Yesterday afternoon Prof. Steven Kyle, applied economics and management, gave a talk on “The World Bank and the International Monetary Fund” to a standing-room only crowd in Caldwell Hall. The talk was held in a forum format, and is a part of the ongoing series of colloquia hosted by the Cornell Institute for Public Affairs.
Kyle, who specializes in the economics of low-income countries and who worked for the World Bank in the ’80s, discussed where the World Bank and the International Monetary Fund come from, what they do and also what he thinks they can do better. The IMF, which draws its funds from member countries, seeks to promote stability in the international monetary system, while the World Bank deals with the economic development of the world’s poorest countries.
“Many people think they’re ogres grinding poor countries under their boot of neoliberal capitalism,” Kyle said. “They’re not evil people — they try to do nice things.”
Kyle gave a brief history of the World Bank and the IMF. Originally called the International Bank for Reconstruction and Development, the World Bank was formed to rebuild a devastated Europe after World War II. The IMF, however, was a reaction to the Great Depression of the 1930s. Governments feared a repeat of the domino effect experienced during the depression, in which the collapse of one economy could trigger the fall of others. Originally, the World Bank’s sole job was to rebuild Europe. However, after that was complete, the World Bank found itself with nothing to do.
“You’ll find that bureaucracies rarely vote themselves out of existence,” Kyle said. Because of this, the World Bank decided that it would shift its focus to the rest of the world. It branched out, and by the ’70s it was the biggest transferrer of capital in the world. Now, the World Bank focuses on helping developing countries adjust their economic structures to encourage growth and get out of debt.
“The World Bank steps in, says, ‘Adjust your policies and structures and we’ll give you a billion dollars,'” Kyle said.
Kyle addressed the increasingly political roles the World Bank and IMF have been playing in recent years and pointed out some misconceptions he feels the public has.
“People think these institutions are slaves to the U.S. government — and they’re not,” Kyle said. “They are run by boards of directors with weighted votes. Originally the weights were determined by the victors of World War II — the U.S., Britain, China, France — other countries were given lesser shares.”
“The U.S. now has a vote weight of about 15 percent, which used to be 20 percent,” Kyle said.
Kyle emphasized that this 15 percent vote, while giving the U.S. a large say in the World Bank and IMF, does not give it a veto.
In summing up, Kyle spoke about a recent call for change by economists.
There has been a push for poverty alleviation in developing countries through total debt forgiveness. Instead of requiring repayment of loans from the IMF, total debt forgiveness would remove possible influences by the IMF on the direction of future development by simply granting the money to the country, no strings attached. Kyle is in favor of this policy. “It’s just paternalism in another face; why should we tell them how to use the money? We should just forgive it and let them go on their own way,” Kyle said. Prof. Kyle’s talk was generally received warmly.
According to Brian Ohl grad, “The talk was great. It was a good overview of everything, and even though the World Bank is very political, not everyone knows exactly what it’s about.” “It was a good intro — hearing the origins — and was appropriate to the audience which didn’t necessarily know a lot about it,” said Shaun Ali grad.
However, Aaron Levy grad said “The walk was decent, mostly broad stuff I’ve heard before. His argument was that there are problems, but what should be done about them? It was nothing new.”
Archived article by Dennis Dunegan
Sun Contributor