By Elliot Dolan-Evans /
Today, the leading role of the World Bank and the International Monetary Fund (IMF) as peacebuilders has been largely ignored by the scholarship and popular press. Both the World Bank and IMF were born during the violent, final stages of World War II, with mandates to promote peace globally. However, this early, primary mission of the International Financial Institutions (IFIs) was quickly forgotten with the Cold War, though both the Bank and the Fund furtively re-engaged with questions of war and peace with the fall of the Berlin Wall and then more resoundingly during the War on Terror, up to today where they are now arguably the most important and influential, yet understudied, actors in peacebuilding.
For example, the World Bank tripled its commitments to conflict to US$18.7 billion between 2017 and 2020, as the Bank identified conflict-related interventions as ‘a central priority’ for the institution. While the IMF lent approximately US$20 billion to conflict-related settings between 2010 and 2020. Both institutions have recently released major strategic reports on their work in conflict, as the Bank and Fund now design programs, apply conditionalities, and advise governments in active warzones across the world, including in South Sudan, Yemen, Colombia, Iraq, Palestine, and Ukraine.
This article reclaims some of the lost history of the World Bank and IMF in conflict, initially charting their early haphazard and variegated engagement in violent contexts up to their contemporaneous status as global peacebuilders. The analysis demonstrates how the IFIs response to questions of war and peace were informed by their general, neoliberal approaches to development, with their work in war crucial to their evolving techniques in ensuring unmitigated insulation of the market economy – the, arguably, foundational aspect of neoliberalism. In doing so, this piece aims to critically question whether the IFIs’ deepening interventions into war is appropriate, as their neoliberal models of development and peace continue to contribute to worsening inequality and violence, as conflicts explode across the globe.
War… war never changes
As the horrors of World War II continued to rage, delegates met at the 1944 Bretton Woods Conference to chart a course for the post-war global order. The World Bank and IMF were conceived as central to fostering peaceful reconstruction as gatekeepers to a new, liberal trading system. The Bank, in particular, was envisioned to handle the post-war reconstruction of Europe but the 1947 Marshall Plan quickly displaced the International Bank for Reconstruction and Development (emphasis added), as the World Bank was originally named, from its primary mission. Then, the eruption of the Cold War between the US and the Soviet Union also made reconstruction far too politically sensitive for the IFIs to wade into. With the reconstruction and peacebuilding business entirely inaccessible, both the Bank and (eventually) the IMF reoriented their mission towards development.[1]
The next forty years, amid the Cold War, saw the focus of the IFIs reorient completely to development and structural adjustment programs across the Global South, as they aggressively promoted neoliberal economic models globally through liberalisation, marketisation, privatization, and fiscal discipline – a suite of reforms known as the Washington Consensus. These IFI-led programs had disastrous impacts on human well-being, economic growth, and development, so much so that the years of their application in Africa and Latin America are known as the ‘lost decade’. As the IMF and World Bank reoriented themselves to development, they refrained from an explicit engagement in the political economy of conflict. However, they did support several US-client states and military dictatorships in this period, who often actively and violently repressed leftist and other insurgencies such as Marcos in the Philippines, Pinochet in Chile, Chun in South Korea, and Marshal Lon Nol in the Khmer Republic.
This rapidly changed as soon as the Soviet Union dissolved, internecine conflicts exploded, and the peacebuilding industry was born through the reemergence of the liberal peace[2] with the United Nations (UN) Secretary General’s 1992 Agenda for Peace. Combined, these dynamics meant that the IFIs began to address peacebuilding and reconstruction. However, it is important to note that the World Bank and IMF at this stage only engaged in countries where there was a formal “end” to hostilities, such as through a peace agreement, in the “post-conflict” stage, though in reality violence in various forms often continued. As such, throughout the early 1990s, the IFIs heightened their involvement in post-conflict situations, such as in Nicaragua, El Salvador, Mozambique, Cambodia, Rwanda, and Palestine, extending the application of Washington Consensus principles to war-torn environments.
The conflict-plagued Central American states were an early focus of the IFIs’ new interest in peacebuilding, mostly at the behest of the US government. For example, in 1990, Nicaragua emerged from a violent civil war between the Sandinista socialist government and right-wing Contra rebels morally and financially supported by the US administration. With the new, non-Sandinista government desperately needing external finances after the war, Nicaragua began a classic Washington Consensus program of ‘stabilisation and adjustment’. The IMF took the lead in designing and implementing the program with a stand-by-agreement in 1991, and then two further loans within the next seven years. Nicaraguan elites who were involved in the newly deregulated export and financial sectors generally prospered, but overall per capita income and daily caloric intake of the average Nicaraguan rapidly deteriorated. The distributional inequalities that originally fuelled the civil war were resurgent in Nicaragua by late 1998, with approximately 71% of Nicaraguans living in poverty, infant mortality at 58 per 1,000 live births, and 26% of children under five years of age suffering from malnutrition. Similar attempts by the IFIs in El Salvador negatively affected the 1992 peace accord, and their Washington Consensus policies laid the groundwork for the inequality, violence, and crime that persist to this day in “post-conflict” El Salvador.
