WTO, IMF,World Bank, and Activism
by Michael Albert
Z magazine, January 2000
(from work by Elaine Bernard, Peter Bohmer, Jeremy
Brecher,Dorothy Guellec, Robin Hahnel, Russell Mokhiber, Mark
Weisbrot, and Robert Weissman)
What is trade?
The logic of trade is simple. Suppose I can make wheat better
than steel and you can make steel better than wheat. If I then
focus on wheat and you focus on steel, we can trade together to
exploit our respective talents to each do better than if we didn't
trade. Similarly, if two countries have different "comparative
advantage" in the production of wheat and steel, and they
each make both wheat and steel for themselves, the total pile
of wheat and steel for the two countries will be less than if
they specialized. Of course, the extra output from specializing
and trading has to exceed the costs of negotiating the trade and
sending the items, but if it does, than both sides can get more
from trading than not. Free trade, then, is simply trade without
tariffs, or other barriers or restrictions. The logic is that
since trade is good in that both parties can benefit relative
to not trading, restrictions that reduce trade are bad.
When and why Is trade harmful?
First, when two parties specialize and then trade to benefit
from comparative advantages, gains could be split to benefit the
worst-off party more, divided equally, or benefit the better-off
party more depending on prices or what is called "the terms
of trade." Some prices could even shuffle all the gains to
one side. They could cause one side to be worse off then if they
hadn't traded in the first place, as in many instances of colonialism.
So in the short-run, who benefits from trade and how much they
benefit depends on prices. One of the ills of international trade
is that larger economies can impose prices while smaller economies
generally suffer the consequences. This doesn't only mean that
the U.S. and Germany can overwhelm Thailand and Guatemala. Of
the 100 largest economies in the world, 52 of them aren't countries,
they are corporations.
Moreover, with no restrictions on international investment,
firms will force countries to compete against one another. Every
country and community is pressured to lower wages, lower taxes
on business, and reduce environmental regulations if they are
to attract and hold businesses. This is what has been called the
race to the bottom.
Additionally, in this system communities can be decimated
if what they have specialized to produce can no longer be sold
profitably on the world market. So, for example, if free trade
means that U.S. corn has a lower price than Mexican corn, U.S.-made
corn will be imported into Mexico and those who produce corn in
Mexico may not only lose their land and livelihood, but be forced
to leave their communities in search of employment elsewhere.
Or suppose two countries trade and prices are such that both
enjoy immediate material gains. However, suppose the division
of labor allows one country to develop and diversify its economy,
but forces the other country to focus overwhelmingly on one product,
perhaps even a product that has no future. One country specializes
in coffee or sugar and the other specializes in computer software.
As a result, the continual downward pressure on prices of sugar
or coffee as well as limited linkage to other industries causes
inequality to persist and widen.
Similarly, two countries could trade and one moves in ecologically
positive directions, but the other focuses in areas with horrible
environmental, labor, or social consequences. Additionally, whether
an economic policy benefits only from profits rather than from
social quality of life and ecological effects has much to do with
domestic agendas in each country. If one country has death squads
to silence opposition (paid for by the government of the other
country), its labor costs can be pushed to rock bottom, children
can be enslaved, toxic waste can be dumped.
Regarding the World Trade Organization (WTO)-its agenda prioritizes
the privatization of education, health, welfare, social housing,
and transport. According to the U.S. trade delegation, "The
United States is of the view that commercial opportunities exist
along the entire spectrum of health and social care facilities,
including hospitals, outpatient facilities, clinics, nursing homes,
assisted living arrangements, and services provided in the home."
Salivating in the wings of the WTO talks were U.S. multinationals,
including the pharmaceutical industry, the long-term care sector,
and HMOs. The WTO seeks to create a new privatization bonanza
in the health sector, as but one instance of its overall agenda.
Multinational and transnational corporations are lining up to
capture the gross domestic product that governments currently
spend on public services such as education and health. The long
tradition of European welfare states based on solidarity through
community risk-pooling and publicly accountable services is being
What is the WTO?
The WTO is an international organization of 134 member countries
that is a forum for negotiating international trade agreements
and the monitoring and regulating body for enforcing agreements.
The WTO was created in 1995, by the passage of the provisions
of the "Uruguay Round" of the General Agreement on Tariffs
and Trade (GATT). Prior to the Uruguay Round, GATT focused on
promoting world trade by pressuring countries to reduce tariffs.
But with the creation of the WTO, this corporate-inspired agenda
was significantly ratcheted up by targeting so-called "non-tariff
barriers to trade"-essentially any national or local protective
legislation that might be construed as impacting trade.
