Meet the New Boss:

Vol. 6, No. 2

September, 2003

Meet the New Boss:

U.S. Ushers IMF & World Bank Into Iraq

by Soren Ambrose & Njoki Njoroge Njehu
50 Years Is Enough Network

At the African Social Forum in January, we were approached by a Somali who has been
working doggedly for the last 15 years to maintain a non-foreign civil society presence in
Mogadishu. He said to us, “Given our circumstances, I haven’t spent much time learning about
the IMF and World Bank, but I’ve decided to start, because I know that once we do have a
government, they will be our next challenge.”

Alas, he is probably correct. Misfortune is seldom visited upon a people in only one form. In
recent years, the World Bank, eager to try its hand at any task, has sought to project itself as the
financial guardian of “post-conflict” societies. In Bosnia, Serbia, East Timor, Mozambique,
Rwanda, and most recently Sri Lanka and Afghanistan, the World Bank has honed its approach
to states that have endured destruction of infrastructure, large-scale killing and mass migration.
Now it appears that the World Bank will be thrust into the spotlight in Iraq, charged with putting
back together what United Nations sanctions, authoritarian neglect, and U.S. military action have
broken.

A Little U.S. Arm-twisting

While the World Bank has been eager to jump into those other countries, Iraq seems to have
made its top officials think twice about their role. They are not accustomed to dealing with
situations where their masters – the G7 governments – are seriously split. The divisions
between the U.S. and U.K. on the one hand and France and Germany on the other over the war
in Iraq have for once made the World Bank nervous about becoming a central player. World
Bank president James Wolfensohn apparently sees no benefit in having the trans-Atlantic split
play out on his Board of Directors; the potential for the World Bank to become a punching-bag
or scapegoat is enormous.

The tussle over whether the World Bank and the IMF would get involved in Iraq before U.N.
recognition of a successor regime was staged at the institutions’ 2003 spring meetings (April
12-13), and by all accounts the U.S. won everything it wanted. While the weekend started with
representatives of the G24 (developing countries) rejecting the idea and insisting that the U.N.
was the only source of legitimacy in Iraq, by the end of the weekend, IMF and World Bank
officials were assuring reporters that they would be taking on the Iraq challenge, and would leave
the worrying about technical niceties like U.N. recognition to others.

That was precisely what the U.S. wanted. A European Union finance ministers’ meeting the
previous weekend had elicited statements from both sides of the divide – Spain and Germany
– calling for a significant role for the IFIs in Iraq. A few days later, U.S. Treasury Secretary John
Snow was calling for World Bank involvement as well, and staged a meeting on April 11 with his
French counterpart at which the two made public their agreement on the matter. Although the
French continued to talk about U.N. leadership, attention began to shift to the World Bank’s role.

By occupying a middleman position in a still-simmering high-stakes political feud, Mr.
Wolfensohn’s anxieties are no doubt still acute. And they should be: what he most fears, we
suspect, is having the international spotlight shine on long-overdue questions of power,
domination, and legitimacy at the World Bank and IMF. While the confrontation between the
U.S. neo-imperialists and their rivals in Europe probably belongs in the U.N. Security Council,
playing it out at the IFIs would have the salubrious effect of exposing the uses to which those
institutions are put, and at whose behest.

That the conflict was downplayed at the spring meetings suggests that the IFIs may represent a
comfortable compromise for both sides – “multilateral” enough both to shield the U.S. from the
sharpest charges of outright colonialism while still ensuring U.S. control, and to shield the French
from charges of total capitulation to U.S. power. As things go wrong, the IFIs can serve as
handy scapegoats – for after all, diffusing responsibility is one of their core functions in service to
the G7.

The U.S. in particular may be in the market for a scapegoat, as its pledges to make both
Afghanistan and Iraq whole again fall victim to President Bush’s – and the rest of the U.S.’s –
short attention span. At the spring meetings the U.S. made the surprise, albeit inconsequential,
announcement that it would contribute an extra $100 million to the International Development
Agency (IDA), the World Bank department that makes low-interest loans to the poorest
governments. Congress subsequently re-directed that money away from the World Bank in
order to increase the amount being devoted to the HIV/AIDS funding that the President was
busy misrepresenting (as a much higher figure than he had even asked Congress for, which
itself was reduced when the administration failed to prioritize it) during his whirlwind tour of Africa.
The public relations strategy is clear: get the points for promising the money – you can always
reduce or eliminate it later.

