The World Bank, International Monetary Fund, and the Rise of Neoliberalism
By: Siyanda Pali
It is often stated that "A rising tide lifts all ships." However, this has not always been the case, especially when referring to the rise of the neoliberal era globally, which took off in the 1970s-1980s. Neoliberalism is an economic policy which is essentially a political or economic idea which supports 'free markets' as the main means to run a society. It is anchored on the principles of free market capitalism, deregulation, privatisation, austerity and globalisation. (Keen 2026). Through the International Monetary Fund, World Bank, and World Trade Organisation, its adoption has been ubiquitous, and it has had some rather potent consequences, especially for the developing world.
The World Bank and IMF were both established in 1944 at the Brettonwoods Conference. These institutions formally came to being on 27 December 1945, first with a mandate to finance the reconstruction of Europe, and later the developing world. A decision was reached that the headquarters would be in the USA, and that the president should come from the country with the largest shareholding, which invariably, was the USA. In tandem with the World Bank and IMF came the formation of the World Trade Organisation from the GATT, a key player in the drive towards globalisation and liberalisation in spheres such as trade and foreign investment regulation (Chang H-J 2007).
The intellectual founding father of the IMF, British Economist John Maynard Keynes, had his own ideas about how the IMF should function eg an international clearing union overseen by a central bank, with an international currency called The Bancor. The US repudiated this, opting for a US Dollar-centered system linked to gold. It was also not fortuitous that Keynes did not support the idea of conditionalities attached to loans. Invariably, Keynes foresaw that corporations from the developed countries would be unable to resist the temptation of taking advantage of countries from the developing world (King LP 2018). Unfortunately, conditionalities became synonymous with IMF loans and their ''Structural Adjustment Programs".
According to Chang H-J (2007), with respect to developing countries, the neoliberal agenda has been advanced by a coalition of developed country governments, spearheaded by the USA and the troika of international economic organisations which they disproportionately control ie the IMF, WTO and the World Bank. These developed countries use access to their home markets and aid budgets to induce the adoption of neoliberal economic policies. Occasionally, this is to the benefit of a few firms in developed countries which lobby for certain outcomes to take place, but generally, to set the scene in the developing countries concerned: an environment which is friendly to foreign investment and foreign goods. The IMF and World Bank come to the fore by attaching conditionalities to loans made to developing countries, i.e.the adoption of neoliberal policies. The WTO, on the other hand, sets trading rules in favour of developed countries in spheres where they are strong, but not where they are weak.
Chang H-J (2007) also notes that these governments and organisations are supported by ''an army of ideologues". Some of these ideologues are highly trained academics who ought to know the limits of their free-market economics but tend to ignore them. The collaboration between these bodies and individuals forms a "powerful propaganda machine, a financial-intellectual complex backed by money and power" (Chang H-J 2007). This unitary, blinkered approach to Economics creates what Economic Historian, Lord Robert Skidelsky referred to as intellectual arrogance (Skidelsky 2015). This previously mentioned sentiment was similarly perfectly captured by Margaret Thatcher during the 1980s, stating that, TINA, "There is no alternative" i.e. that there is no other viable system, other than neoliberalism, to manage the economy, a statement we know to not only be inaccurate, but also ahistorical.
Professor Ha-Joon Chang provides great insights with respect to South Korea, highlighting that "The neo-liberal establishment would have us believe that during its miracle years between the 1960s and 1980s, Korea pursued a neo-liberal economic development strategy. The reality, however, was very different. What Korea actually did during these decades was to nurture certain new industries, selected by the government, in consultation with the private sector, through tariff protection, subsidies, and other forms of government support" (Chang H-J 2007). This was the case until these industries were in a position to compete with international players. In addition to this, he states that "The government owned all the banks, so it could direct the lifeblood of business- credit. Some big projects were undertaken directly by state-owned enterprises- the steelmaker, POSCO, being the best example..if private enterprises worked well, that was fine. If they did not invest in important areas, the government had no qualms about setting up state-owned enterprises (SOEs), and if some private enterprises were mismanaged, the government often took them over, restructured them and usually (but not always), sold them off again" (Chang H-J 2007).
