RESPONDING TO "MAINSTREAM" ATTITUDES
ON THE IMF & WORLD BANK
Many of the educational materials the 50 Years Is Enough Network
and its allies write aim to answer the sort of questions progressive
activists and thinkers pose about the institutions. But many people
- "mainstream" journalists family members, neighbors,
friends - approach issues related to corporate globalization with
the attitudes that have been fostered for decades by corporations,
governments, and the financial institutions themselves.
In early August a critic of the movement for global economic justice,
or perhaps just a skeptic, wrote a letter with several challenging
questions and sent it to one of the e-mail listservs of the Mobilization
for Global Justice, the Washington-based coalition organizing for
fall mobilization. The following series of questions and answers
is based on the response composed by Soren Ambrose, Senior Policy
Analyst with the 50 Years Is Enough Network. It may spur some thoughts
on how to respond to "mainstream" assumptions, allegations,
and questions.
Q. You cite the many evils, as you see them, of the World Bank
and the International Monetary Fund. You say that these institutions
force austerity packages on developing nations and encourage cash
crop production over the production of consumable crops and that
these countries then suffer under the burden of debt. Why don't
you talk about the responsibility of the countries borrowing money
to decide if the terms are something with which they can live? No
one forces them to sign.
A: A key word in this question is "force," as in "force
austerity packages on developing nations," which is rebutted
with "No one forces them to sign." That depends on your
definition of "force." No, the IMF does not literally
point a gun at the head of finance ministers to make them sign.
But if your government (a) cannot get credit or capital from any
other source; (b) does not have adequate resources to feed its people
without external assistance; and (c) does not have a
bargaining chip, such as nuclear weapons, to complicate the political
equation . . . what choice does a Finance Minister have other than
to agree to whatever conditions are necessary in order to prevent
people from starving? Yes, we do think that many Finance Ministers
do not press for the best deal they can get, partly because they've
been trained in the same economic assumptions, and at the same institutions,
as Bank and Fund staff. And yes, some of them are certainly corrupt
or part of a class that benefits from the maintenance of IMF-style
programs. That, however, does not change the very difficult position
they are routinely put in.
In fact we do not shy away from acknowledging the culpability of
many Southern governments in creating and sustaining economic crises.
But neither do we shy away from looking at the responsibility of
Northern governments and the institutions they control, which are,
after all, the most powerful ones in the world, and which do, without
question, hold the upper hand in setting the terms of their loans.
The question implies a suggestion that the debt burdens of these
countries are rightly their own responsibility. This argument against
debt cancellation ignores the following points:
* Much of the debt in question was contracted by undemocratic governments
with little intention of using the funds for responsible development.
Mobutu, Moi, Samuel Doe, the Argentine junta, Siad Barre, Marcos,
Pinochet, and dozens of others got loans from these institutions
because of their utility to wealthy governments like the U.S.'s
in Cold War politics. It is precisely the money borrowed in the
'70s and '80s that constitutes the major portion of the debts that
now burden these countries. You may argue that the loan was taken
out legitimately and it is too bad if it wasn't used wisely, but
at what point do we say no, it's actually illogical and counter_productive
and cruel to force the people of the Democratic Republic of Congo
to pay off the bribes given to Mobutu, to demand that the people
of South Africa service massive debts incurred by the apartheid
regime to build up arsenals to quash democratic movements, or to
insist that the people of the Philippines continue paying the interest
on Imelda Marcos's credit cards? Right now 19,000 children die every
day because of preventable diseases, while health care systems are
cut back, privatized, and subjected to "user fees" that
impoverished families cannot afford. Are we so attached to the sanctity
of contracts signed by dictators whom the institutions and governments
all knew were corrupt? Do we finally cross that moral line when
20,000 a day are dying? No? When?
* Much of the principal of the original loans has been paid back
several times over. It is only the interest, so sanctified by our
economic system, that keeps these loans on the books, perpetually
demanding service.
* Even in the cases of the most responsible loans, most of the
money quickly ended up back in the North, as the terms of World
Bank programs implicitly required that Northern consultants, engineers,
construction companies, etc. be hired. Indeed, the Bank has often
promoted itself to U.S. legislators as a good deal by demonstrating
that for every dollar the U.S. earmarks for it, U.S. companies get
something like $3 in contracts (that figure has recently been reduced).
This is development for the North; for the borrowing country it
just means more and more debt, particularly since most Bank projects
(dams, roads, power plants, etc.) are not themselves direct generators
of income, but infrastructure enabling private actors to do business.
