Denis Flueran: The Imperialist Role Of The IMF And The Slogan Of Debt Cancellation

Article originally published on the Romanian analysis blog Cugetări Marxiste.

In the light of the recently announced wave of protests in debt-ridden countries such as Argentina and Sri Lanka and of the alarming levels of debt that have piled on an international scale (226 trillion USD in 2020), it is essential to understand and to expose the issue of public debt and the role of the International Monetary Fund (IMF), and establish a socialist position on the slogan of external debt cancellation. 

Public Debt And Colonialism

Before we investigate the aims of the IMF, we have to illustrate the role of public debt in the capitalist mode of production. 

As Marx said:

“The public debt becomes one of the most powerful levers of primitive accumulation. As with the stroke of an enchanter’s wand, it endows barren money with the power of breeding and thus turns it into capital, without the necessity of its exposing itself to the troubles and risks inseparable from its employment in industry or even in usury. The state creditors actually give nothing away, for the sum lent is transformed into public bonds, easily negotiable, which go on functioning in their hands just as so much hard cash would. But further, apart from the class of lazy annuitants thus created, and from the improvised wealth of the financiers, middlemen between the government and the nation – as also apart from the tax-farmers, merchants, private manufacturers, to whom a good part of every national loan renders the service of a capital fallen from heaven – the national debt has given rise to joint-stock companies, to dealings in negotiable effects of all kinds, and to agiotage, in a word to stock-exchange gambling and the modern bankocracy.”

– Capital, vol. I 

We can see that public debt has played a major role since the very beginning of the capitalist mode of production—being one of the effortless, risk-free ways in which the industrial capital came into existence. Based on these usurious operations, the emergence of credit, speculation, joint stock companies, share trading, mortgages were stimulated. The need to repay the debts has led to an increase in taxes which contributed to the impoverishment of the peasantry and the petty bourgeoisie and eventually led to expropriation of their lands and other property and their turning into proletarians.

Along with lending as a mean of primitive accumulation, another important lever of the emergence of the modern capitalist system was the harsh exploitation of colonized people by the Western colonial powers. The colonies would not only represent a source of income, but a power outrigger for the dominant classes in European metropoles as well. Marx, who would carefully monitor the development of the revolutionary movements in colonies, and who approached the ‘Irish question’ in 1869, noted that the English reactionary movement had its origins in the subjugation of Ireland. Marx also considered that a Chinese revolution would shake the Western world and would provoke a worldwide crisis.

As capitalism developed and progressed into its imperialist stage in the early 20th century, the bourgeoisie could now extract enormous super profits by exploiting the labor of people in colonies, which they would use to corrupt a thin stratum of workers by higher wages and then use it to counteract the struggle for better working conditions, political rights, and socialism of the working class. This corrupted stratum which Marx calls “the labor aristocracy” finds its expression today among the ranks of the ‘yellow’ trade union leaders, which often do whatever is necessary to keep in line the discontent of the workers and to maintain the order that is required for the business to function. 

Having exposed the importance of public debt and colonialism in the development of the capitalist system, let us now look at the role that the IMF plays in this process.

The Establishment Of The IMF

The International Monetary Fund was created during the monetary and financial conference that took place at Brenton Woods in July 1944. The conference sanctioned the hegemonic role of the United States in the post-WW2 period, as an imperialist power that hadn’t been significantly impacted by the war. By 1949 the US had accumulated nearly 75% of the world’s gold reserves. 

The conference pegged the US dollar to gold, establishing a fixed exchange rate (35 USD per ounce). The rest of the national currencies were pegged to the dollar, hence all of the world’s economies were forced to maintain the exchange rate in rapport to the dollar, while the US could initially print currency without worrying too much – as every bank had to own dollars. 

The International Monetary Fund was conceived –hypothetically – as an institution which seeks to assist the development of countries which were lacking financial resources. In reality, from the very beginning, the decision power inside its structure belonged to the Western powers. 

In order for any measure to be adopted, a threshold of 80 percent of votes had to be met. At the same time, the US already had 30 percent of the votes.[1] The leaders of the World Bank and the IMF aren’t chosen by popular elections, but are nominalized by the European Union and the US. Since 1944, the President of the World Bank has always been an American, and the president of the IMF has been a European.[2] Voting power inside the IMF relies on the Gross Domestic Product (GDP) of a country and its degree of “openness”, which means, in practice, how important and unrestricted the private sector is in the country’s economy. Given the way in which voting power is allocated in the IMF, we can clearly see how the imperialist countries can impose their own will within the organization.

The IMF has never aimed, in practice, at helping poor countries, but at constructing a mechanism to exploit them in a historical period in which the uprisings in colonies were eliminating the direct domination of the imperialist countries over them. With the help of the IMF, the exploitation of the formerly colonized countries could be maintained after the elimination of their colonial status.

