Resist the IMF and World Bank as imperialist tools of corporate greed

Keynote Speech to the People´s Global Conference in Denpasar City, Bali, Indonesia
By Prof. Jose Maria Sison
Chairperson
International League of Peoples´ Struggle
October 12, 2018

Dear Fellow Activists.

As Chairperson of the International League of Peoples´ Struggle (ILPS), I convey warmest greetings of solidarity to the Peoples’ Global Conference against IMF and World Bank. I am grateful and honored to be invited as keynote speaker in this conference.

We, the ILPS, highly appreciate the conference as an independent, people-led initiative that seeks to register the people´s resistance to the International Monetary Fund and the World Bank as imperialist tools of corporate greed, particularly in underdeveloped countries, and to assert the right of the people to chart their own path in a sovereign, democratic, socially just, prosperous and progressive direction.

We consider it timely and appropriate that you are holding your conference to confront the IMF-World Bank Annual Meeting of central bank governors, finance ministers, corporate executives and experts. The agenda of this meeting focuses on mobilizing private finance and engaging big business to invest in lucrative infrastructure projects in underdeveloped countries.

The theme of this meeting is Maximizing Finance for Development, which is to expand and guarantee the profit-making of transnational corporations from the underdevelopment of the Global South (including parts of Eastern European countries and the former Soviet republics), at the ultimate expense of the people. In particular, it aims to promote greater multilateral agreement by expanding neoliberal forms of financing and investments from multinational conglomerates, banking, securities, and real estate investors (including pension and hedge funds), international donor aid, sovereign wealth funds, and other multilateral development banks.

The absurd presumption is that extreme poverty would be reduced by giving free rein to the development of market-oriented solutions to address challenges such as climate change, migration and forced displacement, global health, and war and violence. But in fact, the expansion of financing and investment options will increase wealth disparities between rich and poor countries, and create expanded conditions for the countries and peoples in the Global South to get into more budgetary and trade deficits, balance of payments problems and heavier public debt, to be exploited more through greater work intensification (with short-term contractualization and privatization on the rapid rise), as well as the expanded deregulation of the financial markets.

We welcome and agree with the four objectives of your conference: 1) to develop the analysis and understanding of IMF-World Bank and how international financial institutions (IFIs) serve as instruments of imperialism for economic and political domination; 2) to expose the exploitative and pseudo-development objectives of corporations and its adverse effect on communities and to expound on political alternatives; 3) to contribute in coming up with strategies of resistance and strengthening the capacities of activists and the people to resist exploitation by corporations in the name of development; and 4) to strengthen solidarity among activists and their allies through dialogue and cooperation against the IMF and World Bank.

By way of contributing to the realization of your objectives, I shall try to present to you 1) an overview of the current global political and economic contexts within which international financial institutions (IFI) like the IMF-World Bank operate; and 2) the role of IFIs as instruments of the advanced capitalist states for furthering imperialist exploitation of the peoples of the Global South.

At the outset, let me clarify that corporations play a decisive role in the exploitation or pseudo-development of a subjugated country in colonial times. The colonial powers used joint stock companies and even religious corporations in the plunder of colonies, from the stage of expeditions to the operations of trading monopolies as well as of plantations and mining companies. The colonial exchange of raw materials and manufactures was euphemistically called free trade as the private corporations underscored their role and distinguished it from that of the state prominently financing and protecting the colonial trade in the centuries of mercantilism, from the 16th to the 18th century.

Colonialism was a major instrument of primitive capital accumulation augmenting the proletarianization of the peasant masses and the horribly long working hours for workers in the rising capitalist countries. The colonial government ensured that the people were subjugated by force and that they paid their taxes in the form of fees or corvee labor in order to finance their own subjugation and the improvement of the infrastructure for transport, communication and commerce.

