"Beware the organization that sings; it is invincible" - IWW

The World Bank Part 2

George Hewison                 Political Economy Newsletter Volume 2, #12                  December, 2014 

Last month’s Political Economy Newsletter briefly dealt with the genesis of the World Bank, a brainchild of United States capitalism after WW II. No strategic or tactical consideration for social advance and/or change is possible without factoring in such important components of global capitalism as the World Bank and the IMF. The P.E.N. is therefore indebted to Eric Toussaint, President of the Committee for the Abolition of Third World Debt, and his thoroughly researched book, “The World Bank-A Critical Primer”.

With Toussaint’s account, the reader is struck by two salient points. First, the World Bank is no charitable foundation; and two, its main goal, from inception to the present, was to guarantee that US capital consolidated and extended its preeminent position throughout the world.  The Bank receives money from private banks at prevailing rates of interest, and, in turn, lends to client countries at market interest rates provided that those countries, that desperately need development capital, meet certain criteria laid down by the bank. It is this criterion that establishes the World Bank as the extension of US foreign policy and the needs of its global capitalist enterprise.

Immediately after World War II, the loans granted by the World Bank went for the reconstruction of Europe. By 1946-47, Communist parties, that had been in the leadership of the underground resistance in Nazi-occupied France and Italy, had emerged as the most popular political parties and poised to become government. But “aid” packages of the Marshall Plan[1], along with the strings of World Bank loans, precluded Communist participation in government and effectively thwarted the Communists and any revolutionary sentiment in those countries. Capitalism in Europe was saved.[2]

West Germany, Japan and South Korea, with World Bank assistance, later became showcases for capitalism in the post WWII period, as the US used its overwhelming economic power, coming out of the War, to press its advantage over its erstwhile allies and dictate to friend and foe alike, using institutions like the IMF and the World Bank. Show case number one was West Germany, where East eyeballed West during a Cold War spanning four decades (NATO from 1949 and the Warsaw Pact from 1954). West Germany’s share of the agreed-upon war debt by the Allies at the end of WWII had been forgiven in 1953 by the United States, Britain and France[3]; and was a stunning example of US financial largesse. The Soviets could not match the US in their occupation zone of eastern Germany. Similarly, the support lent to South Korea from 1953 to 1961, despite a succession of brutal military dictatorships in that country was equally generous, and established yet another showcase south of the DMZ after the Korean War ended in a truce in 1953. It “received more from the United States than the Bank lent to all independent countries in the Third World (India, Pakistan, Mexico, Brazil, and Nigeria included)….”[4] This was the foundation for the Korean “miracle”.[5]

Toussaint compares generous treatment in handling the debt of war-ravaged European colonial powers to that subsequently foisted on newly-emerging nations of Africa and Asia and also compliant states in the US backyard, Latin America. Nowhere is the role of the World Bank, as an instrument of US foreign policy, clearer than its handling of Third World debt.

It is impossible to look at the current plight of sub-Saharan Africa, currently facing Ebola and AIDS pandemics, genocide, civil war and lack of basic civil infrastructure without putting the World Bank under the microscope. Imperial countries in Europe, in the immediate aftermath of WWII, received funds from The Bank for developing projects in their colonies that would supply minerals, food and fuel back to the Motherland while increasing the domination over the subject peoples. When independence in the colonies was achieved, the staggering debt load was transferred to the newly-emerging states, a debt that would continue to grow and could never be repaid. A new type of colonialism emerged with a “made-in-USA” template. A perfect debt trap!

Latin America, since the Munroe Doctrine, has long been considered by the US to be their exclusive sphere of influence. The World Bank has been a key player, along with other parts of the US state, to discipline any potentially rebellious Latino nation. Virtually every one of these countries has felt the sting of the World Bank, the IMF, the CIA[6] and/or the US Marine Corp. Nicaragua was for years dominated by the brutal Somoza dictatorship-a US friend. Between 1951 and 1960, Nicaragua received 10 World Bank loans, and Nicaragua allowed the US to establish a military base that was used to overthrow the democratically-elected government of Jacobo Arbenz in Guatemala in 1954, and to invade Cuba in 1961. When the Nicaraguans finally ousted the dictator, Somoza, and he and his family fled, stripping the country bare before going into exile, the World Bank suspended financial assistance to the new government on the flimsy excuse of arrears of payments on loans contracted by the former dictator[7]. Instead, the US, through other means (Iran-Contra), sought to destabilize the new Sandinista government and return it safely to the US fold. The US invasion of the Dominican Republic to oust democratically-elected President Bosch, the military coup that overthrew the democratic government of Goulart in Brazil (1954), the invasions of Panama, Grenada and Haiti all bear the imprint of World Bank-US complicity.  Honduras is the latest victim of a US-inspired coup.