The Uses of Iraq: Illegitimate Debt and Diplomatic Revenge

Treasury Secretary Snow and Assistant Secretary of Defense Paul Wolfowitz have already
made a case for the cancellation of the debt burden accumulated during the Ba’athist regime in
Iraq. The stunning hypocrisy required to make this claim – we should recall that the U.S. did not
protest when the IMF greeted the downfall of Mobutu by suggesting that whatever new
government was established should get working on its $14 billion external debt, or that Nelson
Mandela’s new South Africa should work to pay off the debts accumulated by the apartheid
regime as it murdered and repressed the liberation movement – should not blind us to the fact
that the Iraqi people indeed should not be forced to pay that illegitimate debt. To that end,
Jubilee USA Network and its allies have persuaded Rep. Carolyn Maloney (D-New York) and
Rep. Jim Leach (R-Iowa) to introduce legislation in Congress calling for the cancellation of debts
claimed of Iraq by the IMF and World Bank. It has gained significant mainstream support, and
will likely be the subject of hearings in September.

Freedom for Iraq: Free Trade and Free Markets, That Is

The “post-conflict” and “transition” assignments for the World Bank and IMF demonstrate the
resolve of the U.S. and its G8 economic allies to insure that any newly re-structured economy
should play by the same rules as the structurally-adjusted and bailed-out economies throughout
the Global South and the former Soviet bloc.

While Iraq has been the occasion for unprecedented schisms among the G8, there is little
disagreement about what kind of economic future awaits Iraq. The governments of France and
the United States will be united in their intention to install a regime of “free trade,” “free markets,”
and “sound economic policies” – meaning maximum flexibility for multinational corporations and
foreign investors, and minimal voice for Iraqi citizens.

In post-conflict countries like East Timor and Afghanistan, the World Bank has guaranteed that
new economies fit comfortably into familiar patterns, just as the Bank and the IMF have proven
themselves efficient overseers in countries of the former Soviet bloc. That does not mean that
the people of those countries have necessarily seen their living standards rise – quite the
opposite in Russia, for example. But none of those countries have posed a challenge to the
established economic order. In the “transition” countries that has meant snuffing out any hint of
economic sovereignty in potential mavericks like Moldova, and turning a blind eye to the
autocratic eccentricities of the Asian republics, from Azerbaijan to Uzbekistan, so long as they
cooperate with plans to extract the oil under their lands and waters.

Revolution, civil war, invasion and conquest, or, in the unintentionally ironic phrase used by the
U.S. military to describe one of their operations, “enduring democracy” (whether the fall of
undemocratic governments or the imposition from outside of a more “democratic” one): none of
these will purchase a country’s freedom from today’s universal economic standard –
neo-liberalism – which redefines freedom as the freedom to consume and the freedom to be
exploited by foreigners.

The recognition that the IMF and World Bank have for decades served as the modern-day
instruments of imperialism is not new. The cases of Afghanistan and Iraq, however, more firmly
position the institutions as the clean-up crew for neo-imperial military conquests.

Back to Reconstruction

There is a touch of irony in the fact that the World Bank is now being asked to manage
reconstruction efforts. It was, after all, founded as the International Bank for Reconstruction and
Development – still the official name of its largest division – after World War II. The idea was that
it would finance the reconstruction of war-torn Europe, but it was not sufficiently capitalized, and
so was superceded by the Marshall Plan of the U.S. government.

It will certainly share the stage with the U.S. again, as well as with the IMF. But it is not likely to
be pushed aside; indeed, it will probably fulfill one of its familiar functions: providing political
cover and plausible deniability for the U.S. government. Although the Bush Administration has
seemed unconcerned about international perception of its unilateral assignment of reconstruction
contracts to U.S. corporations Bechtel and Halliburton, at some point the Bank can be expected
to be used as a shield. And while the U.S. will be at least as active in determining the political
future of Iraq as it was in post-war Europe, the IMF and the World Bank will be charged with
filling in the details.

To some the U.S.-dominated reconstruction project after the U.S.-led war may seem like
rewarding the window-replacement company that sends out people by night to break windows,
but its overseers are likely to want to point to it as the most complete example of privatized
development – assuming they can label it a success. The danger, of course, is that the World
Bank and IMF will be used to “internationalize” or legitimize what will in all likelihood be a process
in which all the key decisions are made by the U.S. or by those who know what the U.S. wants.

The three main tasks for the IMF and World Bank will likely be left with are: 1) overseeing, with
the IMF, the implementation of a standard capitalist economic structure and the adherence of a
new Iraqi government to the neo-liberal policies they will have signed onto; 2) managing, with
non-profit organizations or others, the provision of services not deemed profitable by private
interests; and 3) guaranteeing the re-development of oil production, a specialty of the World
Bank, which funds a significant portion of the developing world’s fossil fuel production.

It seems the sad fate of the Iraqi people to emerge from an authoritarian dictatorship only to face
the imposition of another, more amorphous one. Perhaps, however, the egregiously
imperialistic process that has led Iraq to this point will inspire Iraqis and their potential supporters
around the world to reject a system that would turn a recent conquest into a source of cheap oil,
and dash any hopes of “liberation” on the sharp edges of poverty and disenfranchisement.

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