Debt Accumulation And Its Impact 

In the middle of the 20th century, statistics were showing how the debt of the formerly colonized countries were doubling once in 5 years, increasing from 8.5 billion dollars in 1955 to over 150 billion dollars in 1977.[4] The situation has gotten from bad to worse over the years. World Bank statistics from 2020 show that external debt stocks of low- and middle-income countries combined rose 5.3% in 2020 to $8.7 trillion.( )

The domination of the imperialist powers has ceased to be direct, as in the case of colonies, but maintains itself in the present epoch through many economic and financial ties, but also through many coup d’etats operated or supported by these powers in order to install puppet governments in Africa, Asia and Latin America. We often see how the aid from imperialist countries is ending up in the pockets of the local capitalists who are always sympathetic towards the imperial powers and whose interests differ from those of the working masses.

As an example, we can observe the determination of Sihanouk’s regime in Cambodia to stop accepting aid from the US after the National Congress has exposed how it was always falling into the hands of the pro-American bureaucrats or it could be only used by the private sector, but never by state institutions. [5] As a result of this decision, Sihanouk obviously ended up as one of the leaders that was overthrown with the involvement of the CIA. The studies of William Blum have shown that US foreign aid has been employed to influence the elections in over 30 different countries.

As the public debt of the underdeveloped countries was piling up, a larger part of their production was increasingly oriented towards paying back the debt. As a result, the economies of the debt-ridden countries largely maintained their characteristics from the colonial period – they ended up exporting the same types of raw materials or products that they already owned or could abundantly produce (i.e. coffee, cocoa, rice, sugar) and not investing in the creation of new industrial sectors.

Below we can see the percent of exports that were going to amortization of loans and to payment of interest in 1966[7]

In almost all cases, interest is playing a significant role in keeping the countries in the chains of debt. The declaration of former Nigerian president Osabanjo is instructive, in this sense: “Our loans until 1985 or 1986 sum up to 5 billion dollars, and we have already paid 16 billion, but we are being told that we still owe 28 billion more”. [8]

Many such countries are not able to pay their debt, therefore they have to take loans again just to pay the initial debt – and are subjected accordingly by the IMF to so-called ‘restructuring programs’ which always involve the dismissal of public sector workers, a decrease in healthcare, education and social services spending, privatization, an increase in taxes over essential commodities, the reduction of minimum wages, the elimination of protectionist trade policies and opening the doors to international capital, which impacts the local industries. It is therefore evident that the ‘restructuring programs’ are being enacted with the objectives of increasing the countries’ reliance on the imperialist powers and implementing a neoliberal economic model that extends the domination of the international capitalists over the world’s resources and increases the concentration and centralization of capital.

Let’s examine a few instructive examples of the IMF’s activity in the pandemic crisis period and how its policies have caused the death of thousands upon thousands of people.

How The IMF Exacerbated The Pandemic Crisis 

According to an Oxfam study, 84% (74 out of 91) of the loans that were negotiated with the IMF from March 2020 up until now come bundled with austerity measures that ultimately lead to a decrease of healthcare spending during the pandemic and to wage cuts or freezes. [9]

* In the case of Ecuador, the 2020 loan led to the elimination of fuel subsidies and to the reduction of unemployment benefits. 

* Nine countries, including Angola and Nigeria, had to increase the value-added tax (VAT) on essential products.

* 14 countries have announced wage cuts in the public sector.

* Arguably the most shocking discovery of the study is that 64 countries spend more money for debt amortization than for healthcare services.

We can be certain that this kind of policy has affected the working masses, not the bourgeoisie of the countries in question. In this sense we have the example of Greece after the 2008 crisis, where, among other issues, the taxes on low-income households have increased by 337%, while the taxes on the rich have increased only by 9%! [10]

Is Debt Cancellation A Way Out of Misery?

Let’s examine the well-known progressive slogan of writing off the public debt of poor countries. For all the countries of the “global south” that have accumulated huge amounts of external debt the refusal to repay, and cancellation of the debt must be the starting point for any government that wants to serve the interests of the working class and the poor farmers. Continuous payment of the external debt is a constant “bleed” for the national economy that deprives the government from vital resources that can be used in the interests of the working class and poor masses both in terms of socially needed investment in the economy but also in terms of social state welfare (housing, health, education, pensions, lowering taxes etc).    

But although, as we have seen before, a large part of the production of neocolonial countries is oriented towards debt amortization and the restructuring programs frustrate their attempts at protecting their industries and population, demanding just a debt write-off will never be a cure-all solution for all their social and economic issues.

