50 Years Is Enough: The Case against the World Bank and the International Monetary Fund

By Kevin Danaher | Go to book overview

30
World Bunk

John B. Judis

From the end of World War II through the 1980s, Japan's diplomats dutifully maintained that their kind of capitalism and that of the United States were alike. But in recent years, Japanese officials have begun to assert in public what they previously would have only said in private: that Japan's capitalism is fundamentally different from — and in some ways superior to — American-style economics.

More is at stake than bragging rights. At the World Bank, where Japan is now the second-largest contributor, Japanese officials have begun to challenge the economic advice that American academics and Bank officials are giving to Eastern Europe, Africa and Latin America.

The Japanese are arguing that these developing countries should look to East Asia rather than to the United States and Great Britain for their model of capitalist development. So far, World Bank officials have held off Japan's challenge. But as Eastern European economies crumble under the burden of U.S.- and World Bank-sponsored "shock therapy," Japan's argument has become increasingly difficult to dismiss.

Japan's dissent was sparked by a recent change in the way the World Bank loans money. From its founding in 1945 until 1980, the bank primarily provided loans for dams, schools and other infrastructure projects in the Third World. But in 1980, it began to provide "structural adjustment" loans that were not tied to specific projects.

These loans, however, required the recipient country to meet certain conditions. These conditions — dictated by neo-classical economics — consisted of eliminating tariffs and restrictions on foreign investment, privatizing public banks and industries, eliminating subsidies for domestic industries and removing any controls on credit and currency. Developing countries, in other words, were supposed to adapt their economies to the theoretical ideals of the most conservative U.S. economists.

Most World Bank aid to Eastern Europe and the countries of the former Soviet Union has taken this form; these countries — on the

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