IMF: forced to change its course?

Posted: April 16, 2008 in society
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There is one certainty in life: change. Nothing ever stays the same, which includes all bad things in life. In political and global affairs that change of course is often preceded by decades of dreadful and sometimes horrific suffering. The sufferers are generally the ordinary people, and those inflicting the pain and distress bearing conditions are almost always those with power: the power of politics, violence and above all – money. The IMF has cold-hearted history of exerting such power. But that influence is currently waning; the question though is: are we seeing a watershed or just a temporary adjustment?

Like the Worldbank, the IMF has been a staunch promoter and brutal enforcer of the neocon philosophy that has ruled the world for the past two-three decades. It is therefore quite remarkable that the IMF’s Managing Director Dominique Strauss-Kahn states that it is evident that addressing the global financial crisis needs “public intervention”. Strauss-Kahn has called for a global fiscal stimulus, writing that, “Timely and targeted fiscal stimulus can add to aggregate demand in a way that supports private consumption during a critical phase.” And the IMF has announced its support for the fiscal stimulus plan in the United States — a country with significant budget deficits and massive foreign debt.

Two things immediately come to mind. First: this is an organisation whose economic-rationalist thinking is diametrically opposed to government intervention in the marketplace. The mythical market needs to be freed from all constraints and take over every aspect of life. Second: this theory of course was always skewed. There was no rejection of governments pumping money into the market through more than generous corporate welfare strategies; to the contrary – that was expected.

In fact, there always has been a one-way street towards benefitting the accumulation of wealth in the hands of the rich and powerful at the cost of public wealth: privatisation of public assets, deregulation of so-called labour markets, institutionalising of free capital flows, removing legislative restrictions to corporate greed (e.g. environmental and labour protection laws), opening markets to foreign investors, excessive spending on police and paramilitary structures to protect the order of social, political and economic injustice, etc.

While all these measures sound familiar to people living in so-called developed countries, they of course were imposed on the populations by their individual national governments. The IMF’s role on the other hand was to impress them on the minds of government representatives in the so-called developing world. In exchange for loans it demanded from those poor nations “structural adjustment” — a series of market fundamentalist, corporate-friendly policies, including hyper-restrictive macro-economic policies.

The IMF of course was backed by donor countries who shared the philosophical approach in the first place and who set up the IMF to ensure the loans are not just being repaid, but returned with high interest payments. As it happens on all levels from the individual millionaire to governments and transnational corporations: the rich don’t get richer by ripping off each other but by fleecing the poor.

This kind of heavy-handed and ruthless, unrelenting strait-jacketing though has come under attack from a range of developments. Robert Weissman writes in an article on Common Dreams that there “is overwhelming evidence of the failure of the IMF’s policy agenda. Mass privatization has led to enormous concentrations of wealth and encouraged corruption. Deregulation has contributed to financial crises, including those that foreshadowed the current global crisis centered in the United States. The overall economic model had impoverished tens of millions and left developing countries poorer. And government budget ceilings and inflation targets have prevented countries from expanding desperately needed investments in healthcare and education. Indeed, the IMF’s own Independent Evaluation Office has found that the Fund requires poor countries not meeting Fund inflation targets to divert most new donor aid. Instead of spending additional donor money on healthcare, for example, countries must use it to build up foreign reserves or pay down domestic debt”.

Although the Fund according to Weissman had promised that it would reform the way it imposes conditions on poor countries, a new report from Eurodad, the European Network on Debt and Development, finds that, over the last six years, IMF conditions have not changed in number or kind. But the external environment in wqhich the IMF is operating is changing, and that is forcing the fund to react.

For example, middle-income countries have paid back their loans to the Fund, and are not taking out any news ones. “This in turn has two consequences. For now, at least, the IMF has lost its hold over most middle-income countries — but it maintains its iron grip on the world’s poorest countries. And, the Fund is experiencing a financial crunch of its own. It had depended on the interest payments from middle-income countries to support its budget.”

