The G20 meeting, to be held in Melbourne on November 18/19, like the World Economic Forum in 2000, has led to debate about neo-liberalism and the institutions of world capitalism. This article aims to explain how capitalist domination of the so-called underdeveloped world actually works.

It outlines the modern history of the IMF and World Bank. Most importantly it explains why a reform of capitalism and its institutions will not work, as well as offering a socialist alternative economic plan and pointing out the forces that can successfully implement such a plan.

The IMF and World Bank were originally established at the Bretton Woods Conference in 1944. They were mainly funded by the United States to rebuild the shattered world economy after it broke down during the Great Depression of the 1930s and World War ll.

During the Nazi occupation of Europe, the capitalists had either fled Europe or were collaborating with the Nazis. Socialists, in contrast, had been active organisers of resistance groups. By the end of the war, revolutions swept through Europe, and workers and farmers were seizing their factories and farms. The US was forced, in order to prevent revolution, to carry out a massive program of aid and redevelopment in Europe. It was for this task that the IMF and World Bank were founded. Over the past decades, however, the recipients of their international loans have switched away from Western Europe to the underdeveloped world.

Ever since then, the IMF and World Bank have continued on as an instrument for defending capitalism. Within this common framework there is a division of labour and functions between the IMF and World Bank (and since 1995 the World Trade Organisation) although these have tended increasingly to overlap, and the two organisations work together quite closely.

The World Bank makes long-term loans to governments to finance development projects such as roads, power plants, schools, dams, bridges, ports and other “infrastructure”. The IMF decides which countries are eligible for international loans.

The IMF and World Bank will only extend loans if countries agree to accept “structural adjustment programs” (SAPs). SAPs are not democratically decided upon by the people of the debtor countries. They are forced down the throats of the people of the former colonial world. To pay off the loans, the IMF and World Bank demand governments raise money by selling off public assets and companies (privatisation) and cutting state expenditure on social services like health care, education, child care and pensions.

IMF policies also both directly and indirectly impact workers in Australia and other advanced capitalist countries. Because they are partially funded with public money, the IMF and World Bank redistribute wealth from working people in Australia (through their taxes), and funnel it to programmes which benefit multinational corporations. This redistribution of wealth upwards to the richest Australians is similar to that which accompanies any public subsidisation of corporations. Big corporations, though serviced by federal government money, are accountable to no “national interest” but only to their own shareholders.

The IMF and World Bank claim that neo-liberal reforms, while a bitter pill to swallow, in the end lay the basis for major economic growth and therefore higher living standards. But the evidence proves the opposite. The IMF and World Bank loans have created a huge debt trap. This overwhelming debt has led to the poorest countries in the world allocating enormous portions of the national incomes towards paying interest. The sick logic of capitalism means that money is actually going from the world’s poorest countries to the richest.

Today the underdeveloped world owes a total of US$2.5 trillion in international debt to big banks and the IMF and World Bank. “Developing” nations pay the West nine times more in debt repayment than they receive in “aid” from Western countries.

These destructive effects of neo-liberal globalisation are not merely excesses of capitalism, or just a particular, accidental mutation. They reflect the fundamental, essential character of capitalism in this period.

Since the end of the long post-war boom in the mid-1970s, the world economy has entered into a period of crisis and stagnation, as the level of economic growth has declined around the world. During the post-war period, the ever-growing economic “pie” created the basis for capitalists to have profits while allowing workers to receive higher wages and benefits. The crisis in the world economy since the 1970s means that the only way capitalists can maintain their rates of profit has been a redistribution of wealth, through an attack on workers. Between 1974 and 1994 real wages as a share of national income fell by 12%, while profit’s share rose by 40%.

This basic programme has been carried out in every country around the world, regardless of which political party has state power. This suggests that neo-liberalism is no mere accident. It is the inevitable, inescapable logic of the world economy in this period.

We also need a strategy of how we are going to get from here to there. What is the next step in building a mass movement against the multinationals and global capitalism?

Abolish the IMF and World Bank and institutions like G20

The IMF, World Bank and the World Trade Organization should be abolished; they are beyond reform. Any honest review of the facts would conclude that these bodies were set up with the mission of furthering corporate interests. They are hostile institutions, representing the interests of the ruling class. There is absolutely no progressive content to these institutions. To fight the IMF and World Bank effectively, we must be clear what their character is and what role they play in global capitalism.

Cancel the debt now! - Take the banks and financial institutions into public ownership!

