Reflection paper

Mae Khoory

International Development

Reflection Paper 3

Dr. Indrakshi Tandon

Critique the relationship between international financial institutions (i.e. the World Bank and the IMF) and developing nations, and their promotion of neoliberal economic policies.

The World Bank and the International Monetary Fund has expanded their global reach and exert a great amount of influence when dealing with foreign countries and their internal affairs. These financial institutions hold a lot of power when it comes to determining the future of a developing country (or any country whether rich or poor, that took a loan from them). A great example of how these financial institutions utilize their power is the in documentary watched in class, which exhibited the IMF and the Suharto Regime, their relations, what went wrong and the consequences suffered.

Just a brief summary of both financial institutions, the World Bank was founded at the United Nations Monetary and Financial Conference (also known as the Bretton Woods Conference) in 1944. The International Monetary Fund was also founded alongside the World Bank in 1945, which was in the end of World War II. These financial institutions followed the Bretton Woods system; this system was used to control the value of money between countries. They were established in an era where the political climate was completely different than the current political climate. At the beginning, their aim was to help developing countries emerge from poverty and instability, but that slowly changed into an aggressive implementation of neoliberal economic policies that did more harm than good to the underdeveloped countries.

After gathering information and building up a fundamental idea of both these financial institutions and their forceful implementation of neoliberal policies on developing countries; I have concluded that developing countries are the puppets of these financial institutions, and these financial institutions are the puppets of the neoliberal “regime”. Firstly, why do I say neoliberal “regime”? Let us begin by defining a regime. In politics, a regime is a form of government (or a set of rules) that shapes the procedures of a government and its relationship with the society. In this case, the regime consists of private and powerful individuals who own large and powerful corporations that permit control for their own interests in order to gain profit; they shape the procedures of the (underdeveloped) society. I am pointing out the fact that these financial institutions use neoliberal policies as a form of governing on a country.

Why do I say puppet? In regards to the developing country’s relationship with these institutions, they fell into the hands of these powerful entities in (most likely) the desperation of their need for money. After being loaned the money, the IMF and the World Bank are able to control these countries’ internal affairs because now, they have a say in how they should use that money. Whereas the neoliberal “regime” is using these financial institutions as puppets in order to get what they want; private interests, benefits and the maximization of profits.

With all the mess created, the profit made, and the harm done, there is still something that is quite clear: all of them cannot seem to exist without one another. If the developing country wants to increase their output, where will they get their large sum of money from, quickly? Increasing tax does not make sense because their peoples’ income is not that high. They can utilize their natural resources, but it costs something to extract them. The IMF and the World Bank will not exist if the developing countries did not need them. And neoliberal policies will not be effective without a powerful entity implementing them.

How can we improve these financial institutions’ relationship with these underdeveloped countries? I don’t think I have a realistic answer to that. As long as they continue to have a capitalist “way of thinking”, no improvements can be accomplished. As long as these financial institutions carry the power to dominate and the control the weak, exploitation in these countries as a result of borrowing will always exist.