Are the World Bank and the IMF Really "Capitalist" Ideas?

   Often times when one listens to or reads the arguments of those who make it their job to “overthrow the capitalist system,” one will come across the notion that many of the ills of the status quo (which is invariably labeled as “capitalism”) are due in large part to certain institutions which, it is insinuated, are inherent to a capitalist system. Usually such insinuations are peculiar, as, more often than not, the exact opposite is true. The International Monetary Fund (IMF) and the World Bank are two institutions which often take the brunt of the “anti-capitalist” storm, but do they really deserve such treatment?

   The IMF and the World Bank are both known for their practice of lending to the cash-strapped governments of developing countries. Both the IMF and the World Bank often use their lending power as leverage in order to encourage participating governments to embrace reforms recommended by the institutions. Such recommendations tend to call for the privatization of government services. This is where those who tend to call themselves “anti-capitalists” point when they say that these institutions are “capitalist.” Just calling for privatization, however, does not necessarily constitute a “capitalist” or “free market” position. A market can only be considered “free” when there is an absence of forceful coercion perpetrated against the individual, and all transactions are conducted in a free and voluntary manner. Many of the privatization efforts called for by these institutions are directly counter to the notion of a market free from coercion; many of the efforts simply call for governments to hand over monopoly control of certain services (water, power, communications, etc.) to large multi-national corporations.

   A policy of allowing only one company or group to legally perform a service must necessarily rest on coercion, which runs against free market capitalism. The problem arises when governments enforce monopolies of private industry and shut down entrepreneurs for unauthorized competition with the government-contracted multi-national corporation. One example of this might be when an entrepreneur digs a well and begins pumping and selling water to his fellow villagers for less than the price that the government-contracted multi-national corporation is charging, and as a result the government steps in and stops the entrepreneur’s business activity in order to preserve the corporation’s monopoly. Another example would be when a clever individual begins collecting rainwater in a number of large steel drums that he owns and then begins to sell or otherwise distribute, and the government steps in to preserve the monopoly of the privately contracted corporation which provides the same service. It is not difficult to see how these are not true capitalist or free market situations. Such situations are essentially fascist (or national corporatist) situations, wherein the country is essentially run for and by a few key corporations with control over the state monopoly of the use of force.

   In opposition to the above situation is the common view espoused by many libertarians and classical liberals, in which a minarchic state (minimum government) wields objective law-based monopoly over the use of force (police power), without special privilege given to any entity or group. In the most extreme view of capitalism, Rothbardian anarcho-capitalistism, there should exist no entity with such a monopoly on the use of force. After understanding this, it does not logically follow that systems which call for special privilege for none or the absence of any and all coercive interference at all, should be associated with political economies like those seen in the developing countries effected by the policies of the World Bank or the IMF.

The supposition that such institutions are a natural and inherent feature of capitalism is totally refuted by the fact that they were created by states through treaties, and would cease to exist without state funding; they were not and could not have been organic market occurrences. Simply, such institutions are the products of ideas embraced by proponents of state intervention in the global economy. In fact, the creation of government funded development banks, and the centralization and control of credit in state hands, happens to be the fifth of the ten point program of communism given in Karl Marx’s and Friedrich Engels’ infamous work, The Communist Manifesto. It almost seems laughable that anyone could even think to call such a policy “capitalist,” but, indeed, many do so without reservation.