Skip to main content

Bretton Woods policies lead to 'wider' global inequalities, high debt levels

By Maju Varghese* 

The Spring Meeting of the World Bank and IMF, held from April 15-20, marks the commencement of celebrations for the 80th anniversary of the Bretton Woods Conference, aimed at rebuilding the world in the aftermath of world wars and the Great Depression. While the vision and mission of the World Bank and IMF, commonly known as Bretton Woods Institutions, have evolved from wartime reconstruction to eradicating poverty, achieving shared prosperity, and now addressing the imperative of a liveable planet, the institutions have failed to bring about substantial reforms, including governance reforms and rectifying the existence of unbalanced shareholder systems.
Eight decades after the establishment of the international economic order, the world still faces deep crises marked by widening inequality and high debt levels, with policies prescribed by the Bretton Woods institutions failing to foster shared prosperity. The institutions themselves remain stuck in their past, with no substantial reforms in their governance structure despite тАШhigh-level reportsтАЩ with a lack of political will to adapt to changing realities.
Talks of reform appear to be primarily stuck in superficial changes in language and peripheral reforms prompting the Intergovernmental Group of Twenty-Four (G24), consisting of middle and emerging economies, emphasizing the need to address the underrepresentation of emerging markets and developing economies in the IMF's governance structure, which continues to undermine the organizations' legitimacy and credibility.
Despite paying lip service to reforming the institutions, they persist in prescribing the same recipes of liberalization and austerity measures instead of addressing structural problems. An analysis by Oxfam International revealed that 60% of countries receiving loans or grants from the IMF and World Bank are experiencing high or increasing income inequality. This is partly due to policies propagated by these institutions, which exacerbate the gap between the rich and the poor. 
The World Bank's own report acknowledges a historical reversal of development, with half of the world's 75 poorest countries experiencing widening income gaps with the wealthiest economies for the first time this century. The disparity between per capita income growth in the poorest countries and the richest has widened over the past five years. The World Bank itself views this as a very serious structural regression, sounding alarm bells for the world.
According to the Global Sovereign Debt Monitor, the global debt situation is critical. In 130 of the 152 countries surveyed in the Global South, the debt situation is at least slightly critical; in 24 of these countries, it is very critical. Overall, 55% of the countries surveyed are critically or very critically indebted -- contrasting with only 37% before the COVID-19 pandemic. 
The countries in the Global South will have to make more debt service payments to their external creditors than ever beforeтАФa 10% increase compared to the previous record in 2022. For 45 countries, more than 15% of government revenue is being spent on servicing their debt.
According to the World Bank Chief Economist, the G20 Common Framework for Debt Treatment, designed to assist with debt restructuring beyond the Debt Service Suspension Initiative, failed to provide a single dollar of new money. More than half of the 75 countries were ineligible for concessional finance from the World Bank and are in distress or close to it. The World Bank and IMF have failed to cancel debt from poor countries. 
60% of countries receiving loans or grants from the IMF and World Bank are experiencing high or increasing income inequality
In fact, the IMF imposes significant surcharges, akin to penalty charges imposed by banks, on countries with large borrowings from the IMF that are not repaid within a relatively short time. IMF surcharges have become the FundтАЩs largest source of revenue, accounting for almost half of revenues from the beginning of the COVID-19 crisis through the end of 2022. The IMF estimates that borrowing countries will pay over $4 billion in extra surcharges on top of interest payments and fees.
Lawrence Summers and NK Singh, co-conveners of the Independent Expert Group constituted by the G20, discuss a different transferтАФthe transfer of resources from the Global South to the Global North through escalating interest payments and repayments of bonds and loans. According to them, nearly $200 billion flowed out of developing countries to private creditors in 2023, eclipsing the increased financing from international financial institutions. 
Summers and Singh state, "Billions to trillions," the catchphrase for the World BankтАЩs plan to mobilize private sector money for development, has become "millions in, billions out." According to data.one.org, global net financial transfers to developing countries have fallen to their lowest level since the Global Financial Crisis. Debt service repayments to official and private lenders have surpassed external inflows to governments. 
It is estimated that financial transfers to developing countries have fallen from their peak of US$225 billion in 2014 to US$51 billion in 2022, and it is projected to decrease by over US$100 billion in the next two years. This means that US$50 billion will flow out of developing countries in 2024 alone.
The global financial architecture, crafted and enforced by the Bretton Woods institutions in collaboration with their primary shareholder nations, has exacerbated inequality and led to massive debts, while also facilitating the transfer of resources from the Global South. It is imperative to re-examine this framework, including the roles played by multilateral development banks. 
These institutions cannot be trusted to address new challenges, including the climate crisis engulfing the world. A new roadmap is needed to view finance as a public good and to be managed democratically by public institutions. The approach of prioritizing private finance and the "gentleman's agreement" of power-sharing between the US and Europe has run its course. Eighty years is a lifetime; now is the time to bid farewell.
---
*Director Programs and Operations, 
Centre for Financial Accountability (CFA)