In the era of imperialism or monopoly capitalism, the imperialist powers use surplus capital from the metropolis and deploy it in the form of direct investments and loans in order to accelerate the extraction of superprofits from client-states, which may either be colonies, semicolonies or dependent states. Historicaly, in letting colonies become semicolonies, the imperialist powers require the client-state constituted by the local exploiting classes to assume the responsibility for national and local administration, the collection of taxes and the guarantees of profitability for the foreign direct investments and the repayment of the foreign loans previously incurred by the colonial administration.

The imperialist power perpetuates its political and economic dominance over an underdeveloped country by making it dependent on foreign debt and foreign direct investments. In the unequal exchange of raw material exports and manufactured imports, the foreign corporations extract enormous profits but the client-state always suffers from budgetary and trade deficits, which require foreign loans to cover. Debt service payments to imperialist banks and profit remittances by corporations keep the client state underdeveloped, impoverished and subservient to the imperialist master state.

Overview of the Economic and Political Context of IFI Operations

Since the financial crisis of 2008, the world capitalist system has been afflicted by stagnation and depression, euphemistically called the Great Recession. The strategic decline of the US has accelerated in an increasingly multipolar world and has been challenged by the rise of China, which is still categorized as a developing country because its per capita GDP of USD 9,844 is still below the level of at least USD 12,000 for developed countries but which fulfills all the five basic economic features of modern imperialism defined by Lenin. The economic competition and political rivalry among the imperialist powers have intensified.

The IMF, World Bank and regional banks like the Asian Development Bank in coordination with national ´development’ banks and agencies are instruments for deploying surplus capital in the form of loans by the US, Japan and the European Union. These traditional imperialist powers are challenged to some extent in the field of extending loan capital to client states. Even as they themselves are IMF and World Bank borrowers and are still classified as developing countries, Brazil, Russia, India, China and South Africa have set up their own BRICS development bank. China, together with the rest of the BRICS countries and some of the traditional imperialist powers have launched the Asian Infrastructure Investment Bank under the auspices of China´s Belt and Road Initiative.

All the traditional and newly emergent imperialist powers, China and Russia, compete in offering loans to the underdeveloped countries for building infrastructures and thereby enhancing the extraction of energy and other raw materials and the delivery of manufactures. But as a result of the excessive use of credit for the benefit of corporations under the neoliberal policy of imperialist globalization, a public debt bubble problem afflicts both the imperialist powers and the client-states. On both sides, the bubble is untenable and is expected to burst at any time. As of the end of the first quarter of 2018, according to the Institute of International Finance, the global debt is USD 247 trillions and is 318 per cent of the global GDP.

The economic competition among all the imperialist powers has become so intense that the US, the chief instigator of neoliberal globalization, has abruptly reverted to protectionism in an obvious attempt to take back the concessions it made to China in order to wean it away from socialism since the 1980s. The US is showing its regrets that it has outsourced consumer manufacturing to China, enabling it to gain huge export surpluses and develop its economy comprehensively by using the state sector of the economy to achieve strategic goals in industrial and military production. The US wants to head off China´s plan to carry out its own Made in China policy by 2025.

The US has declared a trade war on China and the two are now engaged in a contest of imposing tariffs on the exports of one to the other. The US is trying to induce US companies to bring back their plants from China to the US. Despite its anti-immigrant policy, the Trump regime calculates that it has enough jobless and underemployed Americans to employ at low wages. It is also waging a currency war by shifting from quantitative easing (low-interest rates) to quantitative tightening (higher interest rates on loans). It seeks to suck back the dollars that flowed out of the US as a result of the outsourcing concessions and export surpluses to China and the policy of quantitative easing. It calculates that China is afraid to dump its dollar reserves and treasury bonds at any rate that their value would go down too fast.

The continuing depressed or stagnant condition of the world capitalist system and the intensifying economic competition among the imperialist powers have adverse effects on the underdeveloped countries. These suffer from the overproduction of raw materials and semimanufactures and their declining prices and have further become objects of exploitation by the competing imperialist powers. In previous decades, they had become overburdened by deficits and public debt during the so-called development decades of the 1960s and 1970s and even more so during the neoliberal decades from the 1980s to the present. Now they are being pressed upon to make their public debt larger and more unsustainable than before.

