Behind the Cloak of Benevolence:

World Bank and IMF Policies Hurt Workers At Home and Abroad


by John Cavanagh, Sarah Anderson and Jill Pike


IMF / World Bank and Jobs in the Developing World

...World Bank structural adjustment loans and the various IMF facilities ... translate into an increase in economic hardship for millions of workers and farmers and their families throughout the developing world through at least six mechanisms ...

1. Massive Public Sector Layoffs

Bank and Fund policies in poor countries can be summed up in four words: "Spend less, export more." As governments attempt to cut expenditures, civil service downsizing is often one of the first targets. Morocco's cuts in public service employees in the wake of its 1981 Extended Fund Facility, for example, contributed to a 60 percent rise in unemployment in that country between 1982 and 1984. A similar process occurred in the Ivory Coast where public sector layoffs followed a 1981 EFF. Had it not been for the absorptive capacity of the informal sector, where incomes are low and uncertain, the official unemployment rate by the early l 990s would have stood at 42 percent rather than 29 percent. African trade unionists have pointed out that the multilateral banks would have done better to pressure governments to reduce bloated military budgets and cut widespread embezzlement of money by government and political party officials.

2. Spending Cuts in Basic Social Services

In addition to public sector layoffs, governments have been pressed by adjustment loans to cut basic social services. As education, health care, and other social program budgets are cut, not only are jobs lost directly but the future health and productivity of the workforce are undermined. Ghana received more structural adjustment loans than any other African country between 1983 and 1990. Yet throughout the 1980s, education spending stalled at half of its 1975 levels, and overall enrollment rates declined from 1983 to 1987. During the same period, health spending in Costa Rica fell; the country began its structural adjustment in 1981, and by 1985, the Ministry of Health reported significant increases in the occurrence of intestinal parasitic diseases, rheumatic fever and alcoholism. Cuts in the Costa Rican health budget have greatly weakened the capacity of what was one of Latin America's best public health systems.

3. Crippling Wage Freezes and Labor Suppression

The Bank and Fund also press countries to slow or stop the rise in wages, both to attract foreign investment and to repress consumer demand. In some countries, the lending programs have also undercut workers by promoting the suppression of labor rights. Most recently, a World Bank loan for Nicaragua voted in July 1994 required the Nicaraguan government to adopt measures that undermine collective contracts, weaken public sector unions, and remove non-monetary benefits from labor agreements. In country after country undergoing adjustment, workers' purchasing power drops as wages stagnate while prices rise.

4. Devaluation of Local Currencies

One of the prominent reasons why workers face rising prices in adjusting countries is the common policy prescription that countries should devalue their currency. Devaluations have the effect of making a country's exports cheaper and its imports more expensive.

5. Promotion of Export-Oriented Production

The Bank and Fund pursue a series of policies in addition to devaluation to encourage countries to shift more land from basic food crops to export-oriented production of shrimp, broccoli, cut flowers, coffee, and dozens of other products. In addition to hastening ecological decline (shrimp farms can ruin the water table; the cash crops often rely on more chemical inputs), this shift has often been accompanied by rising malnutrition as basic food prices rise and millions of peasants and indigenous people are displaced from their land. The World Bank has also been a big promoter of "free trade zones" where young women often work in exploitative conditions to produce light manufactured goods for export to Wal-Mart, Sears, K-mart and other outlets. While a small elite gains from these new export ventures, the rising in equalities between the winners and the workers creates new tensions and instabilities.

6. Abolition of Price Controls on Basic Foodstuffs

A favorite target of IMF and World Bank policies is the low prices on basic necessities that governments often subsidize in urban areas. The elimination of these subsidies can be devastating and in several countries, has led to riots and bloodshed. Mozambique received its first IMF Structural Adjustment Facility in 1987. By 1988, prices of basic commodities had shot up exponentially. In the space of one month (March to April), the price of rice rose from 20 cents a kilogram to $1.35; sugar from 25 cents to $1.32; and maize from 14 to 56 cents. A trained secondary school teacher with nine years of basic education and three years of professional training reported spending the dollar equivalent of almost $100 of his monthly $120 salary on basic necessities. Two wage hikes during 1988, of 50 and 15 percent, could not come close to compensating for the 300-500 percent price increases in basic commodities.

In sum, in their zeal to correct macro-economic imbalances and speed the generation of foreign exchange to repay creditors in the rich countries, the IMF and World Bank have visited enormous suffering on the workers of the poorer two-thirds of the world.

exerpted from the book

edited by Kevin Danaher

Common Courage Press
Box 702
Monroe, Maine 04951
phone - 207-525-0900
fax - 207-525-3068

50 Years Is Enough

Corporations Gonna Get Mama

IMF, World Bank, Structural Adjustment