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The International Monetary Fund (IMF) and World Bank have been empowered by the governments which control them (led by US, UK, Japan, Germany, France, Canada, and Italy -- hold 40% of votes on their boards) with imposing economic austerity policies in the countries of the so-called "Third World." The policies, though under the auspices of Third World development, can actually harm these people to a great extent. Once these countries build up large external debts they then look to the IMF and WB for assistance with their debts, and/or lack of economic development.
IMF and World Bank--structural adjustment programs:
To promote economic development in the "global south" the IMF and WB impose the conditions that the borrowing country must enforce "structural adjustment programs". These programs aim at increasing international commerce/investment in countries, or allow the government of Third World countries, to manage their labor/enviromental resources in a manner more appealing to foreign investment. Such adjustments include: cuts in social spending (less money for education health, etc. forcing the poor into illiteracy, less access to medical services),
* reduction of governmental regulation (country has less capacity to monitor businesses' adherence to labor, environmental and financial regulations),
* elimination regulations on foreign ownership (entire sectors of economy tend to belong wholly to corporations, labor and environmental laws are not enforced by government on these corporations),
* tarriff elimination (competition for local enterprises becomes more difficult, businesses are closed / layoffs),
* cuts in subsidies for basic goods (raising cost of items necessary to live, a flashpoint of civil unrest),
* re-orientation of economies--subsistence to export (farmers are given incentives to grow cash crops for foreign markets rather than food for domestic ones--raising difficulty of obtaining food stuffs, extraction of mineral resources leads to environmental dessecration, sometimes leading to contamination of driking water, and land resources).
SAPs are undemocratic:
Decisions made on the countries' behalf involve merely small sections of bureaucrats, though the IMF and World Bank prefer to work with dictators. The institution of these policies are not usually popular, causing civil unrest and deligitimizing the government's claim to rule. The poor are usually the ones to suffer the effects of these policies the most, particularly the urban poor who have an extremely difficult time obtaining items necessary for survival. (most data obtained from US Network for Economic Justice).
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