The idea is simple-instead of only imposing on third world
countries low wages and high pollution due to their weak or bought-off
governments, why not weaken all governments and agencies that
might defend workers, consumers, or the environment, not only
in the third world, but everywhere? Why not remove any efforts
to limit trade due to its labor implications, ecology implications,
social or cultural implications, or development implications,
leaving as the only criteria whether there are immediate, short
term profits to be made? If national or local laws impede trade-say
an environmental or health law, or a labor law-the WTO adjudicates,
and its entirely predictable pro-corporate verdict is binding.
The WTO trumps governments and populations on behalf of corporate
Why are people opposed to the WTO?
There is no denying that someone could oppose the WTO out
of narrow self-interest-saying, in essence, my country ought to
be able to do as it domestically prefers, but other countries
should be entirely beholden to this world oversight on behalf
of corporations (sort of the way the U.S. government relates to
international law and the World Court: it's for everyone else).
But the view of movements against the WTO should be that social,
labor, ecology, cultural, and other concerns take precedence over
profit-making everywhere, not solely in one's own neighborhood.
The real debate between WTO advocates and their left critics
is not about protectionism, therefore, but about who will be protected
from the ravages of unrestrained competition. The WTO has no rules
to guard those who labor or to protect long-term development or
to foster cultural sustainability or diversity. Without such standards,
the majority of people can actually lose from expanding trade,
not only relative to a fair ideal, but relative to abstaining
The critic's theoretical understanding of the WTO as a vehicle
only moved by corporate profit-seeking logic is borne out from
the WTO's history to date. In every case that has been brought
to the organization challenging environmental or public safety
legislation on behalf of corporations, the corporations have won.
When foreign commercial shrimp fishing interests challenged the
protection of giant sea turtles in our endangered species act,
the turtles didn't stand a chance. When it was Venezuelan oil
interests versus the U.S. Environmental Protection Agency's air
quality standards for imported gasoline, the oil interests won.
When it was U.S. cattle producers against the European Union's
ban on hormone-treated beef, European consumers lost. The list
But don't we favor regulation of trade?
Yes, but not the type of regulation proposed by the WTO. The
WTO is about protecting corporate ownership and monopoly over
the patenting of plants, processes, seed varieties, drugs, software,
and all capital, fostering its exchanges of goods despite any
ill effects, and breaking down any protections of labor, the environment,
health and safety, that might limit corporate profit making.
Why do some demand new policies while others demand shutting
down the WTO?
Some critics argue that the WTO trade liberalization program
is fundamentally flawed and we should abolish this dangerous organization.
They urge building global resistance and constructing global solidarity
from below. Other people, in particular much of organized labor,
argue that while the WTO trade liberalization program is deeply
flawed, it's now well established as a powerful organization and
that the concept of negotiated trade- regulation is vital to the
health and welfare of the world community. They argue that if
core labor rights, environmental protections, and what the Europeans
refer to as a "social clause" was inserted into the
WTO's mandate and practice, it could be transformed.
What are ten key reasons to oppose or even shut down the WTO?
1. The WTO prioritizes trade and commercial considerations
over all other values. WTO rules generally require domestic laws,
rules, and regulations designed to further worker, consumer, environmental,
health, safety, human rights, animal protection, or other non-profit
centered interests to be undertaken in the "least trade restrictive"
fashion possible-almost never is trade subordinated to these noncommercial
2. The WTO undermines democracy by shrinking the choices available
to democratically controlled governments, with violations potentially
punished with harsh penalties
3. The WTO actively promotes global trade even at the expense
of efforts to promote local economic development and policies
that move communities, countries, and regions in the direction
of greater self-reliance
4. The WTO forces Third World countries to open their markets
to rich multinationals and to abandon efforts to protect infant
domestic industries. In agriculture, the opening to foreign imports
will catalyze a massive social dislocation of many millions of
rural people on a scale that only war approximates
5. The WTO blocks countries from acting in response to potential
risk-impeding governments from moving to resolve harms to human
health or the environment, much less imposing preventive precautions
6. The WTO establishes international health, environmental,
and other standards at a low level through a process called "harmonization."
Countries or even states and cities can only exceed these low
norms by winning special permission, rarely granted. The WTO thereby
promotes a race to the bottom and imposes powerful constraints
to keep people there
7. WTO tribunals rule on the "legality" of nations'
laws, but carry out their work behind closed doors. The very few
therefore impact the life situations of the many, without even
a pretense at participation, cooperation, and democracy
8. The WTO limits governments' ability to use their purchasing
dollars for human rights, environmental, worker rights, and other
non-commercial purposes. The WTO requires that governments make
purchases based only on quality and cost considerations. Not only
must corporations operate with an open eye regarding profits and
a blind eye to everything else, so must governments and thus whole
9. WTO rules do not allow countries to treat products differently
based on how they were produced-irrespective of whether they were
made with brutalized child labor, with workers exposed to toxins
or with no regard for species protection
10. WTO rules permit and, in some cases, require patents or
similar exclusive protections for life forms. In other words,
the WTO does whatever it can to promote the interests of huge
multinationals-there are no principles at work, only power and
What short-term alternatives are there?
