World Bank, IMF need to be decolonized

The World Bank and the IMF were designed with colonial purposes in mind, and they remain mainly colonial in character to this very day.
The following analysis has been written by Dr. Jason Hickel,
an academic at the University of London, for Aljazeera.
“Most people assume that inequality between the global South
and the global North (the United States, Western Europe, Japan, Canada and
Australia) has been declining over the past few decades. After all, colonialism
is behind us, and surely poorer countries are gradually “catching up” to richer
ones. But, oddly enough, exactly the opposite has happened. The per capita
income gap between the South and the North has quadrupled in size since 1960,
in what can only be described as a striking pattern of divergence.
This trend is due in large part to power imbalances in the
world economy. To put it simply, rich countries have disproportionate influence
when it comes to setting the rules of international trade and finance – and
they tend to do it in ways that serve their own economic interests, quite often
at the expense of everyone else.
Nowhere is this problem more apparent than when it comes to
the distribution of power in the World Bank and the International Monetary Fund
(IMF), two of the key institutions that govern global economic policy. We might
expect that representation in these institutions would be modelled along the
lines of the United Nations General Assembly, or perhaps calculated according
to population. But in reality, they are deeply undemocratic.
The problem starts at the top. The leaders of the World Bank
and the IMF are not elected, but are nominated by the US and Europe. According
to an unspoken agreement, the president of the World Bank has always been from
the US, while the president of the IMF has always been European.
Moreover, voting power in these institutions is skewed
heavily in favour of rich countries. The US has de facto veto power over all
significant decisions, and together with the rest of the G7 and the European
Union controls well over half of the vote in both agencies. Middle- and
low-income countries, which together constitute 85 percent of the world’s
population, have a minority share.
If we look at the voting allocations in per capita terms,
the inequalities are revealed to be truly extreme. For every vote that the
average person in the global North has, the average person in the global South
has only one-eighth of a vote (and the average South Asian has only one-20th of
a vote).
Not only is there minority control over global economic
policymaking, there is also a clear racial imbalance at play: on average, the
votes of people of colour are worth only a fraction of their counterparts.
If this was the case in any particular country, we would be
outraged. We would call it apartheid. Yet a form of apartheid operates right at
the heart of international economic governance today, and has come to be
accepted as “normal”.
In some cases, the differences between countries are
particularly striking. Take Bangladesh and Nigeria, both of which were British
colonies. In the IMF, a British person’s vote today is worth 41 times more than
a Bangladeshi’s vote, and 23 times more than a Nigerian’s vote. And this is the
21st century; many decades after the end of colonial rule.
The inequalities that characterise voting power in the World
Bank and the IMF have their roots in the colonial period. After all, these
institutions were founded in 1944. Countries that were colonies at the time
(like India) were integrated into the system on unequal terms, subordinated to
their colonisers. Other colonies were not allowed to join until after
independence, in some cases well into the 1970s and 80s. These institutions were designed under
colonialism and they remain in key respects colonial in character.
Voting power in the World Bank is allocated according to
each country’s financial shares. In the IMF, it is primarily according to gross
domestic product (GDP), with some consideration also given to a country’s
“market openness”. As a result, the countries that became rich during the
colonial period now enjoy disproportionate power when it comes to determining
the rules of the global economy. Inequality begets inequality.
Defenders of this system argue that this is a legitimate
approach: it makes sense, they say, that bigger economies should have more
power over decisions related to the global economy.
But think of the implications of this claim. In any national
political system, we would reject the notion that rich people should have more
voting power than poor people, and more influence over economic policy
decisions. We would see this as corrupt and morally repulsive. And yet such
plutocracy is normalised in the World Bank and the IMF.
These imbalances in voting power help explain why the World
Bank and the IMF have been able to impose neoliberal structural adjustment
programmes across the global South over the past 40 years. These programmes –
focused on privatisation, austerity, and forced market liberalisation – have
created lucrative profit opportunities for multinational companies, but have
had a devastating effect on the South: during the 1980s and 90s, they caused
incomes to decline and poverty to rise, and in some cases triggered decades of
recession and stagnation. To this day they continue to have a negative impact
on health outcomes, including infant and maternal mortality. Such ruinous
policies would never be acceptable under democratic principles.
There have long been calls by civil society and political
leaders in the global South to democratise the World Bank and the IMF. At
minimum, critics have argued that the leaders of these institutions should be
elected in a transparent process. And they have called for a “double majority”
system such that significant decisions should require not only shareholder
majorities but also member-state majorities. This would ensure that global
South countries have a fairer say in the decisions that affect them, and power
to block harmful policies.
For decades, these demands have fallen on deaf ears. But
this year they received a boost from the UN Secretary-General António Guterres,
who, while giving a lecture for the Nelson Mandela Foundation, called for
democratic reform of voting power at the World Bank and the IMF. This
represents an historic opening, and campaigners should seize it. If we want to
have a shot at a fairer global economy, we need to start by decolonising the
institutions of economic governance.”
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