Comments

TRENDING

AurangzebтАЩs last will recorded by his Maulvi: Allah shouldn't make anyone emperor

By Mohan Guruswamy  AurangzebтАЩs grave is a simple slab open to the sky lying along the roadside at Khuldabad near Aurangabad. I once stopped by to marvel at the tomb of an Emperor of India whose empire was as large as Ashoka the Great's. It was only post 1857 when Victoria's domain exceeded this. The epitaph reads: "Az tila o nuqreh gar saazand gumbad aghniyaa! Bar mazaar e ghareebaan gumbad e gardun bas ast." (The rich may well construct domes of gold and silver on their graves. For the poor folks like me, the sky is enough to shelter my grave) The modest tomb of Aurangzeb is perhaps the least recognised legacies of the Mughal Emperor who ruled the land for fifty eventful years. He was not a builder having expended his long tenure in war and conquest. Towards the end of his reign and life, he realised the futility of it all. He wrote: "Allah should not make anyone an emperor. The most unfortunate person is he who becomes one." AurangzebтАЩs last will was re...

Beyond his riding skill, Karl Umrigar was admired for his radiance, sportsmanship, and affability

By Harsh Thakor*  Karl Umrigar's name remains etched in the annals of Indian horse racing, a testament to a talent tragically cut short. An accident on the racetrack at the tender age of nineteen robbed India of a rider on the cusp of greatness. Had he survived, there's little doubt he would have ascended to international stature, possibly becoming the greatest Indian jockey ever. Even 46 years after his death, his name shines brightly, reminiscent of an inextinguishable star. His cousin, Pesi Shroff, himself blossomed into one of the most celebrated jockeys in Indian horse racing.

PUCL files complaint with SC against Gujarat police, municipal authorities for 'unlawful' demolitions, custodial 'violence'

By A Representative   The People's Union for Civil Liberties (PUCL) has lodged a formal complaint with the Chief Justice of India, urging the Supreme Court to initiate suo-moto contempt proceedings against the police and municipal authorities in Ahmedabad, Gujarat. The complaint alleges that these officials have engaged in unlawful demolitions and custodial violence, in direct violation of a Supreme Court order issued in November 2024.

How the slogan Jai Bhim gained momentum as movement of popularity and revolution

By Dr Kapilendra Das*  India is an incomprehensible plural country loaded with diversities of religions, castes, cultures, languages, dialects, tribes, societies, costumes, etc. The Indians have good manners/etiquette (decent social conduct, gesture, courtesy, politeness) that build healthy relationships and take them ahead to life. In many parts of India, in many situations, and on formal occasions, it is common for people of India to express and exchange respect, greetings, and salutation for which we people usually use words and phrases like- Namaskar, Namaste, Pranam, Ram Ram, Jai Ram ji, Jai Sriram, Good morning, shubha sakal, Radhe Radhe, Jai Bajarangabali, Jai Gopal, Jai Jai, Supravat, Good night, Shuvaratri, Jai Bhole, Salaam walekam, Walekam salaam, Radhaswami, Namo Buddhaya, Jai Bhim, Hello, and so on. A soft attitude always creates strong relationships. A relationship should not depend only on spoken words. They should rely on understanding the unspoken feeling too. So w...

State Human Rights Commission directs authorities to uphold environmental rights in Vadodara's Vishwamitri River Project

By A Representative  The Gujarat State Human Rights Commission (GSHRC) has ordered state and Vadodara municipal authorities to strictly comply with environmental and human rights safeguards during the Vishwamitri River Rejuvenation Project, stressing that the riverтАЩs degradation disproportionately affects marginalized communities and violates citizensтАЩ rights to a healthy environment.  The Commission mandated an immediate halt to ecologically destructive practices, rehabilitation of affected communities, transparent adherence to National Green Tribunal (NGT) orders, and public consultations with experts and residents.   The order follows the Concerned Citizens of Vadodara coalitionтАФenvironmentalists, ecologists, and urban plannersтАФsubmitting a detailed letter to authorities, amplifying calls for accountability. The group warned that current plans to тАЬre-sectionтАЭ and тАЬdesiltтАЭ the river contradict the NGTтАЩs 2021 Vishwamitri River Action Plan, which prioritizes floodpla...

Haven't done a good deed, inner soul is cursing me as sinner: Aurangzeb's last 'will'

Counterview Desk The Tomb of Aurangzeb, the last of the strong Mughal emperors, located in Khuldabad, Aurangabad district, Maharashtra, has this epitaph inscribed on it: "Az tila o nuqreh gar saazand gumbad aghniyaa! Bar mazaar e maa ghareebaan gumbad e gardun bas ast" (the rich may well construct domes of gold and silver on their graves. For the poor folks like me, the sky is enough to shelter my grave).

