USA: IMF on the Ropes

Publisher Name: 
Focus on Corporations

There may be no single institution with greater pernicious influence in
the world than the International Monetary Fund (IMF). Now, for the first
time, the Fund faces a real challenge to its existence, at least in its
current form.

For two decades, the IMF has exerted a stranglehold over developing
country economies, denying them the funding they need to make foreign debt
payments and avoid default, unless they enact "structural adjustment"
policies.

Structural adjustment can fairly be described as a virulent strain of
Reaganomics or Newt Gingrich's Contract with America. The basic idea of
these policies is to open countries' labor markets and natural resource
riches to multinationals, shrink the size and role of government, rely on
market forces to distribute resources and services and integrate poor
countries into the global economy.

Key structural adjustment policies include: privatizing government-owned
enterprises and government-provided services, slashing government
spending, orienting economies to promote exports, lifting trade
restrictions, implementing higher interest rates, eliminating subsidies on
consumer items such as foods, fuel and medicines and imposing tax
increases.

Structural adjustment has been successful at its intended effort to
diminish the scope of government and integrate developing countries into
the global economy.

But it has increased suffering in developing countries immeasurably. In
most of the world's poorest nations undergoing structural adjustment,
poverty has increased, health care systems have collapsed and income
inequality has skyrocketed.

Developing countries that have done well in recent decades, primarily
those in Asia, including China, have succeeded by violating central tenets
of structural adjustment: they have maintained a strong government role in
the economy, and they have protected certain parts of their economy.

Not surprisingly, people in developing countries have protested strongly
against IMF policies. Countries throughout the world have witnessed "IMF
riots" following IMF-ordered lifting of price subsidies for goods such as
bread and gasoline.

But because the IMF derives it authority from rich countries, not the poor
nations, it has been able to weather these outbursts.

In the last two years, however, momentum against the IMF has grown in the
rich countries, as well as in the developing world.

The IMF's admitted mishandling of the 1997-1998 Asian financial crisis
made the economic contraction in Asian nations much worse. The structural
adjustment agenda further slowed the Asian economies that had already
plunged into recession.

This incompetent performance finally sparked widespread criticism of the
Fund in the industrialized countries.

Meanwhile, the worldwide Jubilee movement is increasingly winning support
for the idea of debt cancellation for the poorest countries.

The IMF has deftly tried to turn these weaknesses to strengths. It
adroitly used the Asian financial crisis to win $90 billion in new funding
from the rich countries. The Fund needed more money, proponents claimed,
to keep the crisis economies afloat.

And the IMF has sought new monies so it can offer very modest debt relief
through its Enhanced Structural Adjustment Facility (now known as the
Poverty Reduction and Growth Facility, an Orwellian twist) -- in exchange
for countries agreeing to years of closely supervised structural
adjustment!

But these jujitsu tactics may be running out of steam. Political momentum
against the IMF ratcheted up in recent weeks, when the Meltzer Commission,
a bipartisan advisory commission to the U.S. Congress, released its
report.

While the members of the commission disagreed on many matters, they agreed
on two: First, the IMF (along with the World Bank) should use its existing
resources to cancel all debts. Second, the IMF should get out of the
business of long-term lending -- the kind of development loans to which
structural adjustment conditions are normally attached.

The report has shifted the terms of debate over the IMF in the United
States and the U.S. Congress. Unfortunately, the IMF is only seeking a
relatively small amount of new money from the Congress -- and if that
money goes through, Congress will lose most of its influence over the
monetary agency for several years (until the next funding request).

But the shift in policy circles is now being accompanied by a new
progressive public protest against the IMF in the United States. On April
16, during the IMF's annual spring meeting, thousands of demonstrators
will take to the streets of Washington, D.C. to protest the deadly toll of
IMF policies.

Infused with the spirit of Seattle that shut down the World Trade
Organization meetings, the demonstrators are planning a direct action to
shut down the IMF, as well as a massive, permitted rally and march. (For
more information on the April 16 actions, see http://www.a16.org)

Street demonstrations against the IMF in Washington have the potential to
awaken people in the United States to the needless suffering imposed by
the Fund on people throughout the world, and to mobilize a critical mass
of opponents in the country that exercises a dominant influence at the
Fund.

The IMF's reign of terror may finally be winding down.

AMP Section Name:World Financial Institutions
  • 194 World Financial Institutions