Sunday, March 12, 2006

The New Imperialism, State Capitalism the Keynsian and Neo-Liberal Spacio-Temporal Fixes of the World Bank and International Monetary Fund and a Su

In his book about the British economist John Maynard Keynes Robert Skidelsky states, “On 24 October 1916, above the initials of Reginald McKenna, Chancellor of the Exchequer, appeared the words, almost certainly drafted by Keynes: ‘If things go on as present... the Presidents of the American Republic will be in a position... to dictate his own terms to us’ This fixes the moment when financial hegemony passed across the Atlantic. (p. 19)” Skidelsky was discussing the First World War and how British involvement in what was at the time the most destructive war ever fought, was making the United Kingdom more dependent on the United States for loans to finance the war.

Things continued on that trend, and in 1945 with the end of the Second World War nearing, Keynes played a role in the creation of the the International Monetary Fund and the International Bank for Reconstruction and Development at the Bretton Woods conference. The IBRD would go on to become the World Bank. Membership in the World Bank and IMF was and still is determined by shares bought by different governments. The more shares a country buys, the more votes they have in the institutions. This allowed the United States to gave the overwhelming majority of votes in the post WWII period. As the IMF admits, “Those who contribute most to the IMF are therefore given the strongest voice in determining its policies. Thus the United States now [in 1992] has about 180,000 votes, or about one fifth of the total; the Maldives 270. (Driscoll, p. 6)” The US was now in a position to dictate terms to the rest of the world.

Despite certain cosmetic changes in it’s approach to economics throughout the years, this was a system which not only worked with dictators such as Marcos in the Philippines, but a system which the basic structure of which was undemocratic. It was a system that led to further poverty and inequality. It was a system that bred resistance and a system which upon the ashes of, a new society can grow.

For the first several decades of their existence, the Bretton Woods institutions took their mission almost entirely from Keynesian economics. The basic ideas behind this was that governments might have to intervene in the economy through large scale projects to create jobs. The World Bank was intended to give out loans to finance such projects, while the IMF was to regulate currency exchange rates through a fixed value (the dollar which was linked the gold standard).

Keynes first draft of what would become the world economic order after WWII, revolved around the idea that “creditor countries would not be allowed to ‘hoard’ their surpluses, or charge punitive rates of interest for lending them out; rather they would be automatically available as cheap overdraft facilities to debtors... (Skildelsky, p. 100).” This is the “Spacio-temporal fix” that David Harvey discussed in his book “The New Imperialism.”

Harvey wrote:

“The basic idea of the spatio-temporal fix is simple enough. Over-accumulation within a given territorial system means a condition of surpluses of labour (rising unemployment) and surpluses of capital (registered as a glut of commodities on the market that cannot be disposed of without a loss, as idle productive capacity and/or as surpluses of money capital lacking outlets for productive and profitable investment). Such surpluses can be potentially absorbed by (a) temporal displacement through investment in long-term capital projects or social expenditures (such as education and research) that defer the re-entry of capital values into circulation into the future, (b) spatial displacements through opening up new markets, new production capacities, and new resource social, and labour possibilities elsewhere... (p. 109)”

In essence, the Bretton Woods institutions were to be used to take excess capital from rich countries like the US, and invest it in poor countries like the Philippines. According to the owners of this new system, it would allow those countries to develop and prosper. Was this the case though? There is much evidence that suggests that was not the case.

Consider the case of the Philippines. After WWII, the Philippines was in ruins. “Manila suffered greater devastation than any Allied city, second only to Warsaw (Woods, p. 60).” A Marshall plan for the Philippines, based on Keynesian ideas of government investment in the economy, was implemented. The US gave millions of dollars to the Philippine government in what would be a precursor to the spacio-temporal fixes of the World Bank. The Philippines has received several loans from the World Bank and IMF since at least the 1970’s, when under the leadership of liberal Vietnam war architect Robert McNamara the World Bank became increasingly supportive of the Marcos dictatorship.

Yet despite the decades of this kind of “aid”, in 2006 Damon Woods reported that, “It is estimated that approximately 40 percent of the population lives below the poverty line (p. 107).” and “External debt is 57.96 billion (p. 108).”

Why is it that these spacio-temporal fixes, aren’t fixing anything for the Philippine people? On one hand we must look at the colonial history between the countries that control the Bretton Woods Institutions and countries like the Philippines. The Philippines was a colony of Spain’s for 300 years, until a revolt was supported by the United States in the late 1800’s. The US decided to annex the Philippines instead of respecting it’s sovereignty. A repressive war was fought to control the Philippines, and the US ended up owning the islands. Damon Woods quotes from Schirmer President McKinley’s reasons for US imperial control of the islands. These reasons still ring true today under the World Bank and IMF, “we could not turn them over to France and Germany- our commercial rivals in the Orient- that would be bad business and discreditable” and “we could not leave them to themselves- they were unfit for self-government (p. 50).”

