In 1994, the New York Times described the World Bank and International Monetary Fund (IMF) as “overlords of Africa” and ostensibly so the bankers have indeed become overlords of the global south since the globalisation of neoliberal economic order with the ‘end of history’ moment in the 1990s and decisive win of the western liberal block’ over communist eastern bloc in the Cold War. Created as bulwarks of the Bretton Woods system post the world wars promoting liberal ideas of political development and political modernisation as paradigms of alleviating poverty from the ‘third world’, the World Bank and IMF have now transformed as frontier development agency and lender of last resort respectively. As they mark 80 years of operation, the mission, vision, and future role of these institutions remain topics of significant debate, which we will explore in this essay.
From their very inception, the institutions have faced criticism by the communist bloc and the world system theorists as they branded the Bretton Woods institutions’ aim of promoting democracy, free trade, liberalisation and privatisation of trade as leading to the ‘development of underdevelopment’ in the developing world. Immanuel Wallerstein, countering the notion of the ‘third world’ famously argued there is no third world but a single world connected by complex economic interactions. Importantly, these institutions have played a key role in integrating much of the erstwhile socialist-communist global south into international economic order and globalisation via top-down Structural Adjustment Programs (SAPs) and their conditionalities in the post-Cold War era. Globalisation has been unfavourable to the global south as its resources have been drained towards the global north as ‘imperialist rent’.
Furthermore, the above conditionalities of SAPs and World Bank aid are often criticized for forcing a ‘rollback of the state’ in developing countries. In these regions, the state has traditionally acted as the vanguard of social revolution performing functions such as affirmative action, hand-holding to the structurally plagued agriculture sector and wealth redistribution. India is a case in point of this phenomenon, where while the 1990s saw the opening up of the economy via the New Economic Programme and reduction of the absolute number of poor, the country has been witnessing deepened economic inequality worse than in colonial times and a languishing agriculture sector which still employs 45% of India’s workforce. As Arun Maira writes, liberal economies create illiberal societies, the economic inadequacies in India now are fueling social ills including demands for reservations by dominant castes, farmer suicides, criminalisation of politics and crony capitalism. Proponents of “Asian Values” including Mohammed Mahathir and now Chinese leadership argue that the failure of Bretton Woods lies in its dogmatic and orientalist view of eastern societies and its governance structures. According to them, the state is an architectonic social institution imbibing values of social coherence, discipline, and authority essential for the shared prosperity of the global south.
Fundamentally, the crux of the critique of Bretton Woods lies in the fact that while it has promoted the widening of liberal international economic order, the deepening of values of free trade, choice, and freedoms remains inadequate. According to the Reserve Bank of India, over 100 countries have adopted national autonomous development programs reflecting mistrust in the paradigm of free trade and open markets leading to the crisis of deglobalisation. Further, the institutions’ work has reflected the priorities of the erstwhile hegemons of the West. In the context of the 2008 economic crisis, Jeffrey Sachs has opined that American officials have traditionally viewed the World Bank as an extension of United States foreign policy and commercial interests. IMF’s blind eye to fiscal indiscipline in many economies of Africa, Caribbeans and India’s neighbour Pakistan while favouring Western diplomatic goals has led to promoting and preserving illiberal and authoritarian regimes. This has led to “neo-colonialism,” with countries in Latin America and Africa functioning as “banana republics,” subservient to large corporates’ interests. Such regimes are proving to be apathetic to the interests of both the People and the Planet, fueling major climate crises and hurting the interests of vulnerable Indigenous communities. Depletion of the Amazon forests in favour of palm industries, and tearing down of the Indian forest landscape in favour of many development projects funded by the World Bank are cases in point. A strong front presented by emerging social movements across the global south and instances of eco-feminism like India’s narmada bachao andolan highlight the sociological limitations of Bretton Woods experiments.
Nonetheless, the very first challenge to the Bretton Woods’ hegemony was presented by the New International Economic Order (NIEO) in the 1970s as propagated by the Non-Aligned Movement and spearheaded by India, advocating for south-south cooperation, preserving the sovereignty of states, and self-reliance. Today, the NIEO has evolved into easternization and fragmentation of global finance, led by China and evident in initiatives like BRICS+, Asian Development Bank, and Asian Infrastructure Development Bank. This shift reflects the ‘fall of the West and rise of rest’ with growing illiberal and far-right trends within Western societies—a departure from the ideals originally promoted by the IMF and World Bank.
However, despite their criticisms, the relevance of the Bretton Woods remains strong as they continue to enjoy global trust and consensus to be reliable partners in the developing world’s journey towards prosperity. A prime example is India, which holds the largest portfolio of World Bank projects under its International Bank for Reconstruction and Development, spanning 127 initiatives including partnerships for the future in clean energy, infrastructure, and health. Meanwhile, the newer multilateral development banks including the Asian Infrastructure Development Bank continue to be plagued by capital inadequacy and criticism for peddling a Chinese world view aka pan-sinica.
Hence, the revival of the IMF and the World Bank favours multilateralism, multipolarity and a just world order amidst a changing balance of power, the view also echoed by India. However, reforms are needed, especially in leadership, where the tradition of U.S. and European heads for the World Bank and IMF respectively
has drawn criticism. Further, BRICS countries have been demanding a shift of 7% of quota share from developed countries in the IMF and 6% quota share at the World Bank. This has not been granted. The G20 expert panel on strengthening Multilateral development banks (MDBs) formed during India’s presidency has suggested reforms like aligning development aid with domestic priorities, including private financing for funding MDBs and tripling sustainable lending levels by 2030. Further, the World Bank’s collaboration with multilateral development banks like the New Development Bank and the Asian Infrastructure Investment Bank is part of its ‘new playbook’ which reflects the institution’s willingness to reform.
In this light, a reformed World Bank and the International Monetary Fund not only hold a promise of shared prosperity and inclusive world order but also liberal values which as Dhruva Jaishankar opines ‘remain the basis of all future politics’ as ‘contemporary life almost anywhere in the world is so pervasively imbued with liberalism that it will be impossible to fully escape its gravitational force’.
This essay won second prize in the essay competition organized by the Centre for Financial Accountability on the topic *Interrogating the World Bank @ 80*. Learn more about the competition here.
Sejal Singh holds a degree in Economics and Statistics from St. Xavier’s College, Mumbai. Her interests lie in exploring the intersection of politics, economics and international relations.