The quantitative tightening that the US is undertaking automatically erodes the value of the local currencies of the underdeveloped countries, increase their debt burden and import costs and compel them to take more foreign loans at more onerous terms. The underdeveloped countries cannot rely on foreign direct investments, either of the productive or speculative type, to relieve their increasing need for foreign exchange. Now, the biggest of the imperialist powers, the US and China, are telling their client-states that the way to buoy up their economies is to take foreign loans for building infrastructures. This type of loans almost automaticaly reverts to the lending country and leave behind a heavy debt burden.

The World Bank is set to loosen financing for infrastructure projects and thereby maximize profits for the US private corporations. The transnational corporations benefit from participation in the infrastructure projects as well as from the consequent businesses. The US and its traditional imperialist allies wish to take advantage of the fact that China itself is sitting on a mountain of bad debts and they wish to use the World Bank as the spearhead for outbidding China in offering loans for building infrastructures.

China´s own drive for building infrastructures in client states is vulnerable. The projects are overpriced and the interest on its loans is higher than those of the traditional creditors. China also requires that Chinese companies are in charge of construction and supply of equipment and construction materials and that Chinese workers should be 60 to 70% of the required labor force. Worst of all, when the loans cannot be paid on time, these are convertible to equity or ownership of the infrastructure. Any dispute has to be settled in a Chinese court.

The problems besetting the underdeveloped countries include servicing their accumulated public debt and dealing with the imperialist powers who compete but agree among themselves on squeezing the underdeveloped countries as debt colonies, sources of raw materials and markets for their manufactures. Thus, the underdeveloped countries are treated as objects of exploitation by the imperialist powers.

It is not only by financial and economic means that the imperialist powers dominate the global economy and politics. The strongest of the traditional imperialist powers can unilaterally and multilaterally engage in military intervention and wars of aggression to protect and expand their economic territory and geopolitical influence. They can use the UN Security Council whenever possible and bilateral, regional and multilateral treaties of military alliance to engage in sanctions, military intervention and aggression. The NATO is their strongest military alliance.

As the leading imperialist power, the US has built a global network of military treaties and military bases and engaged in military intervention and wars of aggression calculated to protect and expand economic territory and gain geopolitical influence. The military industrial complex is the most vital part of its economy and makes profits through the sale of weapons to the federal state and foreign states. US imperialism has targeted for subversion and regime change not only governments led by the Communist Party but also in bigger number independent-minded national bourgeois governments.

But the use of military intervention and wars of aggression has limits. The US and its imperialist allies seem to have successfully engaged in wars of aggression with impunity, especialy since the end of the Cold War. But the costs of these wars in Afghanistan, former Yugoslavia, Iraq, Libya and Syria have run into trillions of dollars and have contributed to the debilitation and strategic decline of the US. Moreover, China, Russia and other countries have become alert to the expansionism of the US and the NATO, especially the US under its so-called neoconservative policy of full spectrum dominance and have formed the Shanghai Cooperation Organization as a security alliance against the unbridled US militarism and expansionism.

The apparently successful but self-defeating US deployment of overseas military bases and wars of aggression is generating more intense contradictions among the imperialist powers, the tendency of developing countries to seek independence and wider area of maneuver, and more importantly the rise of revolutionary mass movements on an unprecedented scale in both underdeveloped and developed countries. The imperialist wars of aggression can be turned into revolutionary wars for national liberation, democracy and socialism. For the people of the world, there is the revolutionary choice aside from submission to the escalating terms of exploitation and oppression and the threats of nuclear annihilation by the imperialist powers and global warming due to environmental destruction by the TNCs.

Role of IFIs and TNCs in Furthering Imperialist Exploitation of Global South

The IMF serves to control the economies, the fiscal policies, the exchange value of the local currencies, the budgetary and trade balances, the public debt, the domestic and foreign borrowings and the inflow of foreign direct investments and foreign loans and to ensure that the client states give priority to foreign capital repatriation, profit remittances and amortization of foreign loans. In short, the IMF aims to develop the framework and fundamentals for getting the client states to become more compliant and more deeply integrated (particularly in those with rural areas where capitalism is not yet fully dominant) into the world capitalist production and finance system.