The immediate alternative to the WTO is for international
cooperation to restrain out-of-control global corporations, capital,
and markets by regulating global corporations and markets to make
it possible for people in local communities to control their own
economic lives. The alternative is to promote trade that:
* reduces the threat of financial volatility and meltdown
* enlarges democracy at every level from the local to the
* defends and enriches human rights for all people
* respects and fosters environmental sustainability worldwide
* facilitates economic advancement of the most oppressed and
Rather then the global economy being regulated by small elites
in corporate boardrooms, we should have bottom up commissions
to restrict trade when it is socially or environmentally detrimental.
Further short-term alternatives to the WTO are to:
* encourage domestic economic growth and development, not
domestic austerity in the interest of export-led growth
* encourage the major industrial countries to coordinate their
economic policies, currency exchange rates, and short-term capital
flows in the public interest
* establish standards for and oversee the regulation of financial
institutions by national and international regulatory authorities,
encouraging the shift of financial resources from speculation
to useful and sustainable development
* establish a tax on foreign currency transactions- known
as a "Tobin tax"-to reduce the volume of destabilizing
short-term cross-border financial flows and to provide pools of
funds for investment in long-term environmentally and socially
sustainable development in poor communities and countries.
* create public international investment funds to meet human
and environmental needs and ensure adequate global demand by channeling
funds into sustainable long-term investment
* develop international institutions to perform functions
of monetary regulation that are currently performed inadequately
by national central banks, such as a system of internationally
coordinated minimum reserve requirements on the consolidated global
balance sheets of all financial firms.
The alternative to the WTO is to reorient international financial
institutions from the imposition of austerity and destructive
forms of development to support for labor rights, environmental
protection, and rising living standards. The alternative is for
wealthy countries to write off the debts of the most impoverished
countries and to create a permanent insolvency mechanism for adjusting
the debts of highly indebted nations. The alternative is to use
regulatory institutions to help establish public control and citizen
sovereignty over global corporations and curtail corporate evasion
of local, state, and national law, such as establishing a binding
Code of Conduct for Transnational Corporations that includes regulation
of labor, environmental, investment, and social behavior. The
alternative is to renegotiate WTO, NAFTA, and all other agreements
regulating international trade to reorient trade and investment
to be means to just and sustainable development.
What are the IMF and the World Bank?
In the aftermath of World War II, besides the United Nations,
the important international economic organizations created at
the conference held at Bretton Woods were the International Monetary
Fund (IMF) and the International Bank for Reconstruction and Development
(IBRD), now known as the World Bank. The IBRD - World Bank was
established to help finance the reconstruction of war-torn Europe
and the development of the poorer countries of the world. The
IMF mandate was to regulate an international monetary system based
on convertible currencies to facilitate global trade while leaving
sovereign governments in charge of their own monetary, fiscal,
and international investment policies. Significantly, the effort
to establish the International Trade Organization (ITO) ended
in failure, leaving the "minimalist" General Agreement
on Tariffs and Trade (GATT) as its surviving remnant. But all
that was more than 50 years ago. The IMF has now become the "point
person" for efforts to "liberalize," or deregulate
the international economic system.
The IMF has prescribed the same medicine for troubled third
world economies for two decades now:
* Monetary austerity: Tighten the money supply to raise internal
interest rates to whatever heights are needed to stabilize the
value of the local currency
* Fiscal austerity: Increase tax collections and reduce government
* Privatization: Sell off public enterprises to the private
* Financial liberalization: Remove restrictions on the inflow
and outflow of international capital as well as restrictions on
what foreign businesses and banks are allowed to buy, own, and
Only when governments sign this "structural adjustment
agreement" does the IMF agree to lend enough to prevent default
on international loans that are about to come due and otherwise
would be unpayable. Arrange a restructuring of the country's debt
among private international lenders that includes a pledge of
new I loans.
What Is the effect of the IMF?
The predictable consequences have always been disastrous.
