Divine Revelation

A blog with an Islamic perspective

Neocolonialism is defined as a policy where a major power uses economic and political means to perpetuate or extend its influence over underdeveloped nations, former colonies and new dependencies. The origins of neocolonialism can be traced to the historical Brenton Woods Agreement in 1944. The planners at Bretton Woods set up a system of rules, institutions, and procedures to regulate and control the international monetary system. The International Bank for Reconstruction and Development (IBRD) (now one of five institutions in the World Bank Group) and the International Monetary Fund (IMF) were thus established.

Both the World Bank and International Monetary Fund are headquartered in Washington. An unwritten rule establishes that the IMF's managing director must be European and that the president of the World Bank an American. Decisions are made by a vote of the Board of Executive Directors representing member countries but unlike the United Nations, where each member nation has an equal vote, voting power at the World Bank and IMF is determined by the level of a nation's financial contribution. The United States has roughly 17% of the vote with the G7 holding about 45 %. This clever scheme ensures that the United States always has a dominant voice and can exercise an effective veto at will. Even though the World Bank is a multilateral institution of 184 member governments, its presidency is widely assumed to be owned by the White House. Europe seems happy to play along, presumably to ensure its own "ownership" of other international posts. The 150-plus developing countries are relegated to the back benches.

Both the Bank and the Fund aim at global poverty reduction and improvement of living standards. They claim to provide low-interest loans, interest-free credit and grants to developing countries for education, health, infrastructure, communications and help them overcome short-term balance-of-payments difficulties. However, financial assistance does not come free and the recipients have to agree to policy reforms in their economies which is ingeniously termed structural adjustment program (SAP). This structural adjustment calls for currency devaluation, slashing government spending, privatization and opening up countries to exploitative foreign investment.

The ill effects of structural adjustment are well known and have been well documented.Since the 1980s, SAP has helped create a net outflow of wealth from the developing world, which has paid out five times as much capital to the industrialized countries of the North as it has received. In the two regions with the most structural adjustment experience, per capita income has stagnated ( Latin America) or plummeted (Africa). As the Bank is a lender of foreign currency, it demands to be repaid in the same currency. The borrower countries, in order to obtain the currencies to repay the loans, must sell to the rich countries more than they buy from them. Many Third World countries then end up competing with each other on a limited range of commodities creating a collapse in prices of export goods. Export revenues stagnate while the import bill continues to go up. The only way of repaying loans is to engage in other loans, resulting in a huge accumulation of debts.

Some typical cases of WB-IMF administered disasters include the severe economic contraction of unprecedented scale in Russia in the 1990s with the number of Russians in poverty rising from 2 million to 60 million. The Asian financial crisis triggered by the IMF encouraging Asian countries to open their borders to "hot money" or speculative finance invested in currency, stocks and short-term securities. The crisis resulted from the hot money brokers' herd-like decision to quit Asian countries en masse. Later the IMF made things worse by extracting structural adjustment as a condition for IMF loans. The result was a surge in bankruptcies, layoffs and poverty. In Indonesia, poverty rates rose from an official level of 11 percent to 40 to 60 percent. Indonesia's food shortage became so severe that then-President Habibie implored citizens to fast twice a week.

Instead of targeting the poor people through projects that help augment their income through relevant education, training, and capital, the bank seems to exclusively favor large-scale, capital intensive, mega-projects. Yet, many of these mega-projects have resulted into mega-failure. The hydroelectric dam on the Narmada River in Gujarat at $450 million threatened the habitat of 100,000 tribal poor. Another 140,000 families would have been affected by the attendant canals. The examples of such "flawed" mega projects of the Bank abound in Latin America, Africa, and Asia. Yacyreta the largest hydroelectric dam in the world along the Argentina-Paraguay border that has already claimed $760 million of World Bank fund, will result in forced relocation of 50,000 people from their homes. Many more countries have courted similar disasters after after heeding to the Bank- Fund advice. The Bank prides itself on fighting corruption both within and outside. However it's current President Paul Wolfowitz (the neoconservative hawk and architect of the disastrous invasion of Iraq) is fighting a loosing battle to salvage his seat amidst allegations that he used his position to influence a pay and grade increase for his partner Shaha Riza.

Neocolonialism is not a new phenomenon. It's roots lie in the belief that man is the sole owner of all material resources and he has by all means fair or foul to acquire more and more in order to satiate his hunger. There is no scope for morality, divine guidance and ethics in the race for world dominance. Its survival of the fittest and no mercy for the weak. Islam came to end this dominance of man over man and guide him into the light of justice equality and universal brotherhood by making all as equal slaves of God. Since everything in this world belongs to God man has no right to appropriate these things according to his will. Man should deal with these things according to the rules set by the Master to Whom they really belong. Similarly, all men who inhabit this earth and whose lives are interlinked with each other are the subjects of God. Therefore, they have no right to formulate their own rules and regulations. The entire range of their mutual relationships should be governed by laws made by God. Unless this world view is accepted,neocolonialism is bound to flourish.

Posted by Arshad on Saturday, July 28, 2007.

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