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ANALYSIS FEATURED HISTORY

A Weaponized History of the IMF and World Bank in Unconventional Warfare

World Bank Protester, Jakarta Indonesia in 2004.
World Bank Protester, Jakarta Indonesia in 2004. (Photo via Jonathan McIntosh)

“Some of the best weapons do not shoot,” said a leaked U.S. military guidebook referencing how the U.S. relies on financial institutions such as the International Monetary Fund (IMF) and the World Bank (WB) to act as “unconventional” weapons.

Wikileaks originally leaked the file, officially titled Field Manual (FM) 3-05.130, Army Special Operations Forces Unconventional Warfare in 2008, but the site re-released the document on Twitter in January 2019 in light of what is happening in Venezuela. The U.S. and other countries have sanctioned Venezuela, further crippling an economy that is already in dire shape. The document suggests moves like sanctioning an already struggling country may be done purposefully as a means of unconventional warfare.

One section in particular in the 248-page document, titled “Financial Instrument of U.S. National Power and Unconventional Warfare” drew the most attention. It describes how the U.S. government exerts its financial power and influence by using organizations such the World Bank (WB), the International Monetary Fund (IMF), the Bank for International Settlements (BIS), and the Organisation for Economic Co-operation and Development (OECD) as tools to accomplish its mission through loans, grants and other financial support. This section also explains how the U.S. military uses those financial institutions to produce financial incentives and disincentives to persuade enemies, adversaries to adjust their behavior at all levels.

John Bolton, U.S. National Security Advisor and the current head of the National Security Council (NSC), controls those financial levers, as the guidebook describes the NSC as responsible for “the integration of the economic and military instruments of national power abroad.”

The IMF and WB are often dubbed as independent institutions, but in fact, as this document shows they are often wielded as extensions of U.S. power and are tools to push U.S. geopolitical goals.

The IMF and the WB: A Brief Introduction and How They Differ

The IMF and World Bank were set up at the Bretton Woods Conference in 1944, aimed at strengthening the global economy after World War II.

A country must join the IMF first before becoming part of the World Bank group. Both cooperate at all levels to reduce the foreign debt burden of poor countries. They also provide assistance for member countries to develop a more improved taxation system and financial sector.

But, there are differences between the IMF and the World Bank. IMF loans are for short-term economic problems, aimed at stabilizing a currency and providing general support for a country’s balance and international reserves. While the World Bank focuses more on long-term issues and pushing integrated economic growth.

The IMF concentrates on macroeconomic and financial policy, and the World Bank covers more extensive sectors such as development projects and poverty reduction efforts. The World Bank only provides loans for emerging countries or countries in transition, while the IMF lends to all member countries, regardless of whether they are rich or poor nations.

Both financial lenders have a mission to save and stabilize a healthy global economy. But loans distributed by both financial institutions do not always solve the problems emerging economies are facing. Sometimes their aid complicates the issues. With Wikileaks’ release of the Unconventional Warfare guidebook, a legitimate question is how often are IMF and World Bank loans and projects meant to help the receiving country versus furthering the self-interested goals of the U.S. and its allies?

Below we take a look at some evidence illustrating how the IMF and the World Bank may have been purposefully used as means of unconventional warfare over the years. A credit to the Committee for the Abolition of Illegitimate Debt for much of the information below.

IMF and World Bank Support of U.S.-Allied Dictatorships

The IMF and the World Bank have shown a repeated willingness to ignore gross human rights violations and the usurpation of democracy.

For example, Chile received no loans from the IMF nor the World Bank while the democratically elected socialist Salvador Allende was in office from 1970-1973. However, after a CIA backed coup ended Allende’s term and ended over four decades of uninterrupted democratic rule, both institutions happily lended to the new ruling dictator Augusto Pinochet. Pinochet reversed Allende’s nationalizations and began a violent regime of political suppression that executed and imprisoned tens of thousands. r

The IMF and World Bank’s support of authoritarian rulers was also evident in Brazil (they began lending to Brazil after a military regime ousted the democratically elected Joao Goulart), Nicaragua (they canceled aid after socialist Daniel Ortega was democratically elected) and Romania. Ceaucescu was eventually convicted of economic sabotage and genocide but during his regime Romania “westernized” its economy and became one of the World Bank’s most important clients.

IMF and World Bank Disburse Loans to Known Corrupt Regimes

Despite being aware of massive corruption in Zaire (now Democratic Republic of the Congo), the global lenders turned a blind eye to the fact and provided ample loans to the Mobutu regime.

A report in 1962 from the U.N. showed that Mobutu had stolen several million dollars that was intended to boost the country’s military. Twenty years later, German banker and IMF official Erwin Blumenthal wrote a report that warned foreign creditors not to expect any debt repayment as long as Mobutu ruled. The report clearly demonstrated that lending to Mobotu was not a sound economic decision. However, from 1965-1981 the Mobutu administration borrowed around $5 billion. Even after Blumenthal’s report World Bank and IMF payouts increased. What Mobotu was, was a strategic ally of the U.S. 

IMF and World Bank-Triggered Debt Crises in Africa

In recent years the West has accused China of carrying out “debt-trapped diplomacy;” policies that, as part of China’s Belt and Road Initiative, lure poor nations with financial aid only to have their assets stolen by Beijing once a borrowing country can’t repay.

However, Lawrence Freeman, an African economic and political analyst, argued in an article on The Final Call that the accusations are misplaced.

