“Politics is all about carrots and sticks.” The phrase—which means blending rewards and threats to achieve an objective—has its origins in the metaphor of either dangling a carrot in front of a donkey or flogging it in order to make it move. For centuries, Western nations wielded the imposing rod of colonialism to exploit and subjugate the world. Today, they use carrot-shaped sticks. 

The International Monetary Fund’s (IMF) initial purpose was to prevent escalating trade crises like those during the Great Depression. At the time, there were two opposing views about the proposed institution’s modus operandi. The conservatives, led by the United States, saw the IMF as a global debt-collection agency, enforcing payments on international loans. The liberal ideal, led by British economist John Maynard Keynes, envisioned an international collective fund that states could dip into to maintain employment and economic stability during recessions. Unfortunately, the former prevailed, and the IMF began issuing loans to Least Developed Countries (LDCs) in return for a promise of “structural adjustment.” This adjustment involved a glut of neoliberal policies called Structural Adjustment Programs (SAPs), which included the privatization of state enterprise; devaluation of currency; trade liberalization; and cessation of public spending on education, healthcare, and infrastructure. With the goal of preemptively stymying the spread of socialism,  SAPs were especially targeted towards “third world” countries who refused to align their economic and social policies with either the United States or the USSR. Prematurely introducing liberalization and fiscal austerity measures into countries across Asia, Africa, and South America decimated many fledgling local industries unprepared to face global price competition. Meanwhile, Western countries benefited from the unilateral removal of protectionism by stripping the countries of natural resources under the pretense of free trade. 

The IMF and World Bank’s modern objectives include “promot[ing] … sustainable economic growth and reduc[ing] poverty around the world.” However, they continue to purchase fealty to their agenda from states in desperate financial need, ignoring sovereignty and self-determination. Although many countries may have officially won independence decades ago, their democratic ideals remain critically endangered by these institutions’ neocolonialism. 

For evidence of bias in the IMF, one must look no further than its voting procedures. The overwhelming majority of voting shares are allocated on the basis of economic influence and contribution to the Fund. The five most developed countries on the list—USA, Japan, China, Germany, and France—control over 38 percent of votes, while the 44 lowest-ranked countries together constitute a paltry 5.35 percent. Present relief package stipulations were established by the “Washington Consensus” in 1989 after deliberations involving the IMF, World Bank, and the U.S. Treasury Department. America also possesses a numerical veto in all votes, and therefore is essentially responsible for appointing the IMF Managing Directors and World Bank Presidents— all of whom have incidentally been European and American, respectively. This disparity in voting rights and inadequate representation of LDC members fosters an uneasy power dynamic between creditor and indebted states. Consequently, it permits the United States and other Western nations to bypass barriers of sovereignty and unduly interfere with indebted states’ administrative affairs. Hapless heads of state are compelled to relinquish control as external parties dictate their socioeconomic policies, superseding the wills and opinions of the citizens involved and infringing on fundamental principles of self-governance. 

Structural Adjustment Programs are also predicated on economic principles that are unsound, exploitative, and discriminatory. Prior to the Washington Consensus, existing development revolved around “Modernization.” The theory proposed that the sole avenue to prosperity was that of the Western nations, rapidly transitioning from an agrarian society to an industrial and technologically reliant one. Apart from ignoring that much of European wealth was plundered through conquest, modernization theory also implicitly places the onus of poverty back onto the impoverished state. The Washington Consensus doubled down on this perspective, maintaining that struggling economies ought to insert themselves into the global markets, keep their markets lean and robust, and obliterate the welfare state. 

Entry into international competition is reasonable when implemented judiciously: It would lower prices, heighten standards of living, and expand consumption and production potential. However, a tectonic shift in policy and priority would only serve to provide an untapped market for multinational corporations at the cost of domestic industry. Corporations produce goods of higher quality at lower prices and at a much larger scale than local manufacturers can feasibly compete with, running them into the ground and leaving thousands unemployed. In cases without a preexisting market to displace, jobs are created and new goods are introduced. Still, the resulting wealth gain is siphoned away from local economies toward Western governments and private organizations, continuing the poverty cycle. When fledgling markets are sheltered through protectionist measures and gently eased into the global scene, they can both sustainably grow and contribute to the international market. 

Vilifying welfare states also reveals that the institutions’ true motives are to appease international financial organizations by inducing profitable industrialization rather than to safeguard the target populace’s wellbeing. No economic policy is perfect—each has its own set of unique benefits and drawbacks. But this particular implementation manages to disproportionately heap the shortcomings onto a country’s inhabitants while saving most gains for individuals and groups overseas. It is just the latest in a lengthy series of underhanded wealth-draining tactics used by Western institutions, this time in the guise of altruistic aid. 

The original leaders of the Third World envisioned a future of sovereignty, security and prosperity for themselves. As it stands, this dream is on its deathbed. Instead of aiding lesser-developed countries, the IMF and World Bank entrench these nations further into poverty through manipulation, exploitation, and arbitrary control. It has ushered in a new age of colonialism, one that is far less conspicuous but just as debilitating. States in desperate need of funding are forced into a Faustian bargain, trading away their democratic integrity in hopes of better lives for their citizens. 

However, it need not remain like this. Considering their influence and size, these institutions have the potential for enormous good. Albeit against the grain, individual projects have succeeded in making an impact in local communities. Their funding for certain education and public health programs have undoubtedly aided standards of living. Irrigation projects in Bangladesh and Thailand have doubled farmers’ income. Reformed guerilla fighters from the Philippines were helped integrate into society through secured jobs in World Bank funded projects. To sufficiently respect the democracy and sovereignty of its indebted states, these institutions must first democratize themselves by equitably distributing voting rights and diversifying their leadership. Projects must focus on grassroots-level action and prioritize the voices and interests of the target state’s citizens. Unless the carrots and sticks of the past are discarded for genuine equality and consideration, the IMF and World Bank are doomed to fail in their objectives. As they say, the road to hell is littered with good intentions.