World Bank and International Monetary Fund (IMF) are the leading financial organizations on the planet, and covering their role in the world economy is a serious task. In my opinion, the goals that both organizations pursue – such as global financial stability, sustained economic development, and eradication of poverty – are laudable. However, I also think that the methods they employ in their interactions with developing nations may be of questionable efficiency and are subject to criticism. This is a personal reflection on how IMF and World Bank promote neoliberalism in the developing countries and why I think their universalist approach and policies of continuous borrowing are ineffective and contradict actual experience.
First of all, the World Bank and the IMF maintain the policy of serial lending in their interactions with the developing countries, which I believe is harmful to the economic development of said countries. This policy effectively means that the developing nations do not borrow money once to use it to drive economic development but stretch the process over time. As a result, the countries become reliant on loans and become more and more indebted instead of developing financial sustainability and economic independence (Hillebrand, 2020). As far as I can tell, this policy contradicts the overall goal of eradicating poverty. A country such as the USA may have enormous foreign debt and a thriving economy due to the importance of its currency in the world’s financial system, but this does not apply to developing nations. If they continuously rely on foreign loans to make ends meet, they are at the complete mercy of their lenders. I do not see a way for them to create healthy and stable economies that may protect their citizens from poverty and unemployment under these conditions.
Secondly, the IMF and World Bank use their neoliberal policies indiscriminately, as if thinking that they suit every case. I think that this approach may actually harm the receiving countries in some cases. For instance, the loans usually come with the requirements to cut government spending (Hillebrand, 2020). I see that as an example of how neoliberal policies pursued by both organizations may prove ineffective for some developing countries. If the population does not have much purchasing power, government spending will be one of the primary sources of demand, and cutting it will decrease demand severely, thus stalling economic growth.
Thirdly, and, perhaps, most importantly, the evidence does not support neoliberalism as promoted and encouraged by the IMF and the World Bank alike. When I look at the economic developments of recent decades, the experience of the developing countries does not demonstrate the success of neoliberalism. While some developing countries, such as China or Singapore, have made tremendous economic advances, they followed the state-centered development model rather than the neo-liberal one (Hillebrand, 2020). I interpret it as evidence that the emphasis on market-oriented neoliberal policies is not as effective for the developing nations as the World Bank and IMF paint it.
To summarize, the IMF and World Bank consistently pursue neoliberal policies in their interactions with the developing countries, but I believe these are of limited efficiency at best. In my opinion, serial lending promotes dependency and economic insecurity instead of helping developing nations to build strong economies. I also think the idea that neoliberal policies are equally suitable everywhere to be fundamentally flawed, as sometimes a state-centered development model will do better for a developing nation. Finally, I see that the developing nations of Southeast Asia that made some of the most notable economic advances in recent decades followed the state-oriented strategies rather than the market-oriented approach. Based on these observations, I conclude that the promotion of neoliberal ideas in the developing countries by the IMF and the World Bank is not very effective in developing these countries’ economies.
Reference
Hillebrand, R. (2020). IMF and World Bank. In K. Larres & R. Wittlinger (Eds.), Understanding global politics: Actors and themes in international affairs (pp. 201-218). Routledge.