The Bretton Woods Institutions, along with bilateral lenders, perpetuate financial slavery, keeping countries in a state of desperation.
by P. L. O. Lumumba
Editor’s Note: The following article is based on a recent speech delivered by the author. It offers a critical examination of the roles of the International Monetary Fund (IMF) and the World Bank in shaping the economic landscapes of post-colonial states, particularly in Africa.
The modern state, particularly the Westphalian state characterised by the division of the executive, legislature, and judiciary, is a European creation. Many young nations, especially those previously colonised, had this system imposed on them. Historically, imperial powers like Britain, France, Portugal, Italy, Germany, and Spain controlled these territories as external extensions of their own countries. For instance, the Dutch controlled Indonesia from the Netherlands. When these countries gained independence, they inherited a financial architecture that was foreign to them.
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| Violence in the Sahel region of Africa has been continual for more than a decade. [Credit: Photo by Maeva Bambuck/AP/Shutterstock] |
This alien system operated on taxation. In many African countries, they started with poll tax or hard tax. Taxation became the primary source of financing state affairs, including defence, civil service, and the importation of goods and services. However, it soon became clear that domestic resources obtained through taxation were insufficient to meet societal needs, leading to the necessity of loans. Colonial governments created institutions like the IMF and the World Bank to provide these loans, initially intended to rebuild European countries devastated by World War II. African and non-African countries in Asia and Latin America were later drafted into these institutions.
Even though countries like Kenya and Nigeria are members and decision-makers of the World Bank and IMF, their membership is largely symbolic. These institutions were designed to ensure control over these nations. As the saying goes, the lender remains the master of the borrower. The international economic architecture is alien to many African countries, leading to a situation where they play a game they do not understand, resulting in indebtedness.
To run these alien states, countries incur debt, and these institutions control their decision-making processes. The IMF and World Bank offer advisory services, which often lead countries into a debt trap where they can no longer repay their debts. This situation is exacerbated by political leadership that allows for corruption and wastage, making it impossible for countries to service their debts.
Countries find themselves borrowing domestically, from multilateral institutions like the IMF and World Bank, and bilaterally from nations such as China, Turkey, the United States, and the European Union. This borrowing reduces their ability to run their countries effectively, leading to a debt trap. The IMF and World Bank, through their advisory services, direct countries on how to manage their affairs, often to their detriment. These institutions are not benevolent; they are ‘bad Samaritans’ who want to see these countries struggling without ever achieving true freedom.
The IMF and World Bank, known as the Bretton Woods Institutions, often prescribe solutions that worsen the debt situation. In the 1980s, they introduced structural adjustment programs, urging governments to privatise state assets. This advice often led to negative consequences. For example, the IMF praised Argentina’s economy, only for it to collapse later. The same happened with Ghana. Their economic assessments rarely translate into real benefits on the ground, resulting in what I call statistical growth—a façade of prosperity while people continue to suffer.
The international economic and commercial architecture is designed by Western countries to keep African, Latin American, and some Asian countries in a perpetual state of desperation. This economic dominance allows for the exploitation of these countries’ resources, perpetuating financial slavery. Aid and loans from the Bretton Woods Institutions only ensure that these countries remain in a state of servitude.
Some countries, like Russia, have successfully moved away from the orbit of the IMF and World Bank, demonstrating that it is possible to achieve economic growth independently. Russia, a resource-rich country, resisted economic dominance by moving away from dollarisation and the IMF-World Bank influence, leading to robust economic growth. This example suggests that African, Asian, and Latin American countries can also achieve economic independence.
Economic blocs like the East African Community, SADC, and ECOWAS can help smaller nations achieve viability. Tanzania has started to encourage spending in its own currency, and Russia and China conduct transactions in their respective currencies. True freedom can only be achieved by breaking free from institutions that perpetuate indebtedness. Thomas Sankara, former President of Burkina Faso, once suggested that African countries should stop repaying these debts and treat them as reparations for colonisation.
African and Latin American countries must stand their ground and challenge the insidious loans from the IMF and World Bank. Countries like India and Indonesia, despite being large economies, are also heavily indebted. If these countries united to reject these unfair loans, meaningful solutions could be found.
Countries like Kenya find themselves in eternal servitude due to unsustainable debt levels. It is possible to liberate economies through effective resource use and avoiding unnecessary loans. Botswana, for example, maintains low levels of indebtedness by living within its means. Other countries like Guinea, Burkina Faso, and the Democratic Republic of Congo could also achieve this by utilising their resources effectively.
The IMF and World Bank’s influence extends to the crafting of national budgets, where they impose conditionalities that often lead to over-taxation and public dissatisfaction. This economic stranglehold prevents countries from achieving true economic freedom. Countries need to critically examine their governance structures, reduce wastage, and ensure efficient use of resources to break free from these debt traps.
African economists, central bankers, and policymakers must develop models to achieve debt-free economies or manageable debt levels. While loans can be beneficial if used wisely, reliance on them should be minimised. By using their resources effectively, countries can gain greater opportunities for self-expression and political independence.
The Bretton Woods Institutions, along with bilateral lenders, perpetuate financial slavery, keeping countries in a state of desperation. However, with strategic planning and efficient resource management, countries can achieve economic freedom and break free from the control of these institutions.
Prof. Patrick Loch Otieno Lumumba ( P.L.O. Lumumba) is a prominent Kenyan lawyer and activist known for his staunch anti-corruption advocacy. He currently serves as the director of the Kenya School of Law, following his tenure as the director of the Kenya Anti-Corruption Commission from July 2010 to August 2017. Lumumba is celebrated for his impassioned speeches and writings, which highlight the imperative of integrity and transparency in governance. His career has been defined by a relentless commitment to legal reform and ethical leadership, making him a pivotal figure in Kenya's ongoing battle against corruption and a respected voice on matters of law and governance across Africa.
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