The World Bank and IMF exploit and oppress the underdeveloped world for the benefit of the rich. In this scheme, their partners in crime are the big Western banks and financial institutions. Simply abolishing the IMF and World Bank is not enough. We need to break the power of the big banks that carry out the same exploitative policies as the IMF and World Bank do in relation to the underdeveloped world.

The need for politics

Capitalism - and its international institutions – is not an easy pushover. What kind of movement is necessary to decisively defeat capitalism? While protests of even 100,000 can be a huge embarrassment to big business and cause some short term damage, they will not be enough to turn the tide of neo-liberalism and pave the way for a new kind of society. To do this, we must harness the collective energy of the working class in a mass movement of tens of millions of workers. The working class makes society run, but it is in its numbers that it has strength.
The only way to build a movement this large is to take a class approach - to fight on the day-to-day issues that affect large numbers of working people in this country.

Many people who are disgusted with corporate greed and the politicians will not be involved in the protests at G20 because they see them as something foreign and abstract, not directly impacting on their lives. This is a challenge for the activists, to turn out to the vast majority of working class people. We in the Socialist Party have a long history of such campaigning work on education, anti-racism, community campaigns and industrial battles.

Big business is class conscious - they organize and fight for their class interests. It’s time working people did the same. We need our own political party, funded and controlled by workers, to fight for our interests, like free national health care, better jobs, stopping environmental destruction, a massive increase in funding for education, and an end to racism.
The only viable alternative to global capitalism is a global socialist system. But how could such a new socialist society be created? How do we take power from the 500 top corporations? The answer lies in the huge potential power of the working class. Time and again in the last 150 years, the workers’ movement has challenged capitalism. In the U.S. there was the Seattle 1919 General Strike and the 1917 General Strike in NSW. There was the general strike in France in the summer of 1968 that shut down France for three weeks. In these situations the owners of the big corporations and the big business political parties have found that they control nothing but offices. The workers run every workplace in our societies from transportation, electricity to the computer systems. Even the army and police are run by ordinary workers.
Our organization, the Socialist Party, fights for the coming to power of a workers’ government.

Of course, a workers’ government which began to implement its socialist policies would immediately face massive resistance from big business. In this situation, the workers’ government would need to rally workers and youth to its support. Through mass demonstrations and introducing workers’ democratic control at all levels of society, including the armed forces, the newly elected leaders of the working class in state and federal parliament would not become isolated, but would rest on the huge power and strength of a mobilized and conscious working class, who make up the vast majority of the population. In that way, big business, and the forces it would try to mobilize, would become isolated and defeated. By introducing exchange controls, any attempt by the rich to send their capital overseas would be stopped.
A national review would take place of the productive resources available to the incoming workers’ government. It would then start to reallocate economic resources to provide for the needs of workers in all areas of their lives. The first priority would be to provide decent clothing, housing, health care, food and other basic needs. By sharing out the work, the working week could be reduced to 30 hours a week.

A socialist Australia would be a beacon to workers around the world, in particular in East Asia, the Pacific region and the English-speaking world, sparking similar movements internationally.
With a democratic plan of production, and an end to the artificial distortion of national economies in the underdeveloped world because of their plunder for cheap raw materials and foodstuffs by the big corporations, then industry could start to develop around the world. This would transform these national economies. They could then start to provide the products needed for their own populations. This would then lead to the end of the division of the world into a few rich advanced countries, and the remainder of the world living in abject poverty, not by driving down the wages of workers in the more industrialized countries, but by raising up the wages of workers around the world to the highest levels.

The extreme neo-liberal policies of IMF and World Bank are a product of capitalism in a period of global economic decay. Any effective fight against the IMF and World Bank must be linked to building a powerful movement against capitalism itself, and to replace it with an alternative system. We believe the only viable alternative is democratic socialism.

How else can we control the corporate pollution of the globe? How else can we ensure that the peoples of the world have enough to eat? How else can democracy be defended and expanded in the face of the huge media machines which now straddle the globe? It can only be done by a genuine coming together of the people of the globe based on mutually supporting economies controlled by workers. In other words, we need to fight for global socialism. The task may be large, but the time is right. We urge all those who agree with us to help mobilize against the G20, the IMF and World Bank and at the same time join our organization in the struggle to build a new, socialist world.

What is G20?

The G-20 (Group of 20) is a group consisting of 19 of the world’s largest economies, together with the European Union. The G20 forum of finance ministers and central bank governors was formally created at the September 25, 1999, meeting of the G7 Finance Ministers. It partially aims to buffer the G7 (G8 when Russia is included) from political pressure, and it partially reflects the more complex world economic situation with the growing power of China and India. G20 includes Australia, unlike G8.