Perverse incentives provided by tax codes and government subsidies are an ongoing theme of my articles in The Daly News. These perverse incentives pervade all sectors of the economy and undermine the hope for a prosperous and healthy civilization that lives in harmony with the earth. A paradigm shift away from the present destructive global economic model must entail the elimination of taxes and subsidies that reward pollution and injustice.
Counterproductive U.S. foreign aid is a major source of perverse incentives, and it requires serious attention. There is an urgent need to reform foreign aid to projects and programs that disempower women. Far too much U.S. aid ends up funding programs that degrade the lives of women and result in a downward spiral of unsustainable population growth and widespread poverty. Establishing sound requirements on this foreign aid can instead alleviate poverty, improve the quality of women’s lives, and promote smaller, healthier families.
I will focus on U.S. foreign aid to international financial institutions – in particular, to the World Bank and IMF, both of which receive major support from the U.S. These two institutions remain significant players in advocating an anti-environmental economic paradigm for the world. At the same time, they continue to receive large sums of money from the wealthy nations, as evidenced by last year’s pledge from the G-20 countries of $750 billion to the IMF to assist nations in economic turmoil.
Gender Action, on whose board of directors I serve, has been analyzing the gender impacts of lending by the World Bank and IMF during the past decade. The preponderance of evidence collected by Gender Action shows that the policies and projects of these institutions dramatically worsen the plight of women, especially poor women.
Transforming this aid from a negative to a positive for women will produce two key benefits with cascading effects. The first benefit is a progressive solution to the global problem of unsustainable population growth in a world that now contains 6.8 billion people. Most experts on population growth, citing statistics on family size, observe that when women achieve some degree of power, status and respect, they tend to have fewer children.
A second benefit is poverty alleviation, which the World Bank states as one of its supreme objectives. In fact, in 1999 the Bank renamed its Structural Adjustment Loans “Poverty Reduction Support Credits.” Then, in an act of hypocrisy, the Bank chose not to apply its own policy on gender equality to a category of loans (policy-based loans).
The World Bank and IMF operate under a set of “sacred” tenets, such as downsizing government, privatizing governmental services, and altering banking structures. The policies that stem from these sacred tenets systematically undermine the status of women in the world. The conditions attached to both project and policy loans have negative impacts that disproportionately fall on women, as the examples below describe.
Privatization of Government Services
Privatization of services often results in price hikes that deprive the poor of access to those services. Many women and girls have no choice but to increase their unpaid labor when these services become unaffordable. Girls end up dropping out of school, and women quit their jobs to care for ailing family members.
When Malawi privatized its state marketing board (ADMARC) and Strategic Grain Reserve, a required condition for receiving World Bank/IMF loans, Gender Action discovered serious impacts on poor women throughout the country associated with chronic hunger. Many women were forced to wait into the night for ADMARC maize, or scavenge for other food in rural areas. Some desperate rural women and girls were pushed into sex work.
In 2003 another set of World Bank and IMF loan requirements coerced the water authority in the city of Dar es Salaam, Tanzania to privatize its operations. Bills for water increased, but citizens experienced irregular service in their homes. The new authority’s bill collectors came to collect whether or not people had water. Households then ended up paying double, once to the authority to prevent a cutoff, and once to the aggressive water venders.
Despite comprising the vast majority of farmers and small-scale entrepreneurs in Africa, women have access to less than 10 percent of micro rural credit and less than one percent of total agricultural credit. The spurious reason is that women are less likely to pass strict financial and education requirements for loan approval.
International financial institutions intensify gender inequality and poverty with their insistence on user fees to recoup loans. Although certain user fees can be useful and practical, many are unnecessary and unfair, especially in poor countries. When user fees are placed on essential services (e.g., health care) that were previously provided by state governments, costs tend to shift to poor households. Due to traditional gender divisions of labor, the consequence in practice is that women have to assume additional responsibilities to care for family members.
When nations are forced by international financial institutions to downsize the public sector, the layoff of employees hits females the hardest because they are not considered the breadwinners. Yet most households today rely on multiple sources of income, and many women and children are, in fact, the heads of households.
Gender inequality has increased in many places receiving loans, because the World Bank, IMF, and country policy makers do not recognize women’s unpaid labor in the home, the agricultural sector, or the informal sector. It’s bad enough that women bear the brunt of these misguided loan practices, but these practices also negatively affect the next generation. When households have to cope with fewer public services, decreased access to credit, higher user fees, and reduced wages, Gender Action has noted that parents take girls out of school to supplement family income, and there is an increase in prostitution and trafficking of women and girls, as well as increased cases of HIV/AIDS. The removal of girls from schools reduces the long-term prospects for families to break out of poverty. All of these practices increase the feminization of poverty.
One way to tackle these issues is to make sure that all lending from the World Bank and IMF coincides with a comprehensive gender impact analysis. The point is to demonstrate that such lending will improve, not worsen, the plight of women. Currently there are various requirements on paper, but the executive directors at these financial institutions do not insist on their enforcement. For the United States, one plan of action is to have Congress require U.S. executive directors to obtain such an analysis as a condition of support for a loan, and to demand ongoing oversight and enforcement as a prerequisite for future U.S. funding. Similar strategies could be pursued in other rich nations that have their own executive directors at these institutions.
This recommendation could be tested on the aid and loans to Haiti in the aftermath of the earthquake. Gender justice is especially important in Haiti, given its terrible history of sexual abuse. Money for global relief and reconstruction of Haiti should not entrench past practices and relegate women to reliving past tragedies.
For further reading, visit Gender Action’s website (see, for example, Gender Guide to World Bank and IMF Policy-Based Lending). For population information, visit the Population Institute’s website.