CPMтАЩs evaluation of BJP reflects its political character and its reluctance to take on battle against neo-fascism

By Harsh Thakor*  A controversial debate has emerged in the revolutionary camp regarding the Communist Party of India (Marxist)'s categorization of the Bharatiya Janata Party. Many Communists criticize the CPMтАЩs reluctance to label the BJP as a fascist party and India as a fascist state. Various factors must be considered to arrive at an accurate assessment. Understanding the original meaning and historical development of fascism is essential, as well as analyzing how it manifests in the present global and national context.

How polarization between different ideological trends within the communist movement sharpened in India

By Harsh Thakor*  This article is a rejoinder to A Note on Slogans of тАЬLeft Unity,тАЭ тАЬUnity of the Communist RevolutionariesтАЭ and тАЬMass LineтАЭ by Umair Ahmed, published on the Nazariya blog .

рд░рд╛рдЬрд╕реНрдерд╛рди, рдордзреНрдпрдкреНрд░рджреЗрд╢, рдкрд╢реНрдЪрд┐рдо рдмрдВрдЧрд╛рд▓, рдЭрд╛рд░рдЦрдВрдб рдФрд░ рдХреЗрд░рд▓ рдлрд┐рд╕рдбреНрдбреА: рдЬрд▓ рдЬреАрд╡рди рдорд┐рд╢рди рдХреЗ рд▓рдХреНрд╖реНрдп рдХреЛ рдкрд╛рдиреЗ рд╕рдордиреНрд╡рд┐рдд рдкреНрд░рдпрд╛рд╕ рдЬрд░реВрд░реА

- рд░рд╛рдЬ рдХреБрдорд╛рд░ рд╕рд┐рдиреНрд╣рд╛*  рдЬрд▓ рд╕рдВрд╕рд╛рдзрди рд╕реЗ рдЬреБрдбрд╝реА рд╕реНрдерд╛рдпреА рд╕рдорд┐рддрд┐ рдиреЗ рд╡рд░реНрддрдорд╛рди рд▓реЛрдХрд╕рднрд╛ рд╕рддреНрд░ рдореЗрдВ рдкреЗрд╢ рд░рд┐рдкреЛрд░реНрдЯ рдореЗрдВ рдмрддрд╛рдпрд╛ рд╣реИ рдХрд┐ "рдирд▓ рд╕реЗ рдЬрд▓" рдорд┐рд╢рди рдореЗрдВ рд░рд╛рдЬрд╕реНрдерд╛рди, рдордзреНрдпрдкреНрд░рджреЗрд╢, рдкрд╢реНрдЪрд┐рдо рдмрдВрдЧрд╛рд▓, рдЭрд╛рд░рдЦрдВрдб рдФрд░ рдХреЗрд░рд▓ рдлрд┐рд╕рдбреНрдбреА рд╕рд╛рдмрд┐рдд рд╣реБрдП рд╣реИрдВред рдЬрдмрдХрд┐ рджреЗрд╢ рдХреЗ 11 рд░рд╛рдЬреНрдпреЛрдВ рдореЗрдВ рд╢рдд-рдкреНрд░рддрд┐рд╢рдд рдЧреНрд░рд╛рдореАрдгреЛрдВ рдХреЛ рдирд▓ рд╕реЗ рдЬрд▓ рдЖрдкреВрд░реНрддрд┐ рд╢реБрд░реВ рдХрд░ рджреА рдЧрдИ рд╣реИред рд░рд┐рдкреЛрд░реНрдЯ рдореЗрдВ рд╕рдорд┐рддрд┐ рдиреЗ рдХреЗрдВрджреНрд░ рд╕рд░рдХрд╛рд░ рдХреЛ рд╕рд┐рдлрд╛рд░рд┐рд╢ рдХреА рд╣реИ рдХрд┐ рдорд┐рд╢рди рдкреБрд░рд╛ рдХрд░рдиреЗ рдореЗрдВ рд░рд╛рдЬреНрдп рд╕рд░рдХрд╛рд░реЛрдВ рдХреА рд╕рдорд╕реНрдпрд╛рдУрдВ рдкрд░ рдЧреМрд░ рдХрд┐рдпрд╛ рдЬрд╛рдПред 

Implications of deaths of Maoist leaders G. Renuka and Ankeshwarapu Sarayya in Chhattisgarh

By Harsh Thakor*  In the wake of recent security operations in southern Chhattisgarh, two senior Maoist leaders, G. Renuka and Ankeshwarapu Sarayya, were killed. These operations, which took place amidst a historically significant Maoist presence, resulted in the deaths of 31 individuals on March 20th and 16 more three days prior.