Economist Moises Naim
on how the World Bank
and IMF stopped being scary
Cherry blossoms and anti-globalization marches. For many years, these were inevitable rites of spring in Washington. But today, while the cherry trees are still blooming, the street demonstrations have wilted.
The springtime protests were prompted by the semi-annual meetings of the International Monetary Fund (IMF) and the World Bank, regularly held in early April. The marchers — many traveling to Washington from faraway places — came to voice their fury against free markets, world poverty, environmental decay or U.S. foreign policy. They often had specific demands: Stop imposing unpopular economic reforms (fiscal austerity, privatization, trade liberalization, deregulation) on poor countries in exchange for IMF and World Bank funding. Cancel the debts poor countries owe to international banks. Stop free-trade agreements. Protect the environment. Boost aid to Africa. In general, stop pushing policies that, according to the protesters, promoted savage capitalism and heartless globalization.
Now, though a few vigils and rallies will probably pop up surrounding next week’s meetings, they will be nothing like the multitudinous, riotous and tear-gas-filled affairs of years past. Where have all the protesters gone?
The apparent demise of the anti-IMF/World Bank protests is a reflection of broader transformations in the international economy, transformations that have rendered these global financial institutions less fearsome and less relevant.
First off, the economic policies and loan conditions that the two agencies once imposed on poor nations are no longer so controversial. Many developing countries have embraced pro-market reforms on their own, while the IMF and the World Bank have become less dogmatic. At this year’s meeting, for example, the IMF is adopting a far more flexible posture concerning the controls on international capital movements that some countries impose — controls it used to adamantly condemn. Similarly, global negotiations over free-trade agreements, long a sore point for activist groups, have been going nowhere for more than a decade.
In addition, the new realities of the global economy have forced a fundamental change in the roles and agendas of the international financial institutions as well as their critics. Since the late 1980s and for most of the following decade, developing countries would come to the meetings of the IMF/World Bank (one session in the spring and another in the fall) to obtain new loans and negotiate the policy changes they would have to enact to get the money. Top U.S. and European economic policymakers would lecture them about the importance of swallowing the bitter medicine of unpopular reforms and offer foreign aid to soften the blow. Private bankers would sit in posh hotels while a parade of central bank presidents and economic ministers made their pitches, extolling their countries’ attractiveness to foreign investors.
That world is gone. Many poor countries now sit atop coffers full of money, while many rich nations have become international mendicants. The countries that used to give the lectures are now the ones that must get their fiscal houses in order and carry out tough reforms. Consider this: Since 2000, the economies of developing countries have grown by an average of 6.1 percent every year; in contrast, the advanced economies have grown by a meager 1.8 percent on average. As a result, while in 2000 developing nations accounted for one-fifth of the global economy, today their share has grown to more than a third of the world’s total output.
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