Neocolonialism is an upgraded version of colonialism that relies on soft forces like culture and economy to dominate periphery countries. It is mostly utilized by powerful states to indirectly take poor countries in their influence through economic traps with the help of global institutions. Most of such institutions were formed to increase cooperation among states so they can develop each other but the reality is far different from it as the structure of these organizations is designed to serve the interests of capitalist powers only.
Two major Britton Wood Institutions IMF and World Bank are considered pawns of the world powers as their structures are controversial and accused of being used by core countries for attaining their interests. Professor Jacson Hickel describes it as:
“These institutions were designed with colonial principles in mind and remain largely colonial in character to this day.”
The economic disparities and rising per capita income gap between global North and global South is also the result of neo-colonist behavior of world economic institutions as the chiefs of the IMF and World Bank are usually from Europe and America respectively. This gives core countries an edge to strengthen their influence and power.
There is a misconception that structure of International Monetary Fund and World Bank have been designed same like of United Nations which in reality is indeed not. The Voting system of these organisations is pretty undemocratic as countries with major financial contribution towards the budget of these organisations get more influential decision making rights while low GDP and underdeveloped economies get lesser participation rights in designing global economic policies.
This has been called out by many renowned personalities including UN General Secretary Antonio Guettres who also asked for reforms in the lopsided voting system of multilateral institutions.
Moreover, the IMF provides loans to developing states for stabilising their economy with some reform conditions that considers not only an attack on the sovereignty of an independent state but also based on the agenda to open markets for big powers like the United States. A famous author Joseph Stiglitz in his book “Globalisation and its Discontents” argued that IMF is the primary culprit of failure of most of the developing states by criticising its LPG (Liberalisation, Privatisation and Globalisation) reform constraints that are made to spread American Capitalist System all across the globe.
The major reason behind the conditions put forward by the IMF over furnishing loans to financially struggling states is to open their markets for the big power’s corporations and facilitate them without sourcing raw materials from periphery countries. Some analysts compare it with the concept of “White Man’s Burden” as well as what imperialist East India company did to British colony India.
IMF Bailouts
IMF bailouts are a major source of suppressing economically weak states. For instance, in March 2019 Ecuador Approached IMF for the loan of worth 4.2 billion US dollars which the institution granted but with some reforms conditions includes reduce at least the government budget as 6% of its GDP and for this motive taxes high had to be imposed, government spending’s reduced to a massive extent, major chunk of the government employees had to lose their jobs and government funding to welfare projects were cut down greater level. These reforms were hailed by then IMF chief Christine Lagarde as the comprehensive reform program to bring Ecuador’s economy on track but results were way different and disastrous from her claim. These steps proposed by the IMF took Ecuador’s economy towards mild recession which later faced deep recession amid pandemic COVID-19. Also, the IMF predicted that this package will increase foreign investments of 5.4 billion US dollars but Ecuador faced the complete opposite in the form of a reduction up to approximately 3 billion US dollars.
Additionally, if states refuse to accept the conditions linked with bailouts IMF not only cancels the debt for them but also pressurises them through various ways like imposing strict sanctions and restricting other members to not to go for economic cooperation with that specific state which prevails the phenomenon of neo-colonialism.
Case Study
The example of an African state Ghana would make things more clear. There were a lot of rice forming communities present in Ghana that got large amounts of subsidies from the government and in return ensured food security in the country by producing large-scale rice. However, the IMF refused to provide any assistance to Ghana until she retracks all these subsidies which she did and now import all rice from the United States that costs her way more than it used to produce domestically. Experts believe that the major motive behind this condition put forth by the IMF was to support the US rice industry as if Ghana loses out in producing enough rice she would have to import from America that will benefit its wealthy farmers. Also these loans from IMF also initiated a ferocious cycle of loans for Ghana as in order to import rice, she has to take loans from IMF oftenly that increasing its debts and reliability on the institution more. Aftertaking all schools of thoughts and facts into consideration, it is believed that there is a dire need for reforms in these international institutions which serves equality and helps in reducing the imbalance in terms of utilization of power. Because the disproportionately between states will further leads towards mess and rise in global issues like poverty, terrorism and illegal trafficking etc.
In summing up, as they say it takes two to tango, periphery states also need to put in efforts for elimination of internal factors contributing to their economic instability.
She is a recent International Relations graduate with a passion for global development, foreign affairs, and peace building.
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