* Jubilee South, the coalition of about 50 national debt cancellation
campaigns in Africa, Asia, Latin America and the Caribbean (www.jubileesouth.net)
makes a compelling case that their peoples and environments have
been subjected to centuries of exploitation for the profit of people
in the North. Ecosystems have been ravaged in order to extract oil
and minerals with little benefit for the people living in the area.
Transportation infrastructure has been designed and built, with
loans, in order to facilitate the movement of cheap goods to ports
for delivery to the North. Slavery, of course, was the most dramatic
embodiment of "free trade" exploitation. The colonialism
of the 19th and 20th centuries also put entire continents and regions
at the service of European and U.S. political and economic agendas.
Apart from saying that it "isn't realistic," how does
one argue with the contention of thousands of Southern campaigners
that speaking of "debt relief" in such a context is obscene,
and speaking of "debt cancellation" is just a small part
of the equation. The real conversation begins after the prerequisite
of 100% cancellation of these illegitimate debts, and that conversation
is about reparations.
* The argument that countries should just honor their agreements
fails to take into account the reasoning that produced bankruptcy
laws in most Northern countries: at a certain point, a debtor has
nothing more to give, and totally ruining her serves little purpose
for society. Instead an ostensibly neutral third party, a court,
mediates between creditors and debtors to work out a plan that offers
some satisfaction to creditors and allows the debtor to continue
having shelter and food. Countries can't go bankrupt; there's always
more people to provide cheap labor and more land on which to grow
cash crops, after all. Even after the most outrageous violations
of democratic process and economic wisdom (e.g. apartheid), the
next government can be held liable. And when the debt becomes self-perpetuating,
through the common practice of borrowing to pay off old loans, then
the international financial institutions have the power, as the
directors of what is in effect a creditors' cartel, to require obedience
to their economic policies indefinitely.
Q: What about the Poverty Reduction Strategy Papers or the Enhanced
Highly Indebted Poor Country Initiative? The PRSP is designed specifically
to reduce poverty and it is the borrowing country, not the Bank
or the IMF, that is supposed to engage its own civil society, business,
labor, and local political leaders to develop the strategy. The
HIPC is designed to relieve the debt burden.
A: On HIPC: The first version of this program was unveiled in '96,
apparently in response to the Jubilee 2000 campaign, which was gathering
great momentum internationally. All right, said the IMF and World
Bank, we'll do something to reduce the absurd levels of debt. They
agreed, in short, that if a country that fell under specific poverty
gauges had spent three years in full compliance with an IMF structural
adjustment program and committed to a second (or third, or ) program,
it could negotiate a reduction in the debts claimed by the IMF,
World Bank, regional development banks, and some bilateral aid agencies.
Unfortunately the reduction is far too small, and the pace at which
countries were approved was very slow. The "enhanced"
version announced in '99 expands the amount of debt relief and the
number of eligible countries, and, in response to Jubilee 2000 pressure,
spurred the institutions to quickly move some 20 countries through
the process. But even with the slightly more generous terms, many
"beneficiaries" still pay more on debt service than they
do on health and education. The 50 Years Is Enough Network views
the HIPC initiative as a sophisticated system of bribery to keep
countries which might otherwise default on their loans and band
together to challenge the oppressive rules of today's global economy.
The goal is to perpetuate the debt treadmill (borrow money for an
IMF program, see debt increase and living standards plummet, borrow
more money, etc.). That way the institutions can claim to be generously
reducing debt while continuing to have the power to dictate economic
policy - the real goal, we think, of the debt claimed by the IMF
and World Bank.
It is also worth noting that the IMF and World Bank do NOT write
off these loans, as a private bank would concede that it would never
get paid back on a client's loan. Instead they agree to accept payments
for beneficiary countries' debt servicing from accounts set up to
receive contributions from Northern governments - i.e., taxpayer
money from the U.S. and others. And unlike the U.S. and many other
governments, they refuse to discount the value of the debt: when
the U.S. "forgives" debt, it requires Congress to allocate
just 10% of the face value of the debt of the most indebted countries,
since that debt, based on the likelihood it could never be repaid,
is judged to be worth far less than its stated amount. The IMF and
World Bank, under HIPC, get 100% of the face value of the debt.
The institutions take no hit at all for their destructive and unwise
lending, and in fact are more certain of getting paid off than when
they were relying on the impoverished country's government. HIPC
is effectively a bailout of the IMF and World Bank.