At the most basic level, the Bretton Woods institutions conducting these fixes are not designed to be democratic. They are only fixing the economy for those that own them. If all countries and all people had equal power over the global economic order, those decisions would represent the will of all those people.

The IMF claims that it “has no means of coercing them [member countries] to live up to these obligations [of following free trade and currency exchange measures] (Driscoll, p. 9).” A nice way of saying that even if the decisions for how the world economy is to be run is decided by a few rich countries, the rest of the world doesn’t have to go along with it. But in the Philippines and other countries, the IMF and World Bank have essentially coerced countries to accept the Bretton Woods’ institutions solutions.

As Adebayo Adedeji writes, “Virtually every external support to any African country, including debt rescheduling and relief, became dependent on the award of a certificate of good behavior by these institutions. Such an award was and is dependent upon adherence to SAP [Structural Adjustment Program] and their conditionalities. Consequently, independent policy making and national economic management were considerably diminished and narrowed in Africa (p. 63).”

In this and other ways, the Bretton Woods institutions no longer represent the vision of Keynes. Neo-liberalism has replaced Keynesianism as the dominant economic thought of the World Bank and IMF. What are the main differences between these two trends and are they that different?

To address these issues, we must look at the relationship between Keynesianism and Marxism.

Keynes was an ardent supporter of Capitalism, and even though he visited the Soviet Union twice, he was an anti-communist who believed in state intervention in the economy to prevent communism from taking hold. Despite that, politicians that promote neo-liberalism, like Ronald Reagan did, “view the Bank as the international equivalent of the Welfare Department... (Bello, p. 3).” They saw the Bank as state intervention in the economy, similar to the planned economies of the Soviet Union. This partly stems from Keynes own promotion of complete or universal employment through government investment, an international New Deal in a sense. It should be noted that the only country that achieved universal employment in Keynes time was the Soviet Union. It was even adopted in the Soviet Union’s constitution as a right to employment for all citizens.

To equate the right to work with genuine communism might be misleading. The Soviet economist I.G. Blyumin was paraphrased by Carl Turner, “The capitalist world was troubled by the dangers of unemployment and crises. To escape these difficulties, these groups resorted to ideas and measures that when brought together became know as controlled economy, regulated economy or planned economy.” Turner continues, “Blyumin identified Keynes as the main theoretician of these groups that were strengthening state capitalism (p. 42).”

In essence, Keynesianism in the early World Bank is simply a watered down version of what the Soviet Union was practicing: government promising employment and planning the economy. It should be noted that doesn’t equate Keynesianism with genuine communism.

The Soviet Union was a socialist republic attempting to succeed in an experiment to create a classless, democratic society that would be communism. Since it still had a state, and that single-party state of bureaucrats controlled the allocation of resources much the way stock brokers, CEO’s and politicians in capitalist societies, one could call the Soviet Union just as much state-capitalist as Blyumin called Keynesianism. While there was some accountability in elections of those Soviet bureaucrats, unlike in capitalist economies where no worker is able to elect their manager or CEO, the elections in the Soviet Union were still lacking in democracy as one could only vote for different representatives from the Bolshevik party.

Neo-Liberalism, as espoused by Milton Friedman, promotes a hands off approach from the government in the economy. Thus neo-liberals looked at the Keynesianism in the World Bank as state-capitalism like Blyumin did. The difference being that neo-liberals still wanted capitalism, they wanted to take the state out of state capitalism. Neo-liberals saw a victory in capitalism by abolishing the gold standard exchange rate for currency in the early 1970’s. Floating exchange rates, to neo-liberals, was a deregulation of the global economy.

Despite similarities to Soviet Union’s regulated or planned economy, the World Bank was opening up investment opportunities for private business. Walden Bello quoted the Journal of Commerce, “Over the years, conservative Republicans have systematically accused World Bank supporters of wasting tax-payers money... What is undeniable is that the World Bank and the IDA have made life a lot easier for US investment in developing countries... It is paradoxical and senseless for conservative Republicans to take action which runs counter to the interests of American business (p. 4).” Indeed many of the basic conditions of loans to third world countries include privatization of services offered by the government such as health care, education and public services like building roads. Once privatized, these jobs can be bought by or contracted out to multi-national corporations.

Further more, the spacio-temporal fixes of the Bretton Woods institutions have been used over and over again to finance the defeat of social movements that threaten private industry and would install a socialist, state planned economy.

In the Philippines, the repressive nature of the Marcos dictatorship spawned the emergence of the the Communist Party of the Philippines and it’s military wing the New People’s Army. “The NPA had, by 1980, created 26 battle fronts in the countryside and operated in 41 of the country’s 71 provinces (Bello, p. 92).”

The World Bank helped finance the Marco’s dictatorships Integrated Area Development programs. These IAD’s “ostensibly offer[ed] inhabitants of a region a coherent set of services ranging from ‘security’ and medical assistance to road building and technical agricultural aid (Bello, p. 92).” These IAD’s were all aimed at provinces where major Guerrilla activity occurred and were designed to provide support for counter-insurgency operations. For example “Road Building was clearly meant to facilitate the logistical mobility of the Philippine Army, the conducting a major search-and-destroy operation in the area (Bello, p. 93).”