“It is more than ironic that the West is complaining about Africa’s debt to China. Since the 1960s Western nations, the IMF, World Bank, Paris Club, etc., have ‘looted’ Africa of hundreds of billions of dollars in bloated debt payments and through the manipulation of currencies and terms of trade,” Freeman said.

Backing Freeman’s assertion is a report from Reuters in May 2017 stating that “most sub-Saharan African countries still rely on U.S. dollar-denominated debt to finance their economies. Some investors say this is sowing the seeds of future debt crises if local currencies devalue and make dollar debt repayments more expensive.”

In a report commissioned by the Halifax Initiative entitled Impoverishing a Continent: The World Bank and the IMF in Africa, Asad Ismi details how Structural Adjustment Programs (SAPs) imposed on African nations as a condition of receiving World Bank and IMF loans lead to worsening conditions in Africa. The SAPs forced African economies to reduce tariffs, cut public spending (including subsidies for food and healthcare), raise interest rates (reducing access to credit), privatize state enterprises and generally open countries doors to Western investors. The foreign investment was supposed to help reduce poverty but instead, the SAPs expanded poverty and inequality as those with means got richer and others were left behind.

In the mid-2000s Africa benefited from a massive debt relief program that returned approximately $100 billion to African economies since; however, debt has again begun to creep up – suggesting Africa has struggled to recover from the decades of debt and exploitation at the hands of IMF and World Bank loans and programs.

Funding For Projects Abusing Human Rights

A report released by Human Rights Watch (HRW) in 2013 highlighted the World Bank’s failure to protect basic human rights and cited three case studies where World Bank funds were being used in programs that abused basic human rights. HRW described it as a systemic failure and a lack of appropriate safeguards.

In Vietnam, HRW documented torture, ill-treatment, arbitrary detention and forced labor in a World Bank-financed government drug detention center.

In Ethiopia, the World Bank disbursed $2 billion for sanitation, health, infrastructure and similar projects. However, in Ethiopia’s Gambella region, HRW discovered that to achieve the development objectives funded by the World Bank the government began a relocation program meant to relocate to new villages with better infrastructure and sanitation. In addition to the new villages not being an improvement, HRW found the relocation process was marred by violence.

Jessica Evans, senior advocate on international financial organizations at HRW said: “The World Bank pays tens of billions of dollars every year to support development efforts around the world. But it needs to stop undermining its efforts by making sure it isn’t contributing to human rights abuses.”

World Bank Projects and Forced Eviction

The Kedung Ombo Dam project in Indonesia’s Central Java province (1985-1991) required the forced relocation of 5,268 families from 20 villages. Most opposed the project and fought to cling to their land even as waters rose around them.

In an internal World Bank memo on the dam project, the Bank noted: “recent surveys of reservoir people show an average decline of 40 percent in incomes since relocation, and 50 percent of house plots are smaller than before.”

Locals took the government all the way to the Supreme Court which ordered the government to compensate displaced locals at rates far superior to the World Bank-funded plan.

Research conducted by Indonesia’s environmental watchdog Walhi and Katadata revealed that local residents affected by the $283.1 million dam project are still suffering from the work. Most of their farming land was flooded, forcing them to leave their villages to seek a better life. About 87 percent of the local residents affected by the project were farmers.

Similar forced relocations of World Bank-funded dams happened in India (Chandil Dam) and Zaire (Ruzizi II Dam).

Reform Desperately Needed

According to the Joint Economic Committee of the U.S. Congress in 2000, the failure rate of all World Bank-sponsored works reached between 55 percent and 65 percent in 2000. The failure rate reached an alarming  73 percent in Africa.

The most recent President of the World Bank, Jim Yong Kim, resigned from his post on Feb. 1. Following his resignation, U.S. President Donald Trump nominated David Maplass to replace him, Malpass is considered a fierce critic of the World Bank.

However, reform is needed to make the World Bank and the IMF more successful and relevant to the times. Kim himself was an outspoken critic of the institution he once chaired. The South Korean faulted the World Bank in his 2000 book Dying for Growth for imposing costs on the poor.

David Adler and Yanis Varoufakis wrote in the Guardian that a new system to rejuvenate the function of global financial institutions is as needed now as it was 75 years ago at Bretton Woods. As global warming is threatening the world, a new Bretton Woods can be set up, and the World Bank can turn idle savings into environment-friendly investment.

Maybe, it is also time to revisit the concerns of John Maynard Keynes, the chief British negotiator at Bretton Woods. According to The Guardian, Keynes predicted how dangerous the system would be if the system relied too heavily on U.S. dollars and proposed an alternative system.

He suggested that international economies could subscribe to a multilateral International Clearing Union (ICU). Countries could keep their own currencies while denominating all international transactions in a global accounting unit Keynes called the bancor and clearing all transactions through the ICU.

At Bretton Woods the U.S. rejected the idea and wanted its greenbacks as the primary currency in the new monetary system, limiting the World Bank to being a source of emergency lending. Keynes had envisioned a system where the World Bank and the ICU would work together to stabilize world economies, perhaps it is time to revisit this idea.

It is also time to revisit the ability of the U.S. or any single country to wield “independent” multilateral financial institutions as unconventional means of war.

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Yasmeen Rasidi

Yasmeen is a writer and political science graduate of the National University, Jakarta. She covers a variety of topics for Citizen Truth including the Asia and Pacific region, international conflicts and press freedom issues. Yasmeen had worked for Xinhua Indonesia and GeoStrategist previously. She writes from Jakarta, Indonesia.

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2 Comments

  1. Larry Stout July 19, 2019

    Don’t tell me you don’t trust lovable Christine Lagarde and her international social group!

    Reply

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