As the disastrous policies of the Washington Consensus became increasingly obvious by the mid-to-late-1990s, and the IFIs’ denial of their odious consequences for development were untenable, the World Bank and IMF theorised a new policy suite, later called the Post-Washington Consensus. This latter paradigm had many of the same aspects as the former. But this importantly regulated the recipient’s economy in reference to international agreements, treaties, and imperatives of global institutions, such as the World Trade Organization, thereby protecting domestic economies through international structures and strictures. There was an attempt to remove political power over the economy out of the domestic sphere and tie it explicitly to the demands of internationalized, global fractions of capital. Analysts typically note that the internationalized Post-Washington Consensus was applied following the Asian Financial Crisis and the Bank’s 2007 World Development Report, but crucial elements of this paradigm were tried out by the Bank and IMF after the Bosnian War in 1995.
The 1995 Dayton Peace Agreement, ending the Bosnian War, called for the introduction of neoliberal economic models through a depoliticized discourse of necessary reform. The envisioned Bosnian state at Dayton, promulgated by the international community (excluding Bosnian input), had conditional sovereignty and accorded to EU policy priorities. For the IFIs, both privatisation and marketisation were non-negotiable conditions of Bosnia’s post-conflict development and codified these into the Bosnian Constitution imposed at Dayton. A law even stipulating that the IMF would appoint the governor of the Bosnian Central Bank, who could not be Bosnian.
Further, the IFIs’ agenda in Bosnia was assisted by the unaccountable, EU-appointed Office of the High Representative, who was a unelected foreigner that held ultimate power and forced through wide-ranging restructuring efforts and ‘bulldozed’ regulations, much to the delight of World Bank staff. However, despite following these policies, foreign investment, private sector involvement, and growth were unimpressive. By 2000, the economic situation was dire and Bosnian authorities needed more foreign loans to meet their debts, as poverty gripped a third of the population. Privatisation was also a disaster, with foreigners and the Bosnian elite pilfering former state-owned enterprises on the cheap. Overall, the IFI-directed international intervention into post-conflict Bosnia further aggravated social conditions and led to basement levels of social trust today and the possibility of a new Balkans war, nearly thirty years following Dayton.
War and profits
The September 11, 2001 attacks on the US represented a turning point in the IFIs’ peacebuilding approaches. Prior to 9/11, due to their failures in Nicaragua, El Salvador, Bosnia and others, there was significant internal contestation at the World Bank as to whether these peacebuilding activities represented ‘mission creep’. However, the 9/11 attacks left a ‘palpable personal effect on Bank staff’ and effectively muted critics of the Bretton Woods institutions’ post-conflict activities. Deepening Post-Washington Consensus precepts further, many voices argued that conflict-affected states must further acquiesce to external institutions, aspire to an ‘integrated sovereignty’ that is constrained into international frameworks that overrode domestic will. Fragile and conflict-affected states had to demonstrate capacity for de jure sovereignty, rather than de facto sovereignty; with the EU and IFIs’ rule over Bosnia a poignant example of bridging this “capacity gap”.
With these trends, the IFIs gained a mandate from the US’ Bush administration to intervene into Afghanistan, as the US invaded militarily. The UN Security Council similarly sanctioned the IFIs’ involvement in Iraq as the US expanded their “War on Terror”. Both created controversy as the IFIs are not signatories to international humanitarian law instruments, do not have overarching obligations to the UN Charter, and lack accountability to the affected populace, making them questionable peacebuilders. Regardless, IFI reforms in Afghanistan meant that by 2009, the country maintained ‘a market-oriented, pro-private sector policy stance…one of the most liberal in the region’, with foreign banks dominating, small corporate tax rates, and IFI administrative reforms fragmenting the government. The continued inequalities, rock-bottom state legitimacy, and overt foreign intervention subsequently fuelled the Taliban insurgency, as peace comprehensively failed.
The failure of finding peace in Afghanistan and in Iraq, with the new, intensified Post-Washington Consensus, triggered more soul searching in the IFIs’ nascent peacebuilding mission.
By 2008, the Global Financial Crisis hit, followed by the Eurozone crisis, years of stagnation and inflation in the global economy, the Arab Spring in the 2010s, and other ongoing signs of global instability. In this context, the World Bank and IMF began to reorient their involvement in peacebuilding towards a “risk-management” approach, where the IFIs would try to reduce risks for private capital in uncertain situations (such as war). This also saw the International Finance Corporation (IFC), the private sector lending arm of the World Bank, get increasingly involved in conflict-affected settings despite its history of supporting extractive industries’ profit at the expense of the community in violent and fragile contexts. Around the same time, the IMF also signalled an intensification of their work in conflict-affected settings, despite even Fund officials complaining that their current conditionality policies were overly harsh for countries struggling with conflict.