The IMF does not only extend stabilization and structural adjustment loans directly to central banks and impose austerity measures at the expense of the people but also opens the door for further borrowings by the compliant client state from other creditors, including commercial ones. Upon the inability of a client-state to repay for its due debt service, the IMF approves a whole bloc of imperialist countries to oversee the credit condition of a client state, the recourse to the bond market and to the vulture banks, which specialize in buying bad debts and compelling the client state to pay higher debt service.

The IMF is partner to the World Bank in preventing a client state from truly developing its economy through a planned balance of national industrialization as the lead factor, land reform as a means of liberating and making the peasants more productive, creating a larger domestic market and the appropriate measure of infrastructure building. The IMF and World Bank make sure that the domestic and borrowed resources of the client states are used to maintain their economic and political subordination to foreign monopoly capitalism.

They tie down the client-states to a pattern of production of raw materials and semimanufactures for export and importation of manufactures from the advanced capitalist countries, especially the US. The World Bank is the special instrument for requiring the client-state to overspend state funds for infrastructures at the expense of industrial development, employment and social services, for perpetuating the colonial exchange of raw material exports and manufactured imports and for dispossesing the peasants and indigenous peoples and the plunder and degradation of the environment.

The World Bank had a heyday in financing the infrastructure projects in underdeveloped countries in the 1960s and 1970s . Aside from perpetuating the colonial pattern of trade previously described, the infrastructure projects were touted as a Keynesian measure for raising employment and stimulating demand. The World Bank went into disrepute when the economies of many of the client states did not ´take off´ as expected but actually became more crippled. The balance of payments problems deteriorated because of the unequal trade, the high cost of repressive regimes, the corruption of puppet officials, the persistence of the oil crisis in most of the 1970s and the usurious recycling of the petrodollars by Western Banks to client-states.

The World Bank Group consists of five international organizations: the International Bank for Reconstruction and Development (IBRD), the International Development Association (IDA), the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA) and the International Centre for Settlement of Investment Disputes (ICSID). The IBRD and IDA are often conflated in reports as the World Bank.

The US has a controlling minority share of 16.5% in the World Bank and dictates its policies with the support of other advanced capitalist countries at the expense of the less developed member-states. The IBRD pools the contributions of all member-states and decides the policy for using the bank´s capital. The IDA speciaiizes in grants and concessional loans, especially in connection with influencing policies of the client-states in education, health, community development, environment and the like. The IFC lends capital exclusiveky to private corporations and helps them to maximize their profits from WB-funded projects. The MIGA and ICSID provides guarantees and insurance against economic and political risks.

The client states are made to take loans from the World Bank and provide sovereign guarantees and ultimately the people through taxation are made to amortize the loans and guarantee profit remittances of the transnational corporations. These TNCs are in charge of feasibility studies, designs and plans and of securing construction equipment and other supplies at the highest level. They subcontract to their own subsidiaries or local contractors the various phases and aspects of the infrastructure projects and also provide opportunities for a multi-layered system of bureaucratic corruption.

Imperialist-dominated international financing institutions like the IMF and World Bank, which are the largest in the world, play an important role in creating the conditions for the entry and growth of TNC operations in underdeveloped countries. The IFIs play the key role of persuading the underdeveloped countries to open up to the TNCs and accord them national treatment, tax holidays, exemptions from social and environmental restrictions and other special privileges in violation of economic sovereignty and national patrimony.

The IFIs are persuasive because they can provide or deny loans and open or close the way for client-states to access loans from commercial banks and funds from the bond and other financial markets in the world. Failure to pay the foreign loan on time is penalized by more stringent terms of credit, conversion of debt to equity for the TNCs and subjection to the vulture banks which offer extended periods of payment at more onerous terms.

