The US and the International Institutions

According to Ngaire Woods, international organizations such as the IMF and the World Bank were created primarily to support and enforce policy that is in the United States’ best interest. Woods also asserts that the US involvement with these institutions is a strategy to impose US foreign policy without being conspicuous and offensive to the rest of the world (Woods, 2003). There are several components of why the US is exceedingly influential in these institutions. Woods described four different direct and indirect approaches by the US which are: core budget, use of resources, staffing and management, and finally representation and deliberative functions.

The US privileges within the institutions are primarily due to the United States’ massive contribution to these agencies. Their contributions are as high as 17.33% to the IMF and 16.98% to the World Bank. These contributions grant the United States some degree of autonomy or superiority in deciding what they think is best for the rest of the world. If countries try to outbid the United States with a substantial amount of contribution, the US makes sure that by placing US officials within the institutions, policies that are being implemented will not be in the disadvantage of the US. Any policy that is passed in the institutions must have the United States approval. For example, officials from the US Treasury are placed to devise policies towards the IMF and State officials are placed to give advice and input to the World Bank. The role of the US Treasury and State to these institutions is then pressured and overshadowed by Congress to make sure that the preferences that are mobilized by the Treasury and the State Department have a positive outcome for the US overall. This type of check-and-balance within the US government in overseeing international institutions makes the US an effective player in the international community.

A considerable contribution results in a substantial amount of control. The World Bank does not have to rely on its members to get loans. They can issue AAA rated bonds to companies and countries that are willing to participate. In return, countries and companies that lend the World Bank at a lowest rate in the market are guaranteed some sovereignty within the institution. Furthermore, the US is also able to pressure the IMF and the World Bank by not contributing enough to the budget proposal set forth by the IMF or the International Development Association (IDA), unless their interest is being prioritized. The IDA, which gives loans to poor countries at an extremely high rate of return, opens up a new channel for wealthy countries to have influence over the World Bank. The US itself contributes 20.86% alone to the IDA, which gives the US the power to watch over the budget. The threat of not contributing is further supported by an IDA policy called “pro rata provision,” whereby other countries can also reduce their contributions in proportion to the reduction made by the US. Thus, if the US withdraws fund along with others, poor countries are left with less financial assistance. That can obstruct development in their country. They will have to agree with any outcome decided by the rich countries even if it is going to hurt them in the long run.

The IMF and the World Bank are engaged in lending to countries only if they country cooperates fully with the US. According to the World Bank’s Articles of Agreement, the qualifications to receive loans are determined by the performance of the poorer country’s economy. However, there has been a historical pattern of US lending decisions which have heavily leaned towards a political behavior that rewards those that give benefits to the US and punishes those that do not. For instance in Indonesia, the World Bank began a very close relationship with Indonesia despite the country’s intense level of corruption and its human rights violations. In addition, many loans were also given out to many countries in Eastern Europe during the Cold War to stop the USSR’s influence. With these examples, it is apparent that many of the decisions and motivations were driven to promote an interest that benefited the US.

The United States’ influence on the IMF and the World Bank is also mobilized by how the staff is managed within the institutions. The employment of officials is not equally diverse in terms of national origin. Though, employees will be allowed to work for these agencies from other countries, the distribution of such employment remains favorable to English speaking Western nations such as the US, Canada, UK, and Australia. Thirty-five out of fifty-four officials have originated from these major developed countries. In addition, 90% of the Ph.D.’s in the institutions are also obtained in the US and Canada. Since developed nations are the majority, their policy will adopt an approach that is rational and relevant to them while leaving behind inputs coming from many developing countries. Because inputs are restricted and outweighed by many developed Western countries, many poor nations are incapable in receiving the right assistance and strategy that can help advance their country.

Inequality in representation within the institutions is also an example of how US’ influence is mobilized. Executive boards in both the IMF and the World Bank exist to grant representation for each member. However, not all members are equally represented. Many wealthy counties have their own executive director, while many poorer countries only have one executive director that represents them as a group. Having an equal representation in the executive board is extremely crucial. Every decisions voted by all member states will further be reviewed in the executive board. Since every major decision must be approved by these executive directors, poorer countries that are less represented will not be able to exercise the same privileges as everyone else. Obviously, the United States does not control the executive board, but the US can “garner” support from these executive directors that can sum up as majority vote within the executive board. The role of an “Interlocutor” is also another factor of how influence is exercised in these institutions. “Interlocutor” is a term that describes someone who is very influential in a country or any governing bodies. If an interlocutor of a nation is not able to create a relationship with the IMF, it can affect the way the institution treats that country when help is needed. The lack of these representations limits the voice of the poor countries that depend heavily on these institutions for guidance in managing their economy.

When poorer countries seek for advice and guidance to better their economy, they no longer can depend exclusively on international institutions such as the IMF and the World Bank. The structure of these international organizations has been controlled and influenced strongly by the US. By being able to speak at every issue and being able to put government officials in the organizations, the US can assure that their interest is being prioritized. Imbalances such as these are the cause of the inequality and the injustice that halts the process of development in poorer countries and the promotion of humanitarian causes.

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