American Imperialism: It Isn’t Just Warfare

by: Alysha Ahmad

When we think of American imperialism, we think of drones operated by men wearing camouflage; of tanks rolling over barren sand dunes in the Middle East; of the smell of sulfur and metal. However, American imperialism also includes the enactment of neoliberal policies abroad that favour the interests of those in the Global North. Through international financial institutions (IFI), neoliberal programmes are implemented in countries in the Global South so that countries in the Global North, particularly the United States, can maintain their hegemonic endeavors. The economic goals of American imperialism are realized in the case of Pakistan’s financial crisis, which is exacerbated by the country’s entrapment in a long-term dependency on IFIs, including the International Monetary Fund (IMF) and the World Bank.

Economic imperialism thrives off of and preys on vulnerable countries, which describes Pakistan’s current state. Prior to borrowing from IFIs, Pakistan had high inflation and a high fiscal deficit. These difficulties were amplified by political instability, weak governance and corruption, making it difficult to implement effective policies and attract foreign investment. Now, Pakistan has a high level of debt due to constant borrowing from other countries, the IMF and the World Bank. Pakistan borrows from others to fund projects that would support the development of infrastructure resulting in the country’s total borrowing being approximately USD$130 billion in 2020, which has only worsened since. The country’s balance of payment crisis has also greatly contributed to its financial issues, with recent data revealing that Pakistan’s account deficit stood at a startling $12 billion in 2022.

Due to this account deficit, the pressure on Pakistan’s foreign exchange reserves has greatly increased. The reserves have dropped to about $3 billion, which is enough to cover just three weeks of imports.It also doesn’t help that Pakistan’s weak position is worsened by years of political instability and stark political polarization within the region, as demonstrated by the multiple changes in government and numerous military interventions. Furthermore, Pakistan’s fragile state has exacerbated due to the more recent COVID-19 pandemic, causing decreased economic activity; particularly the demand for Pakistani exports and fewer remittances from the Pakistani diaspora. For this reason, Pakistan continues to seek assistance from IFIs in an attempt to escape its deep financial crisis.

IFIs frame their endeavors in altruistic manners, but the practice of their goals proves otherwise. The hegemonic interests of imperialists are actualized by IFIs with the help of policy conditionality, voting power, and debt-traps. According to the organization’s website, the IMF assists developing countries with strengthening their economic capacity through advising finance ministries, aligning legal and governance frameworks to international standards, and training policy-makers. The World Bank has similar goals of ending extreme poverty, and helping developing countries create sustainable economic growth. After connecting with the IMF, Pakistan was subject to harsh austerity measures to decrease its deficits resulting in reduced social spending, related to healthcare, education and social protection. These policies have negatively affected the poor and working class, effectively widening the country’s wealth gap. That is, the IMF pushed for market-oriented reforms and privatization measures, ironically resulting in the loss of jobs. It’s clear that these reforms primarily serve the interests of corporations in the Global North, since only corporations reap the benefits of privatization. Similarly, the World Bank emphasizes privatization and deregulation.

Through policy conditionality, Pakistan is forced to obey the IMF in order to receive loans, despite the negative impacts this has on the country. By analyzing the voting power of the IMF and the World Bank, the polarized power dynamics between decision-making countries and the country requiring assistance are obvious.Countries who have the most voting power within these organizations are the United States and the United Kingdom, which are among the most prominent countries in the Global North. Accordingly, the financial advice provided to developing countries is through the lens of countries in the Global North that have the specific interests of only developed countries in mind. This is demonstrated by the emphasis on privatized public assets, which provides the opportunity for Western multinational corporations to purchase public assets and profit off of them. Thus, the presence of IFIs harm industries in Pakistan and limits job opportunities for those who need them most.

Pakistan has become dependent on IFIs not only as a result of contrasting power dynamics and policy conditionality, but also by being indebted to them. The policies backed by IFIs undermine the sovereignty of vulnerable countries like Pakistan. Pakistan’s dependence on IFIs has deepened due to the IFIs’ policies regarding loan restructuring, high-interest rates, trade and investment, and the exchange rate. Pakistan adopted loan restructuring policies to manage its debt burden by renegotiating the terms of existing loans, including extending the repayment period. While this seemingly provides immediate relief to the country, it results in long-term challenges due to increased interest payments. Thus, Pakistan’s ability to make payments to creditors becomes increasingly difficult. The liberalized trade and investment policies implemented under the direction of the IMF and the World Bank also decrease Pakistan’s sovereignty. That is, Pakistanis increasingly dependent on foreign powers from the Global North, since the IMF encourages policies that attract direct foreign investment. This is also the case when it comes to Pakistan’s exchange rate, which the IMF made to be a fixed exchange rate. Therefore, a slowdown in global trade would harshly impact the country.

Pakistan’s experience with IFIs is not an isolated one; Sri Lanka is subject to a similar economic imperialism as Pakistan. Sri Lanka experienced a financial crisis in 2018-2019, which presented some similarities to Pakistan's financial crisis. For instance, both countries faced external debt challenges and consequently sought support from the IMF and World Bank. Sri Lanka also had external debt challenges, including a large trade deficit and declining foreign reserves. It was also forced to undergo harsh austerity measures and structural adjustment programs, as a condition for receiving loans. Like Pakistan, these policies required the government to decrease social spending on programmes, including social welfare programs and public services. Similarly, these policies encouraged market-oriented reforms, including privatization and deregulation.Sri Lanka’s financial crisis was also exacerbated as a result of the country’s political unrest, including its anti-government protests. Consequently, Sri Lanka has experienced an increased dependency on IFIs, making it difficult for the country to escape its financial crisis.

As demonstrated by the cases of Pakistan and Sri Lanka, it’s clear that international financial institutions prey on vulnerable countries to trap them in a long-term dependency on those in the Global North. International financial institutions, like the IMF and the World Bank, are merely tools of economic imperialism and serve to accommodate only the interests of the Global North. These institutions simply operate under the guise of providing altruistic assistance to vulnerable countries, by having these countries become indebted to them in a seemingly indefinite way. Even though gunpowder isn't bombarding Pakistani soil and the smell of sulfur no longer permeates Pakistani air, the economic policies pushed by IFIs reek of a smell that is wildly familiar to its people: imperialism.