Then there is the global credit squeeze; donor money is harder to come by. So, the IMF has to swallow some of its own medicine. Apparently the IMF’s governing body has approved a proposal involving cutting its staff by about 20 percent and selling some of its own assets: gold stock. The returns would be used to create a trust fund that would fund administrative operations in the future.

Selling gold though is easier said then done. With gold prices riding high and the fund could generate a lot of capital, gold cannot be sold without U.S. approval, and the U.S. representative to the Fund cannot support gold sales without Congressional authorisation. I am not sure about the reason for this kinf of power America holds over what seems to be an international organisation; at first sight though it seems to demonstrate once again the imperial role America plays in today’s world.

However, there seems to be a good side to this restriction. According to Weissman, “health, development and labor organizations in the United States are mobilizing so that Congress approves gold sales only after achieving fundamental changes in IMF policy. Last week, 80 U.S. organizations — including Action Aid International USA, the AFL-CIO, Africa Action, the Bank Information Center, Essential Action (which I direct), 50 Years is Enough, Global AIDS Alliance, Health GAP, Jubilee USA Network, the ONE Campaign, Oxfam America, RESULTS USA, Service Employees International Union (SEIU), and the Student Global AIDS Campaign — urged Congress not to approve gold sales until first achieving real change at the Fund.”

The letter urges Congress to require from the IMF to annul the fund’s right to use overly restrictive deficit and inflation reduction targets, exempt health and education spending in so-called developing countries from IMF-imposed budget ceilings, permit developing countries to spend foreign aid for its
intended purposes, cut the link between debt cancellation and harmful economic policy conditions, and disclose crucial documents currently kept secret.

Whether or not Congress, being a deeply enmeshed part of the economic-political-military power structure will give into such public demands will have to be seen. Complex systems are unpredictable, and often small disturbances can have big effects. There is for example Barney Frank who chairs the House Financial Services Committee, which must approve the gold sales proposal prior to the full House of Representatives considering the issue. According to Weissman, Frank strongly denounced at last week’s 20th anniversary celebration of the Bank Information Center the concept of structural adjustment, and stated as a matter of fact that gold sales will only be authorised if additional IMF gold is sold to cancel poor country debt; he also made clear that he intends to obtain policy changes from the IMF as a condition of permitting gold sales.

There could also be positive signs that the IMF under the relatively new leadership of Strauss-Kahn (he took on the role last September) is “ready to re-evaluate its market fundamentalist, corporate-friendly policy prescriptions for poor countries. A statement issued by the Fund last week said that African countries did not need to raise interest rates in response to inflation driven by higher prices of food and fuel, and that some subsidies might be permissible in some circumstances.” And with rising world food prices and people standing up to their governments in violent acts of desparation and will to survive, the fund might be forced to relent even more.

Right now though the IMF overall is very much sticking to its traditional policies and shows little sign of yielding to external pressures. We also need to be aware of the fact that if the gold sales deal is approved by the U.S. Congress, the IMF will become self-financing and Congress will lose much of its power to demand changes in how the IMF operates. And it doesn’t matter which part of the political spectrum people belong to, they generally don’t like to give up power full stop and certainly not political influence. Already there is no certainty about when the gold sales authorisation will come before Congress; currently it seems it may be delayed until 2009. It will be a long battle, and even if the IMF’s wings are clipped there is no guarantee that some other structure won’t take its place. After all: this is not about dismantling capitalism nor are we talking about a watershed shift in human values (such as the elimination of greed). The best outcome we can hope for will be nothing more in the end than just a baby step in the direction of global justice – for humans; we’re not even talking about other species and the planet as a whole.

The above mentioned Robert Weissman is co-director of Essential Action, a corporate accountability group based in Washington, D.C. that focuses especially on international issues and has been very involved in the access to medicines campaign. He is also editor of Multinational Monitor magazine. With Russell Mokhiber, he is editor of a weekly column, Focus on the Corporation, archived at


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