Tight monetary policy and skyrocketing interest rates not only
stop productive investment, stampeding savings into short-run
financial investment instead of long-term productive investment,
it keeps many businesses from getting the kind of month-to-month
loans needed to continue even ordinary operations. This fosters
unemployment and drops in production and therefore income. Fiscal
austerity-raising taxes and reducing government spending-further
depresses aggregate demand, also leading to reductions in output
and increases in unemployment. Likewise, if any of the government
spending eliminated was actually improving people's lives, then
reductions in those programs eliminates those benefits. Privatization
of public utilities, transport, and banks is always accompanied
by layoffs. Whether productivity and efficiency is improved in
the long run depends on how badly the public enterprises were
run in the first place, and if private operation proves to be
One of the most glaring inefficiencies of "structural
adjustment," even on its own terms, has been that in its
haste to reduce public sector budgets, the IMF has seldom taken
the time to try and distinguish between poorly run and well run
public enterprises. In its crusade to privatize, the IMF routinely
lumps efficient public enterprises together with "white elephants"
that do provide poor service to the public while paying bloated
salaries to relatives and political supporters of ruling political
parties. The IMF never considers the possibility that private
replacement might be even worse.
Hasty removal of restrictions on international capital flows
makes it easier for wealthy citizens and international investors
to get their wealth out of the country, i.e., removal of "capital
controls" facilitates capital flight, further reducing productive
investment, production, income, and employment. Removing capital
controls further exposes the local economy to the vicissitudes
of global capital mobility, including the disease of "contagion.
How do we change such important institutions as the global
The same way one wins a new stoplight on a busy street, wins
a pay raise, wins an affirmative action law, or ends a war-by
raising social costs that the policy makers find so odious and
dangerous that they feel they must give in lest the costs climb
even higher. What do elites care about even more than they care
about these international agencies? Not much-it's true, but one
thing is the overall stability of their material advantage and
power. Pursuing WTO agendas is something corporate and political
elites want to do, there is no denying that. On the other hand,
if doing so polarizes populations into movements that threaten
not only these policies but even the underlying requisites of
profit-making and governing, that is too high a price to pay.
They do not want to awaken a "sleeping giant"-the populations
that they govern and exploit.
So we raise social costs by educating a growing public regarding
the WTO and other global financial institutions and by channeling
the resulting anger and aspirations into social movements that
challenge the WTO and local government's business as usual. What
will make these movements most compelling is if they clearly embody
the threat to
* grow continuously
* become steadily more militant
* diversify in focus from the WTO to international trade more
broadly, to international relations, and finally to domestic economic
policies and arrangements as well
What is the relation between capitalism and institutions like
the WTO, IMF, and World Bank?
Capitalism is an economic system defined by private ownership
of the means of production, corporate workplace structure, and
market allocation. These defining features contour much of what
can and will happen in
capitalist economies. Some implications are: that those who
own means of production will accrue vast profits and hold most
power; that those who manage and otherwise monopolize daily decision-making
will have considerable income and power as well; and that those
who only obey orders and carry out labor defined by others will
be overwhelmingly subordinate in income and in power. Corporations
will dominate economic and social life by creating a virtual dictatorship
of the owners and administrators of workplaces, and by corrupting
political relations with commercial values and pressures in pursuit
of profits. Citizen's behaviors will be pushed by market competition
toward individualist selfishness and outcomes will bias from collective
fulfillment toward private profit.
Another mark of capitalism is the market-driven competitive
pursuit of profit among capitalists and the use of every means
they can muster to defend and enlarge their advantage relative
to workers. To further both agendas, various institutions are
established. In the international realm these include the WTO,
IMF, and World Bank, each a natural outgrowth of the desire of
the most powerful capitalists to (a) dominate their own economies
without restraint and (b) extend their profit seeking as widely
internationally as they are able to, again, without restraint.
What is an alternative to capitalism and markets?
Ultimately, if we don't like international agencies because
they elevate corporate profit over popular well-being, private
power over democratic participation, and short-run expediency
for the few over long-run fulfillment and sustainability for the
many, then we should also reject private ownership, corporate
structure, and markets on the exact same grounds.
But what alternatives are there? This is controversial, of
course, but an alternative economy might include things like:
remuneration according to effort and sacrifice rather than according
to private property, power, or output; jobs balanced for quality
of life and empowerment plus workers and consumers council democracy
rather than hierarchical corporate structure and authoritarian
administration from above; and participatory cooperative social
planning rather than individualist, corporatist, competitive market
Movements for short-run program such as reforming or eliminating
the WTO can benefit greatly from orienting their analyses, program,
and strategies in tune with longer-run aims. This increases the
likelihood of members sustaining hope and commitment; increases
the threat that the movement's growth poses to elites, making
it more compelling and powerful; and helps to insure that today's
victories lead to further gains tomorrow and ultimately to a new