So we see how neo-liberal ideologues were forced to work with the World Bank and IMF, implementing only a few changes from the Keynesian model. In many ways the biggest supporters of neo-liberal “laissez fair” have used the bluntest instruments of the state- the army and other means of force, to open up those spacio-temporal fixes. The best example of this would be George W. Bush and the invasion of Iraq. Now that Iraq is occupied by the US, the World Bank and IMF are able to give out loans and implement conditions that they wouldn’t be able to get away with in any other country.

Carl Turners paraphrasing of Soviet economist Kotov might be right when he states, “that the neo-liberals were generally against state intervention in the economy except when intervention was against the workers (p. 139).”

In the capitalist system, dissent in the work place is kept down through the fear of unemployment. Sure you could form a union, but the management could fire you for attempting that. Some leftists have suggested that there is a progressive interpretation of Keynes that goes along the lines that universal employment would improve the material conditions of workers, and thus give them more leverage to negotiate with their managers. If you can’t be fired, then you can dissent on the job, and not fear serious repercussions.

While that might be true in theory, it should be remembered that unless that guaranteed employment is in democratically run cooperatives, it can be used for reactionary causes. As Carl Turner paraphrases Soviet economist Kocketkov, “Keynesianism had also served the fascists. Hitlerite Germany accepted Keynes’s theory for the basis of its economic system even before it was accepted in England.”

One possible leftist application of Keynes ideas might be seen in the domestic economic policies of the Bolivarian Republic of Venezuela under the Presidency of Hugo Chavez. When Venezuelan Consul General for Chicago Martin Sanchez spoke at DePaul, he spoke of how the Chavez government was investing in cooperatives. Sanchez saw this as a democratic alternative to being bossed around and told what to wear by a CEO or dictator like Bill Gates.

However the Venezuelan promotion of cooperatives is only a step towards abolishing the current undemocratic Bretton Woods organizations, and creating new directly democratic institutions that coordinate the activities of a world wide network of democratically operated cooperatives.

Activists around the world can take notice of the bold social and economic experiment occurring in Argentina as detailed in Naomi Klein’s movie “The Take”. In the aftermath of the IMF induced collapse of the Argentinian economy, multinational corporations withdrew their investments from Argentina, to prevent the devaluation of their assets. This led the corporations to close down hundreds of factories, workshops and other businesses. Workers organized themselves into democratically run cooperatives where they would meet once a week, and elect their manger (who is paid the same amount they are and whom they have power of instant recall over), and these cooperatives have occupied and restarted production in these abandoned businesses. These different cooperatives even practice mutual aid with each other, sharing resources and creating a small gift economy which as it continues to grow and inspire others, could develop into a serious threat to the competition and exchange economy of capitalism.

Capitalism, whether in the guise of state capitalism, Keynesianism or neo-liberalism would have us believe that this is the best of all possible worlds and that there is no point in fighting for something outside of the capitalist systems of control. But as social movements as diverse as Food Not Bombs in the US and Europe, the Bolivarian Circles of Venezuela and the occupied factories movement in Argentina have shown, and the World Social Forum proclaimed, another world is possible. We can create direct democracy in all spheres of life- political, social, economic and personal. The same reason you wouldn’t want to be in a personal relationship with someone who controlled you and told you what to do, is the same reason why we shouldn’t accept the political-economic attempts of the Bretton Woods institutions to deprive us of our autonomy and freedom. Equality and democracy are twin pillars to the society that anarchists, communists, pacifists, idealists and other dreamers have fought for, two pillars that are being created despite attempts by capitalism to bring them down.


Adedeji, Adebayo. “An African Perspective on Bretton Woods.” The UN and the Bretton Woods Institutions: New Challenges for the Twenty-First Century. Ed. Mahbub ul Haq, Richard Jolly, Paul Streeten, Khadija Haq. 1995. St. Martins Press, New York.

Bello, Walden; Kinley, David; Elinson, Elaine. “Development Debacle: The World Bank in the Philippines.” 1982. Institute for Food and Development Policy: Philippine Solidarity Network.

Constitution of the Union of Soviet Socialist Republics. October 7, 1977.

Driscoll, David B. “What is the International Monetary Fund?” 1992. External Relations Department: International Monetary Fund.

Frank, Joshua. “Let the Drilling Begin: Iraq’s IMF loan.” December 8, 2005.

Harvey, David. “The New Imperialism.” 2003. Oxford University Press.

Klein, Naomi. “The Take.” 2005.

Skidelsky, Robert. “Keynes.” 1996. Oxford University Press.

Turner, Carl. “An Analysis of Soviet Views on John Maynard Keynes.” 1969. Duke University Press.

Woods, Damon L. “The Philippines: A Global Studies Handbook.” 2006. ABC-CLIO, Inc.

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