The Cuban Revolution of 1959, against the brutal U.S-backed dictator, Fulgencio Batista, shook up Washington and the World Bank and their Latin American strategy. Each Latin American country’s situation had to be re-evaluated and re-calibrated to prevent another Cuba[8]. In the meantime, this little island nation, 90 miles off the Florida coast, was to be quarantined until it complied with US diktat. The abortive Bay of Pigs invasion and the Cuban Missile Crisis brought the world close to nuclear Armageddon in 1961, but thus far, Cuba has refused to bend to the US embargo, and has acted as an outlier example to other populations throughout Latin America. Its leader, subjected to numerous CIA assassination attempts, for more than five decades, has counselled Third World leaders to repudiate “illegitimate” debt foisted on them as the only way forward in eliminating poverty and illiteracy in developing countries. Cuba’s example has been infectious to the chagrin of Wall Street bankers. Nevertheless, only a month ago, President Obama, ordered yet another extension of the embargo on Cuba until “democracy” is restored.

Eric Toussaint offers many examples of World Bank and the US State Department synchronized approaches to client Latin American states. Nowhere was this more apparent than the case of Chile, which up until 1973 had been a model of parliamentary democracy for more than 150 years.  When Salvador Allende was elected in 1970, the US State Department made sure the World Bank issued no new loans to Chile, until the violent coup of Augusto Pinochet in 1973 meant that the Bank’s taps could be turned back on.

The current crisis in Mexico: the disappearance of 43 teaching students that gives lie to the “war on drugs,” cannot be understood without understanding the role of the US and the World Bank[9]. With the tripling of foreign revenues from its oil industry after 1973, Mexico hardly seemed to need World Bank loans. Nevertheless, from 1973 to 1981, thanks to US corporate-friendly leaders, World Bank loans quadrupled from $118 million US to $460 million[10]. That was in addition to money borrowed from private (mainly US) banks for ten times that amount. Lending Mexico money was a way to keep control over the country. Public finances were in crisis even as lending continued to increase. When interest rates ballooned[11], Mexico could not make payments. In August 1982, Mexico had only $180 million in currency reserves and owed $300 million in payments. In December of 1982, the IMF and other financiers told Mexico it would advance more loans providing the government “used the money to refund private banks and that Mexico implement drastic structural adjustment measures.” The government devalued its currency and assumed over 6 billion U.S dollars of the debts of the banks. Mexico has never recovered. Poverty has helped spawn an illicit drug industry. The debt trap worked marvellously once again.

As a socio-economic formation, capitalism has constantly changed and adapted. US-led capitalism, from WWII to the present, has all the appearances of omnipotence, but internal contradictions, and what is new and developing, is what social activists keep their eyes on in framing strategy. Bubbling underneath the veneer of the massive economic and military power of the United States lay tremendous contradictions that threaten its leadership. Capitalism is morphing again as the world enters a most dangerous phase.

What’s New and Developing?

The ubiquitous war on terror has turned back the clock on habeas corpus, civil liberties and human rights at home, while the US recklessly throws its crude economic and military weight around the globe to inflict its brand of “democracy” as increasingly refined and defined by the Tea Party and oil magnates like the Koch Brothers.

The price tag for its more than half trillion dollar annual military budget is borne by the American people and at the peril of the world’s largest economy, an economy that has dragged the integrated global economy close to the abyss more than once in this decade.

As the world copes with the existential threat of climate change, real options to solve basic economic and social dilemmas are in short supply. The U.S. is riven with a racial and social divide that mirror its epic Civil War, while the roots of the divide are buried deep in its capitalist developmental past. The world watches in horror at the shooting of unarmed blacks and draws connections to CIA torture and extra judicial executions in the post-9-11 atmosphere that would surely have had its leaders in the dock in Nuremburg in 1946 for war crimes and crimes against humanity. The mask of democracy and the rule of law are slipping as capitalism enters deepening crisis.