On the PRSP: In a stunningly Orwellian move, the IMF announced
at the 1999 annual meeting that it was renaming the Enhanced Structural
Adjustment Facility (ESAF) - the account from which lending for
structural adjustment programs came - the Poverty Reduction and
Growth Facility (PRGF). It was as if they chose precisely what structural
adjustment doesn't do, and renamed it for those qualities. Under
the new procedures, the IMF is to cooperate more closely with the
World Bank in setting up structural adjustment programs, with both
institutions merely reviewing a "Poverty Reduction Strategy
Paper" (PRSP) to be drafted by the borrowing government in
conjunction with civil society organizations (trade unions, women's
groups, development advocates, etc.), plus an adviser or two from
the IMF and World Bank. Within a few months of the introduction
of the new program, internal guidelines from the IMF emerged which
very clearly explained that a PRSP would attract the requested funding
only if it pledged adherence to the same macroeconomic principles
that the IMF had always insisted on in ESAF programs. As one World
Bank official acknowledged in an unguarded moment, "the PRSP
is a matter of the people with the money telling the people without
the money what they have to do to get the money." The role
of civil society was envisioned as being that of gauging the level
of poverty in the country, identifying what budget priorities should
be for pledged poverty-reduction funds, and determining how successful
poverty-reduction efforts would be. Since civil society groups had
no expertise in economics, the IMF assumed that they would neither
want nor deserve input on trade policy, tariffs, labor policy, investment
laws, etc. In the countries that have gone through the PRSP process
- Bolivia, Mauritania, Kenya, Tanzania, Zambia, Honduras, Mozambique,
Nicaragua, Burkina Faso, Uganda - the public has indeed been completely
excluded from these vital policy discussions. While the procedure
has offered some organizations in some countries increased leverage
in dealing with their governments, that influence has not extended
beyond simple budgeting issues. The policies that people around
the world have been attacking structural adjustment for during the
past 20 years are still not up for discussion. In fact the PRSP
scheme has presented new dangers: the IMF and World Bank are now
involved in planning and assessing an even broader range of national
economic plans and priorities; the IMF has taken on a mandate of
"poverty reduction" for which it has no qualifications
and proven incompetence; and civil society involvement in aspects
of the process risks giving the resulting structural adjustment
programs the appearance of popular, democratic approval, despite
the fact that the key policy decisions are usually not revealed
until after consultations with civil society are over.
The blithe assumption by the IMF that civil society will not be
at the table for macroeconomic decisions is consistent with its
insistence, since its founding, that it does not involve itself
in political matters, just economic ones. That decisions about trade,
investment, labor, currency, health, education, housing, and privatization
policies could possibly be construed as "apolitical" is
a gauge of just how myopic the IMF's view of the world is.
Q: In point of fact regarding cash crops, I know of several
IMF and World Bank programs that specifically encourage economic
and agricultural diversification to reduce dependency on cash crops
and to reduce the need for imported foodstuffs to improve the balance
of payments situation.
A: We recently learned of one such World Bank program, in fact.
In that case (which we haven't been able to examine completely yet),
it is entirely possible that the Bank is doing something worthwhile.
That does happen occasionally. With over 10,000 employees and billions
of dollars moving through it every year, it would be remarkable
if they had a perfect record of disasters in everything they do.
At the same time as we make that acknowledgment, it's important
to understand what the problem is they're addressing. Before the
IMF and World Bank swept through the South on the wings of structural
adjustment programs in the '80s, there was substantially more agricultural
diversity. The basic scheme promoted by the IMF and World Bank in
Latin America, the Caribbean, Africa, and Asia - most of the tropical
world - was a greater orientation to production of cash crops, which
would allow countries to earn hard currency, which could then be
used to pay off debts and to buy food on international markets to
replace that which was no longer being grown at home. So Brazil,
Tanzania, Ghana, Indonesia, and dozens more all devoted greatly
increased amounts of their best lands to growing coffee, cocoa,
cotton, tea, flowers, and tobacco. The most elementary rule of market
economics, the law of supply and demand, kicked in: with a greatly
increased supply of the commodities, their price plummeted to all-time
lows, where they remain mired. Most countries found themselves unable
to afford to buy enough food for their people on international markets.
So they took out more loans. In the case of Uganda, the first "beneficiary"
of HIPC debt relief, the calculations of "debt sustainability"
were based on the prevailing price of coffee; when the price dropped,
Uganda became eligible for HIPC a second time, less than a year
after receiving its benefits. Was this just a gross oversight on
the part of the IMF and World Bank, a neglect of the most fundamental
rule of economics? Or was it more than a coincidence that multinational
corporations based in the G-7 countries profited enormously from
the low price of commodities, and consumers in Northern countries
were delighted, and now addicted, to incredibly cheap prices for
a whole range of products which are imported from far away? Whatever
the case, there is now some effort underway to backtrack on those
earlier recommendations, since countries aren't able to even make
their debt servicing payments, and the price of coffee has bottomed
out so dramatically that farmers in some countries are simply dumping
their crop and people in coffee-producing areas of Nicaragua are
dying of starvation.
