al eco­nom­ic par­a­digm — under­pinned by a new or sub­stan­tial­ly trans­formed mul­ti­lat­er­al archi­tec­ture with the capac­i­ty and will to tru­ly deliv­er. This means either dra­mat­i­cal­ly over­haul­ing insti­tu­tions like the IMF, World Bank and WTO, or design­ing new insti­tu­tions to take their place. As Richard Kozul-Wright and Kevin Gal­lagher have recent­ly stat­ed, to make a glob­al Green New Deal work, many of the mul­ti­lat­er­al pro­grams that have accu­mu­lat­ed over decades will have to be culled, and a new gen­er­a­tion of smarter insti­tu­tions will have to be established.”

In oth­er words, the Glob­al Green New Deal can be our generation’s Bret­ton Woods. It is a moment with tremen­dous poten­tial to con­struct new — or rad­i­cal­ly reformed — inter­na­tion­al insti­tu­tions that pro­vide sup­port, aid and invest­ment on the basis of fun­da­men­tal­ly dif­fer­ent val­ues and con­di­tions” than before. As calls for such a New Bret­ton Woods” get loud­er — includ­ing most recent­ly from for­mer UN offi­cial Rachel Kyte — it is imper­a­tive the move­ment for a Green New Deal does not sim­ply seek to tin­ker at the edges of a fun­da­men­tal­ly bro­ken eco­nom­ic and impe­ri­al­ist mod­el. It is a chance to cre­ate real inter­na­tion­al eco­nom­ic and envi­ron­men­tal coop­er­a­tion root­ed in local expe­ri­ence, cul­ture, own­er­ship, and control.

The Wash­ing­ton Con­sen­sus is dead, and should now be buried once and for all. In its place, a new form of glob­al sol­i­dar­i­ty and new mul­ti­lat­er­al insti­tu­tions must rise to con­front the inter­sect­ing crises we now face — and to build a last­ing inter­na­tion­al­ism and an eco­nom­ics focused on nur­tur­ing peo­ple and plan­et, not on extrac­tive exploita­tion by the glob­al elite. There is a world to win, or to lose. The stakes could hard­ly be higher.

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