The divide is not just domestically between Republicans and Democrats in the US. Internationally, new formations are arising such as BRICS (large capitalist economies (B)razil, (R)ussia, (I)ndia, (C)hina, and (S)outh Africa) that have banded together to challenge US leadership. The new group has formed its own bank to counter the World Bank, and while the upstarts are not yet as potent, the signals are clear. A gauntlet has been dropped.

Latin America is no longer America’s exclusive casino. Cuba is no longer isolated as it once was. New trade and financial groupings are arising in the region and Cuba is on the inside, while the US is now on the outside looking on. The new really bad boys according to the World Bank, the IMF, the State Department and the craven US (and Canadian) media are Venezuela, Bolivia and Ecuador, with Argentina, Uruguay and Brazil not far behind. The World Bank and the IMF are still throwing their weight around[12], but are doing it more tactically. Although the decline in the global price of oil is causing severe contractions and social difficulties, ALBA[13], one of the new regional players, is challenging the World Bank and the IMF head on.

“Regime change” in Ukraine is the latest project of US-led capital and could quickly become the most dangerous flashpoint for the peoples of the world. But again, Europe has been very uneasy with the US strategy towards the Ukraine. So far, it has been compelled to go along despite its own deepening problems, and contradictions of its own where the US is concerned. Capitalism, whether led by the US, or not, has never been monolithic and it is these contradictions that bear watching.

The Harper Conservatives are the Canadian franchise of the U.S. Republican Party.  This Canada branch agency of the Republicans supports every global corporate adventure, especially in Africa and Latin America, where Canadian-based corporations are becoming as despised as U.S.-based ones. Like their US counterparts, the Conservatives are justifying increased military expenditures and now are among the most bellicose and militaristic voices in NATO and the G7.

Prime Minister Harper, up until now, has had two major planks in his political economy program. Both serve the interests of a handful of corporate pirates: tar sands oil/pipelines and austerity. Both planks are gravely wounded.  To further his objectives, he has been sorely testing Canadian democracy, borrowing heavily from the Republican Party playbook. As the structural crisis of capitalism deepens, as with our big neighbour to the south, so too does the crisis of democracy, despite all the Conservative manoeuvring and rhetoric to the contrary.

Canada has been increasingly integrated to the US since Finance Minister Abbott determined that our main economic course would be as ‘hewers of wood and drawers of water’ back in 1947; and Mulroney, and now Harper, is trying to cinch the DEAL with so-called “free trade’.

For those seeking to keep alive the dream of fundamental social justice and change, the Harper Republican Party solutions must be defeated.

Having said that, those who foster a kinder, gentler World Bank, IMF, NATO and CIA/CSIS alternative are dealing in illusions. Real alternatives to move in a new direction will not come easy. Escaping from the effects of a decades-old grasp of the 150 member Canadian Conference of Chief Executives will mean Canadians, in their majority, have started to realize that there is no other future save and except joining with, and supporting, those others in the world who seek fundamental justice for their peoples. In the meantime, it is to be hoped that, in fashioning stop gap alternatives to the growing crisis and, as we work towards lasting solutions, progressives will keep their eyes on the long term prize; can avoid eating their own (those who should be allies but may differ on tactics); and save our invective for the real enemies of humanity. In that category, we have a number of real opponents to choose from. Heading a star-studded cast of global villains, a round of applause please as we nominate the World Bank!

George Hewison is a lifelong union organizer and former officer of his union, the United Fishermen and Allied Workers Union, on Canada’s west coast. He embraces political and social activism in the interests of social justice and fundamental social change.

Hewison believes in the power of the people, who, if given the proper tools, can change the world. One of those tools is a deepening understanding of how our society is put together. He has been the recipient of many important lessons, both positive and negative, from veterans of Labour’s struggles stretching back decades. He has spent most of his adult life sharing those lessons with others.

For a number of years, he has also embraced a study of the political economy of capitalism, including its current iteration, and conducts discussion groups with interested folks who share his desire to understand and explain the complexities of the social, economic and political world around us.

He continues a tradition of combining working class activism with the power of song and continues to tour and perform extensively.

He may be reached at georgehewison@gmail.com .