Who are the people really running
the IMF and World Bank?
How do they get their money?
And what's the difference
between the two institutions?
Dollars and Sense magazine
July/August 1999, p41
The International Monetary Fund (IMF) and World Bank are run
by their member governments, but not on the basis of one-country-one-vote.
Instead, governments have votes based on the amount of money they
pay in to the organizations. In this sense, they operate much
like private corporations, except that the owners of shares are
governments instead of individuals.
The U.S. government has by far the largest share of votes
in both the IMF and World Bank and, along with its closest allies,
effectively controls their operations. In 1998, the U.S. held
18% of the votes in the IMF and 15% in the World Bank. Together,
the United States, Germany, Japan, the U.K. and France control
about 40% of the shares in both institutions. With the rest of
the shares spread among 175 other member governments, some holding
a tiny number of votes, the United States is effectively in charge.
So the people running the IMF and the World Bank are the same
folks who run the U.S. government and the governments of its closest
allies. Since the institutions were founded at the end of World
War II, the president of the World Bank has always been a U.S.
citizen, and the head of the IMF has always been a European. These
are all men, generally coming from the top of the financial industry.
While the IMF and the Bank operate as extensions of the U.S.
government's foreign policy, they are well insulated from democratic
accountability. Congress, to say nothing of the populace in general,
has no role overseeing their operations, and they operate largely
outside the public eye (though Congressional ire sometimes appears
in response to a request for more funds).
What the IMF and the World Bank do is lend money to governments.
Because many governments, especially governments of poor countries,
are often in dire need of loans and cannot readily obtain funds
through financial markets, they turn to these institutions. And
if the IMF and World
Bank will not loan to a country, international banks certainly
won't. As a result, the IMF and the World Bank have great power,
and are able to insist that governments adopt certain policies
as a condition for receiving funds.
The IMF and the Bank make sure that U.S. allies get the financial
support they need to stay in power, abuses of human rights, labor,
and the environment notwithstanding; that big banks get paid back,
no matter how irresponsible their loans may have been; and that
other governments continually reduce barriers to the operations
of U.S. business in their countries, whether or not this conflicts
with the economic needs of their own people.
In the division of functions between the IMF and the World
Bank, the IMF provides funds to governments in immediate financial
emergencies and the Bank provides funds for long-term development
projects. For example, when the financial crisis that developed
in 1997 spread through several Asian countries, capital fled to
safer havens. The values of local currencies fell drastically
relative to the dollar. Governments (and private firms) whose
revenues were in their own local currencies could not meet their
dollar obligations to international bankers. This forced governments
to turn to the IMF for funds to maintain the values of their currencies
and meet their obligations to international banks. Along with
the loans, however, came conditions: the IMF's program for economic
The World Bank may receive fewer headlines, not being on the
spot in crises, but over the long run it shapes the economies
of countries where it makes loans. Its loans cover a wide spectrum
of projects, from large hydro-electric dams to local business
training programs. Many of the Bank's programs appear desirable
in themselves-who would object to dean water facilities, education
in animal husbandry, or better roads? Yet the particular projects
promote a development strategy that minimizes the role of the
public sector, and demands the privatization of communal lands
and other public property.
As to the source of their funds, the IMF gets most of its
money as subscriptions from member governments-the amount determining
the number of votes each government has in running the operation.
When, in extreme circumstances, the IMF needs an especially large
amount of funds, it can activate a line of credit it has established
with governments and large banks.
The World Bank raises its money by taking loans from the private
sector, operating through financial markets as would private firms
or governments. Because the Bank is backed by funds from member
governments, it can obtain private funds at relatively low interest
rates. It then turns around and loans this money to the governments
of poor countries to support development projects. In effect,
the Bank allows governments of poor countries to borrow, through
it, on the international capital markets and at lower rates than
they could borrow were they to seek funds on their own.
World Bank, Structural Adjustment