Q: Democracy, or the lack thereof, in many of these developing
nations, doesn't appear to be much of concern for you. The autocratic
nature of many of the governments of the countries you are defending
is a much bigger reason the peoples of the developing world are
suffering than bad IMF/Bank agreements. Moreover, you don't mention
corruption at all. In many of these countries, if not most, corruption
is one the biggest reasons that the money borrowed from the IMF
or the World Bank does not go to improve the lives of the people
rather than the terms of the agreement of struck with the Bretton
Woods Institutions.
A: We really aren't so na•ve as to think that the governments of
Southern countries are purely beneficent and noble. Many of us work
extensively with partner organizations in those countries, and some
of us are actually from those countries. Our colleagues in the South
in most cases are more interested in working to change their governments
than they are in the international financial institutions. At the
same time, they understand that the shackles put on their countries
by the IMF and World Bank (and the interests they represent) will
bind any government that comes to power, good or bad. So they critique
the institutions and the imperialistic system they represent. In
our work we take what we think is the only responsible position:
we support our colleagues' efforts to make their governments accountable
and responsible in whatever ways we are asked to, but we direct
our main efforts to changing the situation we're more responsible
for: the system perpetuated by our governments and corporations,
in large part through the "multilateral" institutions
they control. We refuse to take on the imperial role of guiding
people in other countries to an enlightened system of government.
Not only do we obviously not know the political and cultural circumstances
intimately, but we recognize how far we have to go in our own country(ies)
before we can claim anything like democracy as our governmental
system. Even if the idea of prescribing other peoples' policies
and methods of governance were not morally dubious for us, we would
recognize that dictating such things from the outside very seldom
works.
On the question of corruption, we should probably all be particularly
cautious to avoid the sort of Eurocentric bias betrayed by the question.
The World Bank itself has uncovered many corrupt schemes among its
employees, one of the most recent involving Swedish staffers and
Swedish companies. In most other cases, when corruption in the South
is highlighted, it is amazing how infrequently we focus on who is
handing out the bribes. Most European countries allow corporations
tax deductions for bribes paid; a fact that has caused some U.S.
companies to complain that the Europeans have an "unfair advantage."
Look at Northern political and economic scenes, and see if you can
spot corruption. An honest look will prove that we are no more in
a position to lecture others on corruption than on democracy.
Q: The G-7 controls 40 percent of the votes in the Bretton Woods
institutions. While substantial, that is not a majority. What are
the developing countries doing with their votes?
A: Actually it depends on how you count it. Since two of the G-7
countries hold the seat for larger groupings of countries, they
actually influence large enough percentages of votes to say that
the G-7 controls between 45 and 60 percent of the votes.
The salient point, however, is that "majority" is not
a very relevant term. To make any significant shift in policy at
either institution, a "super-majority" of 85% is required.
That means - and the calculation is quite intentional - that the
U.S., with between 16 and 18 percent of the vote at each institution,
can block any policy changes. That fact, together with the presence
of the institutions in Washington, and the U.S.'s acknowledged dominant
role in the global economy, makes the U.S. much more powerful than
even having the largest share of votes would indicate. On most matters
it can rely on the support of their G-7 allies as well as other
substantial blocks represented by countries like Belgium, the Netherlands,
Spain, the Scandinavian bloc, and Saudi Arabia. Sub-saharan Africa
has two representatives on the Board, each representing over 20
countries, and casts a combined total of something like 5% of the
votes.
Of course it's also the case that there are very few actual votes
taken. Instead most decisions are made by consensus - though quite
assuredly not a consensus marked by the twinkling and stand-asides
that characterize the movement for economic justice. Instead it's
a consensus process through which those without much power quickly
learn the position of those with power, and more often than not
choose not to argue, for fear of later ramifications. It's also
the case that in some respects, such as a desire for more capital,
the Southern Board representatives are charged with representing
governments that clearly want the money to flow, no matter what
the project or policy is. Again, virtually no one in our movement
claims that turning power over to the representatives of the Southern
governments is the answer. It's not a matter of picking the good
guys and the bad guys - the whole system is rotten and must be transformed
into something else altogether.
Q: Why doesn't you ever mention military spending in developing
countries? I know of many that spend much more they need on weapons
leaving precious little for development.
