With friends like the IMF and the World Bank..who needs Enemies?
International trade has undoubtedly lead to an increase in living standards and prosperity for all countries involved. For example, in Bangladesh, the growth of the clothing manufacturing industry has lead to an increase in sales to overseas markets and thus a creation of over 1 million new jobs, mostly for women.
Yet even though there are advances for some countries, others experience many negative consequences. For example, a country that is carrying a heavy debt load may ask the IMF or the World Bank for a loan. The loan may be given to a country on the basis that it is considered good for the country because it will allow them to avoid similar problems in the future, but these institutions impose several conditions on the country. These conditions are referred to "SAP" (structural adjustment programs). Most of the SAPs have negative consequences for the poorest people in the poorest countries in the world.
For example, the government may require a country to reduce spending, which can sometimes lead to unemployment or a reduction in health and education programs. SAPs may also require countries to raise interest rates to stop inflation which can discourage local businesses due to the high cost of finance.
Often times the IMF and the World Bank may require these countries to cut protections to their local industries and open the country to imports if they are to receive financing.
Mexico is the perfect example of a country that follows the rules mandated by the IMF and World Bank, yet has seen little improvement in its living standards. In 1982, Mexico asked for and received $3.9 million. They have since cut government spending, opened the country up to trade and investment, signed a trade agreement with the US, and raised interest rates. And the result, Mexico has doubled its level of foreign debt. Wages still remain relatively low; currency has devalued;unemployment doubled (12,000 Mexican businesses filed for bankruptcy and those living in severe poverty grew by 4 million people) ;interest rates have risen.
Short term pain for long term gain? It seems as if there is a never ending cycle of declining living conditions, increasing poverty, and rising debt levels for countries that seek out assistance from
their friends, The World Bank and The International monetary Fund.
http://www.ozspirit.info/2003/54bg.html
Yet even though there are advances for some countries, others experience many negative consequences. For example, a country that is carrying a heavy debt load may ask the IMF or the World Bank for a loan. The loan may be given to a country on the basis that it is considered good for the country because it will allow them to avoid similar problems in the future, but these institutions impose several conditions on the country. These conditions are referred to "SAP" (structural adjustment programs). Most of the SAPs have negative consequences for the poorest people in the poorest countries in the world.
For example, the government may require a country to reduce spending, which can sometimes lead to unemployment or a reduction in health and education programs. SAPs may also require countries to raise interest rates to stop inflation which can discourage local businesses due to the high cost of finance.
Often times the IMF and the World Bank may require these countries to cut protections to their local industries and open the country to imports if they are to receive financing.
Mexico is the perfect example of a country that follows the rules mandated by the IMF and World Bank, yet has seen little improvement in its living standards. In 1982, Mexico asked for and received $3.9 million. They have since cut government spending, opened the country up to trade and investment, signed a trade agreement with the US, and raised interest rates. And the result, Mexico has doubled its level of foreign debt. Wages still remain relatively low; currency has devalued;unemployment doubled (12,000 Mexican businesses filed for bankruptcy and those living in severe poverty grew by 4 million people) ;interest rates have risen.
Short term pain for long term gain? It seems as if there is a never ending cycle of declining living conditions, increasing poverty, and rising debt levels for countries that seek out assistance from
their friends, The World Bank and The International monetary Fund.
http://www.ozspirit.info/2003/54bg.html
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