Treasury Secretary Scott Bessent complained last week that the World Bank and the International Monetary Fund are suffering from “mission creep.” But Bessent announced that Trump will be “doubling down” on supporting the largest foreign aid gushers on earth. “Far from stepping back, ‘America First’ seeks to expand U.S. leadership in international institutions like the I.M.F. and World Bank,” Bessent declared.
Bessent complained that the IMF “devotes disproportionate time and resources to work on climate change, gender, and social issues.” Unfortunately, Bessent said nothing about how the IMF and World Bank bankrolled many of the worst crony Covid crackdown policies.
But what should the US government expect when Congress and endless presidents give the World Bank and IMF billions of US tax dollars to play with? The US government is on the hook for $52 billion to the World Bank. The US has a financial commitment of $183 billion to the IMF.
The IMF was created in 1944 to shore up currencies and help nations with temporary balance-of-payment problems. In the decades since the IMF’s founding, global capital markets and fluctuating currency exchange rates have made the IMF a relic. But too many people have gotten rich from IMF largesse to permit the curtain to be closed on this institution.
The IMF enabled scores of governments that chose to pointlessly shut down their own economies after the outbreak of Covid-19. IMF Managing Director Kristalina Georgieva declared in April 2021, “While the recovery [from Covid] is underway, too many countries are falling behind and economic inequality is worsening. Strong policy action is needed to give everyone a fair shot—a shot in the arm to end the pandemic everywhere, and a shot at a better future for vulnerable people and countries.”
The IMF’s “fair shot” consisted of its international bureaucrats providing scores of billions of dollars in “emergency financing” to 80 governments, most of whom exploited Covid to stretch their own power. The IMF provided emergency relief via the Catastrophe Containment and Relief Trust (CCRT) to 29 governments to supposedly help them “combat the impact of the COVID-19 pandemic.” The IMF’s deluge of handouts to government helped fuel the worldwide inflation surge in recent years.
The World Bank President Ajay Banga “has sought to emphasize the bank’s focus on job creation…and to prioritize private sector involvement in projects around the world,” the New York Times reported. But the World Bank’s notion of the private sector has often been either a fraud or a political smokescreen. In the late 1980s, the World Bank touted its loans to Communist nations as private sector-oriented loans – one bait-and-switch too many, as I detailed in a 1988 Wall Street Journal article. And permitting the Bank to exonerate its handouts by counting illusory jobs created is a recipe for make-work scams.
The Covid pandemic provided the World Bank with the chance to play savior. In the first months of the pandemic, the Bank proudly announced that its “emergency operations to fight COVID-19 (coronavirus) have reached 100 developing countries – home to 70% of the world’s population.” From April 2020 to March 2021, the World Bank “committed over $200 billion, an unprecedented level of financial support, to public and private sector clients to fight the impacts of the pandemic. Our support is tailored to the health, economic, and social shocks that countries are facing.” The fact that the World Bank was effectively financing governments to pointlessly shock their own nations was omitted from celebratory press releases.
The IMF and World Bank have helped turn many foreign nations into kleptocracies – governments of thieves. A 2002 American Economic Review analysis concluded that “increases in [foreign] aid are associated with contemporaneous increases in corruption,” and that “corruption is positively correlated with aid received from the United States.”
Most importantly, neither the IMF nor the World Bank has any qualms about bankrolling tyranny. A 2015 report of the United Nations’ Special Rapporteur on extreme poverty and human rights, Philip Alston, concluded that the World Bank “now stands almost alone, along with the International Monetary Fund, in insisting that human rights are matters of politics which it must, as a matter of legal principle, avoid, rather than being an integral part of the international legal order.”
The Bank justifies this position by insisting that it cannot involve “itself in the partisan politics or ideological disputes that affect its member countries” by improper methods such as “favoring political factions, parties or candidates in elections,” or “endorsing or mandating a particular form of government, political bloc or political ideology.”
But any time an international organization financially bails out a regime, it bolsters its power. After the United States invaded Afghanistan and Iraq, the Pentagon coined a term that perfectly captures the effect of foreign aid: “Money as a Weapon System.” The 2015 UN report noted that “the existing approach taken by the World Bank to human rights is incoherent, counterproductive and unsustainable. For most purposes, the World Bank is a human rights-free zone. In its operational policies, in particular, it treats human rights more like an infectious disease than universal values and obligations.”
The World Bank actively blindfolds itself to avoid hearing about atrocities in nations ruled by governments that it is bankrolling. The Special Rapporteur noted, “By refusing to take account of any information emanating from human rights sources, the Bank places itself in an artificial bubble.”
The Trump administration’s lust for “doubling down” on the IMF and World Bank is dicey to reconcile with their terminating 90% of foreign aid contracts from the US Agency for International Development (USAID). Cynics across the land rejoiced that Washington policymakers finally recognized one of the biggest swindles of the past 80 years.
If the Trump team can’t even get sound policy on the World Bank, then what hope is there of them resolving any more complex challenges? I was briefly a consultant for the World Bank in the late 1980s, getting paid to co-author a report on the follies of farm subsidies. At that point, Reagan administration officials had periodically caterwauled about the Bank for almost a decade, and they were followed by sporadic howling by the US Treasury Department ever since. Secretary Bessent complained on Wednesday that the World Bank “should no longer expect blank checks for vapid, buzzword-centric marketing accompanied by halfhearted commitments to reform.” But after almost a half-century of failed US attempts to reform the Bank and IMF, there is no reason to expect any boondoggles to be left behind.
Or do Trump’s appointees believe that laundering U.S. tax dollars through international entities somehow makes them beneficent? Or maybe US Treasury Department honchos want to make sure they continue to get invited to the most lavish parties in D.C. and around the world. Regardless, the IMF and World Bank financing the worst Covid policies around the globe is another reminder of why those entities should be axed.
Reprinted with permission from the Brownstone Institute.
