To build a stronger and resilient world from the economic, health and social devastation of COVID-19 and the crises of
inequality and climate change which preceded it, the World Bank and International Monetary Fund must move beyond
structural reforms driven by market fundamentalism. Two new reports catalogue decades of failed policies that weakened
the social contract and left countries vulnerable to the pandemic and economic crisis.
In an unprecedented global crisis, millions of people are losing their jobs and being pushed into poverty. This comes on
the heels of a fragile and incomplete recovery from the 2008-2009 global financial crisis, in which a rapid shift from
stimulus to austerity and attacks on working people fatally undermined initial progress. “The IMF’s renewed supply-side push: Four decades of structural adjustment and austerity conditionality” traces the central role of the Fund in these destructive decisions following the global financial crisis as part of a
longer arc of failed policies.
“After a crisis in 2008 caused by the financial sector and bailouts for those responsible, working people became the
target of an all-out attack on collective bargaining, labour rights and public services. As we plan economic recovery
plans from the damage caused by COVID-19, we cannot repeat the same mistakes of prematurely ending stimulus and pursuing
harsh spending cuts that undermine growth” said Sharan Burrow, ITUC General Secretary.
In 2015, the UN Sustainable Development Goals presented an opportunity to turn the page with a universal agenda for
decent work, gender equality, social protection and more. However, energy has been redirected to promoting the interests
of private investors as the only way to finance sustainable development. The World Bank has been at the forefront as
detailed in “Market fundamentalism and the World Bank Group: from Structural Adjustment Programmes to Maximizing Finance for
Development and beyond”. The Maximizing Finance for Development approach adopted by the Bank shifts the institution away from catalytic
investments and towards policy reforms to benefit private foreign investors, or even financial engineering to protect
their investments.
More than $100 billion has left emerging market countries since the onset of COVID-19, in the largest and most rapid
case of capital flight in history. These two reports describe how World Bank and IMF policy recommendations on capital
markets and financing for development contributed to fragility, financialization and inflows of speculative private
capital. Simultaneously, the institutions have frustrated the creation of quality employment, public services, and
policies to raise wages.
Left unchecked, the ravages of the current crisis will compound three decades of lost progress on development. The
reports document a shift at the World Bank and IMF in the 1980s, when the Reagan administration pursued ideological
agenda that changed the operations of the international financial institutions. This shift initiated the era of
structural adjustment programmes that imposed a strict set of deregulatory supply-side policies labelled the Washington
Consensus. Although this straitjacket was abandoned in the early 2000s, the reports document that since then the
international financial institutions have continued to be guided by market fundamentalism, with many changes being
cosmetic rather than substantive reforms to the institutions.
“Massive capital flight, severe debt burdens and the effects of failed policies are dragging down developing countries
at a time when they need to prepare inclusive stimulus and reconstruction plans. Now is the time to commit to an
extension of debt relief for two years with an end to austerity measures as conditionality and an alignment with
investment in SDGs and put an end to loan conditions and policy advice promoting failed approaches. This is especially
necessary in World Bank Development Policy Loans and the standard IMF loan agreements that will follow the current round
of emergency response financing. International financial institutions need to change more than just their rhetoric by
aligning their operations with international labour standards, evidence-based policies for growth with shared
prosperity, and the Sustainable Development Goals,”
“Multilateralism will need reform to ensure global coordination for economic recovery plans that deliver global social
protection funds for poorer countries, realigns debt relief with conditionality for SDGs, provides investment not
austerity, rebalance trade rules with fundamental labour rights and environmental standards, see a treaty on business
and human rights that mandate due diligence and reforms taxation rules to eliminate tax havens. The IMF and World Bank
must not be a barrier to the New Social Contract on which recovery must be built,” said Sharan Burrow.