Question

2-How did the role of the International Financial Institutions (IFIs) change from Bretton Woods to Neoliberal Globalization? (HINT: Elaborate your answer by identifying key aspects and principles of the Structural Adjustment Programs).

Answer 1

The last decade has seen numerous debates about the performance and the future of the International Monetary Fund (IMF) and the World Bank as well as many proposals for reform. Some have criticized the international financial institutions (IFIs) for creating problems of moral hazard and have argued that their original mandates have been gradually distorted and overextended. Others have condemned the narrow theoretical framework behind structural adjustment programmes or the narrow focus on business interests and the disregard for civil society. Although such critiques are inspired by different assumptions and political orientations, many of them are characterized by a tendency to isolate the IFIs’ operations from the dynamics of the capitalist relations of which they are part. More substantial critiques of the IFIs must locate their discourses and policies in the context of the neoliberal transformation of the economies and societies of the global South — a process that involves the liberalization of trade and finance, the creation of opportunities for accumulation through the privatization and commodification of public goods, the protection of foreign direct investments and the building of domestic institutional structures of accountability to international financial markets. Indeed, over the past decade the role of the IFIs has been extended from the enforcement of these reforms to the management of their adverse effects (such as impoverishment, social dislocation, expropriation of public goods, regressive distribution of wealth and environmental degradation). Their new focus on poverty, governance and transparency was meant to shore up their legitimacy and to enhance their capacity to manage the conflictual and contradictory development of neoliberal globalization and contain the spread of the disruptive effects of crises.

"Structural adjustment" is the name given to a set of "free market" economic policy reforms imposed on developing countries by the Bretton Woods institutions (the World Bank and International Monetary Fund (IMF)) as a condition for receipt of loans.

SAPs were developed in the early 1980s as a means of gaining stronger influence over the economies of debt-strapped governments in the South. To ensure a continued inflow of funds, countries already devastated by debt obligations have little choice but to adhere to conditions mandated by the IMF and World Bank.

Most donor countries, including Canada, condition their bilateral assistance upon a country's adoption of structural adjustment programmes.

SAPs are designed to improve a country's foreign investment climate by eliminating trade and investment regulations, to boost foreign exchange earnings by promoting exports, and to reduce government deficits through cuts in spending.

The IMF and the World Bank rebranded their ‘structural adjustment’ facilities, opting for the nondescript terminology of ‘extended credit’ and ‘development policy’ loans. Yet although we may be witnessing the end of the era of the undisputed dominance of the Western-dominated World Bank and IMF, it would be premature to announce their demise. Over the decades, these organizations have shown themselves to be remarkably agile at adapting to major changes in their environments – perhaps most strikingly, the IMF was able to survive the collapse of the Bretton Woods monetary agreement and to remake itself into a promoter of market liberalization around the world. Whether or not they remain agents of neoliberalism, we can expect the two organizations to endure.