The risks and rewards of war
Alongside the 2015 Sustainable Development Goals, both the IMF and the World Bank successfully demanded that development could only be achieved by mobilizing private capital, in their report From Billions to Trillions. This meant that states had to ensure a safe, comfortable, and reliable environment for private capital investment to “maximize finance for development”, with the help of the IFIs, even in war. Simultaneously, the IFC became more central to the World Bank’s approach to conflict-affected situations, with it tasked to “create markets” for the private sector in ‘developing, conflict, and insecure environments.’ In other words, de-risking wars for profiteering. This reached a zenith when the IFC began receiving funds from the development arm of the World Bank, much to the chagrin of some Bank staff who lamented the ‘IFC-ization of the World Bank’, as the IFC expanded its commitments to over US$23 billion for private companies in developing and conflict-affected contexts by 2019.
The shift towards a “risk management” and “de-risking” approach in conflict reflected broader changes in neoliberal thought after 2015. This demanded that states and international institutions actively mitigate the dangers of investing in developing, fragile, and conflict-affected contexts to guarantee the profits of private capital. Scholars have termed this the Wall Street Consensus; a form of neoliberalism that prescribes not only legal, institutional and international protection for the market (like the Post-Washington Consensus) alongside liberalisation, privatization, and marketization (like the Washington Consensus), but also insists that the state and IFIs actively de-risking the developing or conflict-affected context to guarantee private profit through private-public partnerships, blended finance, and other tools. This is a promise to ensure the profits of private capital as the ultimate development objective, regardless of whether confronted with demands of social justice, the precipice of ecological collapse, worldwide pandemics, or rapidly spiralling violence.
It was with the COVID-19 pandemic that the Wall Street Consensus started to gain strength as a new development paradigm, as Western states and their central banks were actively tasked to protect the private sector as COVID caused collapse, while equally planning for a green transition. The taboo on de-risking was broken, and the Bank and IMF worked to proselytize the Wall Street Consensus across the developing world as necessary to get those “untapped trillions” from the private sector. Simultaneously, the World Bank finally formalised its approach to peacebuilding in 2020, which not only highlighted the need to de-risk private capital in conflict and ensure optimal investing environments, but also legitimised the entry of the IFIs into active war, not just post-conflict.
Making war safe for capitalism?
The IFIs recent fervour for guaranteeing the profits of private businesses in conflict is despite the significant evidence that demonstrates how private capital often furthers inequalities, poverty, and the extraction of resources during violent war. During the War in Donbas in Ukraine, for example, the IMF and World Bank de-risked the active conflict environment for foreign investors — the first instance so far of the IFIs applying the Wall Street Consensus during active war. But this also catalysed crippling poverty through unaffordable gas bills, heightened inequality, increased the burden of women’s unpaid labour, and created devastating, unpayable debt for the Ukrainian government that has destroyed its social safety net just as Ukrainians need it most.
Over the course of the last 35 years, the IMF and World Bank have increasingly engaged in post-conflict, and now activeconflict, contexts. During this time, the form of the neoliberal agenda they have applied to war and peace has changed. Today, the Wall Street Consensus has turbocharged many of the precepts of previous neoliberal nostrums of development, such as the Washington and Post-Washington Consensuses, now privileging private business as the primary social unit to protect, even during devastating conflict. However, the evidence so far indicates that the IFIs’ work in conflict has not sufficiently helped conflict-affected people, nor have their approaches brought sustainable peace.
Finally, and moreover, recent wars demonstrate that, politically, the World Bank and IMF are unable to act as honest brokers in peace. After Russia invaded Ukraine in 2022, the World Bank mobilised US$41 billion and the IMF lent US$15 billion in support of Ukraine, while loudly condemning Russia’s invasion. These sums are astronomical even though they retain similar problems as noted above. However, after months of Israel’s disproportionately brutal assault on Palestinians in the Gaza Strip following the October 7 attacks, which has been noted to likely constitute genocide, involved the commission of grave war crimes, and caused horrific violence to civilians, the official response from the IFIs has been silence. The IMF has offered no funding and a feeble statement. While the World Bank has mobilised barely US$60 million in relief for Gaza, it strenuously avoided any attribution of blame on Israel for the carnage and destruction. This is despite both IFIs having a long history of involvement in Palestine.
If the World Bank and IMF’s history of programs in conflict-affected contexts tend to catalyse further inequality, poverty, and violence, and they do not even have the political wherewithal or courage to do anything about the most violent war of the 21st century in Palestine, then they are inappropriate partners in times of either war or peace.
[1] The World Bank is explicitly, and well recognised as, a developmental bank. While the IMF typically positions itself as a “guardian” of the world’s financial system while also addressing the macroeconomic foundations of a recipient’s economy and is not always seen in the same league as the Bank in development. However, it is important to note that these objectives of the IMF have developmental implications, and the Fund often claims that their work aims to support the achievement of the Sustainable Development Goals.
[2] The idea of the liberal peace, which animated peacebuilding at this time, was an imputed association between philosophical liberalism, manifested in the institutions of democracy (representative rule), human rights (freedoms of religion, the press, speech etc.), and a free-market economy (inclusive of private property rights and free trade), and the absence of war.
Elliot Dolan-Evans is a lecturer in the Faculty of Law and an Assistant Lecturer in the Faculty of Medicine. He has previously worked as a lawyer and medical doctor, and as a conflict analyst at the International Institute for Strategic Studies. His post-PhD research focuses on the political economy of peacebuilding.