The imperialist state and interstate banks and foreign commercial banks are responsible for deploying surplus capital from the imperialist countries in the form of loans. When the loans accumulate, their interest earnings are as substantial as or even bigger than the returns on direct investments by the TNCs. The neoliberal policy regime and the recurrent and worsening economic and financial crisis have compelled the general run of developing countries to deliver to the developed countries higher rates of debt service and profit remittance and suffer further impoverishment at an acelerated rate.

In the era of modern imperialism, there is the merger of bank and industrial capital in the monopoly firms at the highest level in the advanced capitalist countries. There is also continuing interplay and cooperation of various banks and the TNCs in various ways.The TNCs deploy surplus capital from the imperialist countries in the form of direct investments which earn profits. The hedge funds also deploy portfolio investments which prey on the financial markets in developing countries. The TNCs enlarge their direct investments by borrowing from the IFIs and even from the domestic banks of the underdeveloped countries.

Your conference focuses attention on the operations of the IMF, World Bank and the TNCs. But you must also pay attention to the interplay and cooperation of the Washington-based triumvirate of the IMF, WB and the World Trade Organization (WTO). They harmonize their respective policies to constitute, the so-called Washington Consensus in accordance with the hegemonic interests of US imperialism.

They have been responsible for imposing the neoliberal policy on the entire global economy and have caused the largest and fastest transfer of social wealth in the form of debt service and profit remittances from the developing countries to the imperialist countries, the severest aggravation of poverty and biggest social inequality between said types of countries and within each country. According to the report of Oxfam International as of January 2018, the richest one per cent bagged 82 per cent of the wealth created in 2017, while the poorest half of humanity got nothing. According to the latest Credit Suisse data, 42 people own the same wealth as the poorest half of humanity.

The Oxfam report reveals the following: Billionaire wealth has risen by an annual average of 13 percent since 2010 or six times faster than the wages of ordinary workers, which have risen by a yearly average of just 2 percent. The number of billionaires increased at an unprecedented rate of one every two days between March 2016 and March 2017. The pay in four days for a chief executive officer from one of the top five global fashion brands is more than what a Bangladeshi garment worker will earn in her lifetime. In the US, it takes less than one working day for a CEO to earn what an ordinary worker makes in a year. Even in imperialist countries, poverty has increased, with the middle class eroding. But of course the biggest and widest extent of poverty is in the developing countries.

Under the still regnant neoliberal regime of imperialist globalization, the WTO has been a major instrument of the US and all its allies in the deployment of surplus capital in the name of free trade for the economic and political domination of the underdeveloped countries by the imperialist powers. In the name of free trade, the WTO has always underscored the liberalization of investments and trade, the use of every device to push down wages and maximize private profit, privatize profitable public assets, perpetuate TNC control of patents and copyright at the expense of public interest, deregulate social and environmental restrictions and denationalize the economies of underdeveloped countries.

US imperialism is on an accelerated strategic decline but is still the No.1 economic and military superpower and is trying to decelerate its decline and further strengthen its position. The trade war it is waging against China is to recover the concessions that it previously made, assert financial dominance and strengthen again its manufacturing sector and control of high technology. The US appears barefaced as a protectionist vis-a-vis China. But in fact, the IMF, WB and WTO are all instruments of imperialist domination over the Global South even as imbalances and conflicts arise among the imperialist powers.

In accordance with the assignment of subject to me, I have focused on presenting an overview of the current global contexts within which the IMF-World Bank operate and the role of IFIs in furthering imperialist exploitation. Let me conclude by emphasizing that the people’s resistance to imperialist exploitation and oppression has been growing by leaps and bounds, in so many forms and fields of struggle, and in so many countries.

The ILPS is part of this ever-widening and intensifying anti-imperialist and democratic movement. We continue to share the heightened spirit of solidarity with all anti-imperialist and democratic forces and peoples worldwide. We express once more our confidence that the people’s struggles for genuine sovereignty, democracy, social justice, real development and cultural progress will reap more victories in the years ahead.###

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