Imperialist countries are using multiple tactics to exploit the rest of the world, and debt cancellation would not cancel the thousand and one ways in which the economies of the exploited countries is tethered to the international imperialist chain. To name a few modern imperialist methods: 

*International competition. Any national capitalist economy is exposed to the international competition of the market. Neo-colonial countries do not stand any chance to win this competition as their economies have historically been lucking in technology and productivity. As long as the countries of the “global south” are forced to sell commodities, raw materials or agriculture goods in order to buy high technology industrial goods and machinery from the rich, imperialist countries – the external debt, even if cancelled will return as a result of trade deficits. 

* Plundering of resources. This is also a very important aspect. For example, in Congo, and so many other countries in Africa, western multinationals rob their resources (diamonds, rare earths, hydrocarbons etc), workers give their lives in mines for “a piece of bread”. And officially this is not colonialism or imperialism but “free market” …     

* Patents. It is estimated that monopolistic companies from imperialist states are owning up to 97% of all brevets. [11] Only in 2016, these companies earned 328 billion dollars only from certificates for the technology they own, because of their monopoly on intellectual property. [12]

* Transfer pricing. It means the practice of declaring the profits of a company in tax heavens in order to avoid taxation. In 2009, the developing countries lost 1.1 trillion dollars because of this tactic. [13]

* ‘Brain drain’. Due to a severe lack in opportunities in their homeland, workers choose to emigrate and work in the imperialist countries.

* Illicit capital flows. With the help of a ‘contact person’ in a state institution, companies can avoid paying taxes by the intentional false reporting of imports and exports (declaring the wrong prices and quantities) and then keep the money in tax heavens. Developing countries are losing 875 billion dollars annually in this manner. [14] 

* Unequal exchange. This is caused by the differences in productivity between the industries in rich countries and poor countries. The workers from the former must work significantly more to produce the same commodities that are produced with less living labor in the imperialist countries. A 2017 estimation shows that unequal exchange has resulted in the transfer of 2.2 trillion dollars from developing countries to imperialist powers. [15] 

Among all these practices, we must keep in mind what we mentioned earlier: the loans and the “aid” are ending up in the pockets of corrupt local elites, in close collaboration with the imperialists and the economies of the “developing” countries are condemned to economic one-sidedness. 

It is true that debt cancellation would free up a large quantity of resources which can be used to improve the situation of poor countries. However, this is not sufficient for a way out of misery. 

The solution for the debt-ridden countries is through a revolutionary political program that breaks with the laws of the capitalist system and opens the road for the socialist transformation of society. Apart from the cancellation of the debt, measures such as the nationalization of the banks, the state monopoly of the foreign trade, the implementing of workers control in all the spheres of production and the nationalization of the means of production (i.e., the big industries, energy production, transportation etc.) are vital in order to break with the noose of debt, underdevelopment and poverty. In such a revolutionary process the working class and the Left must make an internationalist appeal to the working class of the other countries to show solidarity and to follow the same revolutionary path. 

The implementation of this program cannot be possible without the conquest of political power by the working class, in the form of a workers’ government or a popular front consisting of the working masses of the country, which is to be led by the working class.

It will also require the formation of a workers’, revolutionary socialist international organization, as the international unity of the working class based on a revolutionary, scientific theory, constitutes one of the most important conditions in the struggle of the proletariat for emancipation.


[1] Hudson, Michael. Global Fracture, the new international Economic Order. New York, 1977. p.11-12

[2] Jason Hickel, Apartheid in the World Bank and the IMF, 2020

[3] IMF, IMF Quotas

[4] Enver Hoxha, Imperialism and The Revolution, 1978

[5] Washington Post, Jan. 2 1966, cited in William Blum, Killing Hope, ed. Zed Books, pg. 136

[6] William Blum, Op.cit, pg. 390

[7] Magdoff, Harry. 1969. The Age of Imperialism. New York: Monthly Review Press

[8] Rob Lyon, The shackles of imperialism. Third-world debt, 2005

[9] Oxfam, IMF paves the way for new era of austerity post-COVID-19, October 2020

[10] Shocking austerity: Greece’s poor lost 86% of income, but rich only 17-20%, 2015

[11] Chang, H.J., 2008. Bad samaritans: the myth of free trade and the secret history of capitalism. New York: Bloomsbury Press

[12] Manilla Institute of Political Economy, Lenin’s Imperialism in the 21st century, pg. 35

[13] Christian Aid. 2009. False Profits: Robbing the Poor to Keep the Rich Tax Free. London: Christian Aid.

[14] Zak Cope, The Wealth of (Some) Nations, pg. 19, Pluto Press, 2019

[15] Jason Hickel, Dylan Sullivan & Huzaifa Zoomkawala (2021): Plunder in the Post-Colonial Era: Quantifying Drain from the Global South Through Unequal Exchange, 1960–2018, New Political Economy

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