South Africa's Democratic Transition
The territory currently referred to as South Africa today is one in which Africans had ruled and reigned over for centuries. The Mapungubwe, in particular were a sophisticated African kingdom based in what is now the Limpopo province in South Africa, flourishing between the 11th and 13th centuries (Cartwright 2019). The society's wealth was based on sophisticated metallurgy, mining and vast trade networks, with locally mined gold, iron, copper and ivory being central to trade with countries such as Egypt, China and India.
In line with a history of trade with other nations, the Cape, based in what is now the Western Cape province of South Africa, served as a key trading "proto-port" where travelers would victual their ships with fresh fruit, vegetables, cattle, sheep and fresh water, trading with Africans stationed in the Cape, as they embarked upon voyages to and fro. On 4 November 1497, Portuguese Explorer Vasco da Gama docked at St Helena Bay (approx.. 150 km north of Cape Town), where he had a skirmish with the Khoi, because his men attempted to expropriate fresh water without permission. About a decade or so later, strangely enough, another of his countrymen, one Portuguese Viceroy of India named Francisco de Almeida landed in the Cape of Good Hope in the early 1500s to victual his ships, en route to his homeland of Portugal. Initially, he and his men had traded with the Khoi, to the satisfaction of both parties: trading iron for cattle. However, when de Almeida's men tried to steal numerous cattle at a Khoi village they had visited, the plunderers were chased away back to their ships. After being persuaded by his men to take revenge upon these Khoi, de Almeida led a party of 170 men with weapons to carry out this act of revenge on the village. It was then that he, together with 10 of his generals and 64 of his men, were routed by the Khoi warriors, never to return to Portugal alive (Van de Aa 1707).
Data from the Huygens Institute, which shows historical logbook data of Dutch ships, shows that approximately 1000 Dutch ships alone sailed the route between the Netherlands and Asia via the Cape between 1600-1652.. In addition, historians also posit that European nations such as the French, Portuguese, English, Dutch and Danish consistently used the Cape before 1652 on a systematic, regular basis for the purposes of victualing their ships and for trade between Africans and Europeans. Furthermore, Patric Tariq Mellet posits that a conservative figure of 120 000 travelers docked their ships at the Cape between 1602-1650, further underscoring the established system of trade in place (Mellet 2002).
Emeritus Professor of Economics Sampie Terreblanche illuminates that South Africa experienced 4 main political-economic systems thereafter:
1. The VOC period/ Dutch colonisation (1652-1795)
2. British colonialism during the 1800s
3. The Mineral Energy Complex (MEC), Union of South Africa (1910) and various other SA governments during the first half of the 20th century
4. The MEC and National Party/ Apartheid government from 1948-1994
This period of colonial-apartheid was fiercely resisted by Africans (Klaas JJ 2023, Stapleton 2016, Biko 1978). The US abandoned the Gold Standard in 1971. Prior to the official fall of Apartheid in 1990, Terreblanche (2012) states that there were 4 events which were of great significance during South Africa's transition period in 1986. First, the Chernobyl nuclear disaster of 26 April 1986 laid bare the dearth in the nuclear technological expertise of the Soviet Union. The second event was the declaration of a state of emergency in South Africa on 12 June 1986. The third event was the Comprehensive Anti-Apartheid Act passed by the US Congress and Senate, which imposed severe economic sanctions on the Apartheid government of the White minority in Pretoria. The fourth event was the summit in Reykjavik between former US President Ronald Reagan and former Soviet President Mikhael Gorbachev, which took place in October 1986.
The confluence of the abovementioned events led to pressure being put on the White minority government by the US and on the ANC by Gorbachev, to find a political solution or negotiated settlement. In addition, South Africa's economic growth rate gradually stagnated, falling from an average of approximately 5.5% between 1946-1960 to an average of between 1.2%-1.5% between 1980-1990. It was also during this period that neoliberalism was on the rise globally and was sold with gusto to South Africa. Professor Terreblanche argues that the abovementioned circumstances were a harbinger for South Africa's transformation.
In light of the dynamics prevalent at the time, the Mineral Energy Complex played a massive role, together with key African National Congress leaders, in facilitating South Africa's transformation from a political economy perspective, taking place in the mid 1980s. However, in doing so, they had to grapple with numerous challenges which they saw as stumbling blocks to South Africa's transition.
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