U.S. Treasury Secretary Scott Bessent complained on Wednesday that the World Bank and the International Monetary Fund (IMF) are suffering from “mission creep.” But Bessent announced that the Trump administration will be “doubling down” on supporting the largest foreign aid gushers on earth. “Far from stepping back, ‘America First’ seeks to expand U.S. leadership in international institutions like the I.M.F. and World Bank,” Bessent declared.
Bessent complained the IMF “devotes disproportionate time and resources to work on climate change, gender, and social issues.” What should the U.S. government expect when Congress and endless presidents give the IMF billions of U.S. tax dollars to play with? The U.S. government is on the hook for $52 billion to the World Bank and has a financial commitment of $183 billion to the IMF.
The International Monetary Fund was created in 1944 to shore up currencies and help nations with temporary balance-of-payment problems. In the decades since the IMF’s founding, global capital markets and fluctuating currency exchange rates have made the IMF a relic. But too many people have gotten rich from IMF largesse to permit the curtain to be closed on this institution.
World Bank President Ajay Banga “has sought to emphasize the bank’s focus on job creation…and to prioritize private sector involvement in projects around the world,” The New York Times reported. But the World Bank’s notion of private sector has often been either a fraud or a political smokescreen. In the late 1980s, the World Bank touted its loans to communist nations as private sector-oriented loans—one bait-and-switch too many, as I detailed in a 1988 Wall Street Journal article. And permitting the Bank to exonerate its handouts by counting illusory jobs created is a recipe for make-work scams.
American politicians have pissed and moaned about these agencies forever. In 2002, then-Treasury Secretary Paul O’Neill denounced the IMF and the World Bank for driving many poor nations “into a ditch” with excessive lending which governments subsequently wasted. IMF and World Bank handouts allow politicians to entrench themselves and scorn their own people. Those loans to bad governments are “odious debts” for the people in those nations. The downtrodden masses will be taxed to repay loans that their rulers pocketed, squandered, or used to tighten their fetters or maybe their nooses.
The IMF and World Bank have helped turn many foreign nations into kleptocracies—governments of thieves. A 2002 American Economic Review analysis concluded that “increases in [foreign] aid are associated with contemporaneous increases in corruption,” and that “corruption is positively correlated with aid received from the United States.”
Most importantly, neither the IMF or the World Bank have any qualms about bankrolling tyranny. A 2015 report of the United Nations’ Special Rapporteur on extreme poverty and human rights, Philip Alston, concluded that the World Bank “now stands almost alone, along with the International Monetary Fund, in insisting that human rights are matters of politics which it must, as a matter of legal principle, avoid, rather than being an integral part of the international legal order.” The Bank justifies this position by insisting that it cannot involve “itself in the partisan politics or ideological disputes that affect its member countries” by improper methods such as “favoring political factions, parties or candidates in elections,” or “endorsing or mandating a particular form of government, political bloc or political ideology.”
But any time an international organization financially bails out a regime, it bolsters its power. After the United States invaded Afghanistan and Iraq, the Pentagon coined a term that perfectly captures the effect of foreign aid: “Money as a Weapon System.”
The 2015 UN report noted that “the existing approach taken by the World Bank to human rights is incoherent, counterproductive and unsustainable. For most purposes, the World Bank is a human rights-free zone. In its operational policies, in particular, it treats human rights more like an infectious disease than universal values and obligations.”
The World Bank actively blindfolds itself to avoid hearing about atrocities in nations ruled by governments that it is bankrolling. The Special Rapporteur noted, “By refusing to take account of any information emanating from human rights sources, the Bank places itself in an artificial bubble.” That bubble continues despite the ravages resulting from the World Bank financing brutal resettlement programs in Tanzania, Ethiopia, Indonesia, and elsewhere. American taxpayers should never forgive the bank for its late 1970s aid to the government of Vietnam—after the communist North Vietnamese conquered the American ally in the south. The Bank financed a forced collectivization policy that turned hundreds of thousands of farm families into refugees, many of whom drowned in the South China Sea.
The Trump administration’s lust for “doubling down” on the IMF and World Bank is dicey to reconcile with their terminating 90% of foreign aid contracts from the U.S. Agency for International Development (USAID). Cynics across the land rejoiced that Washington policymakers finally recognized one of the biggest swindles of the past 80 years.
But—no such luck? But if Donald Trump’s team can’t even get sound policy on the World Bank, then what hope is there of them resolving any more complex challenges? I was briefly a consultant for the World Bank in the late 1980s, getting paid to co-author a report on the follies of farm subsidies. At that point, Ronald Reagan’s administration officials had periodically caterwauled about the Bank for almost a decade, and they were followed by sporadic howling by the U.S. Treasury Department ever since. Treasury Secretary Bessent complained on Wednesday that the World Bank “should no longer expect blank checks for vapid, buzzword-centric marketing accompanied by halfhearted commitments to reform.” But after almost a half century of failed American attempts to reform the Bank and IMF, there is no reason to expect any boondoggles to be left behind.
Or do President Trump’s appointees believe that laundering U.S. tax dollars through international entities somehow makes them beneficent? Or maybe U.S. Treasury Department honchos want to make sure they continue to get invited to the most lavish parties in Washington DC and around the world.
Regardless—American taxpayers must no longer be on the hook for hundreds of billions of dollars to organizations that don’t give a damn about the United States.