A: Many of our colleagues in Southern countries certainly do just
that, and we support them. One of the main arguments of our colleagues
in Chad and Cameroon who opposed World Bank financing for an oil
pipeline running through their countries was that profits would
be used by Chad's dictator for weaponry to repress government opponents.
We echoed their critique. Earlier this year newspapers carried the
news that President Deby did indeed skim $5 million off the first
payment to buy weapons, to the great embarrassment of the Bank,
which thought it had an enforceable agreement that he would not
do that. In general, coming from the leading arms merchant nation,
our work in the U.S. is on the supply end.
Q: While criticizing the failures of capitalism and the global
economy have you thought seriously about the failures of alternative
models in India, China, Vietnam, Cuba, Tanzania, among others? What
is a viable alternative? Your movement doesn't even begin to respond
to that question.
A: We are not so arrogant as to think we have all the answers.
Nor do we believe that there is a single alternative system to solve
all the problems (though some parts of our movement surely do).
We in fact believe that much of what is wrong with the global economy
comes from the assumption that there *is* one system that will work
for every country, every society, and that we just need the right
scientists at the lab in Washington to figure out all the answers.
Dictating answers from Washington is not only imperialistic, it's
been a huge catastrophe, and is likely doomed to always be one.
Our goal is to change the power dynamic, to remove the shackles
our government and the IMF and World Bank have placed on those in
the South. Yes, there will be some failures, but there will also
be some successes. The failures will likely not be too much worse
than the last 20 years of externally-imposed neo-liberal policies
requiring the selling off of Southern economies to Northern multinationals.
That said, it is really a strain to claim that alternative systems
have failed mainly because of their own flaws, and that the one
system we have now is as good as can be expected. In Tanzania, some
mistakes were made, no doubt, but a great deal of positive change
occurred also, as our Tanzanian colleagues still appreciate - not
least the creation of a society where activism and progressive values
still come more naturally than in most others. To say that Tanzania's
experiments were unaffected by the Cold War, by the U.S.'s desire
to not see any avowedly socialist system survive, is na•ve. For
Cuba, you can't seriously claim that the presence of an enthusiastic
band of aspiring plutocrats 90 miles away in Florida with substantial
support from an unprincipled U.S., the world's major superpower,
has nothing to do with any flaws you may detect in its government.
Regardless of such flaws, you will have to admit, as Larry Summers
and James Wolfensohn both have, that Cuba has done far better at
providing health care for its people than most Southern countries,
and most Northern countries, and that overall it has actually provided
a standard of living more equitable and more satisfactory than that
found in many other Southern countries. Both Summers and Wolfensohn
seem to prefer to think of it as a fluke, but we suspect it might
well point to some of the wholly predictable failings of the neo-liberal
model the institutions impose everywhere. As for India, one can
certainly say that the state of Kerala has provided an encouraging
alternative, just as Eritrea (before the latest war) did, just as
Rio Grande do Sul state in Brazil does, and, just as the social
democracies of Scandinavia and Germany did before they were moved
to the right through the pressure of the current global economic
system. We do not hold any of these out as the perfect model; but
we do maintain that all had attractive elements that give them more
appeal than what we are commonly told now is the only viable economic
system. That alternatives have existed and worked, that some still
do, often in isolation, is evidence enough that many alternatives
are possible. The trick is end the hegemony of Washington-based
institutions and multinational corporations.
Q: Why don't you spend more time encouraging political solutions
other than protesting? Why don't you encourage voters in the G-7
to elect officials who would change their countries to vote differently
at the boards of directors meetings?
A: We do, and our colleagues in other G-7 countries do. We've made
some progress in Canada and Germany, but it's always fragile.
Q: Why don't you ever mention that the labor rights you claim
to want to protect are in fact promoted by the unions in industrialize
nations, NOT the countries of the developing world which see labor
rights as unfair trade barriers?
A: The conflation here of "countries" with "governments"
is troubling. In fact the position of the investor class and governments
in the South is very different in most cases from the position of
the workers and farmers. Again, we don't for a minute see ourselves
as advocates for Southern governments in general, except in the
sense that we advocate for more sovereignty and localized decision-making.
Government opposition to labor rights in the South is greatly influenced
by the fact that the IMF and World Bank have "recommended"
that such fanciful notions be discarded by their clients in order
to be more attractive to Northern investors. Had this "race
to the bottom" not been initiated and fanned by the institutions
(in service of their corporate partners), the situation might be
somewhat different today. Even if it weren't much different, at
least we would not have the International Labor Organization's conventions
constantly undermined by the much more powerful multilateral institutions
based in Washington.
Q: Many of you hail Josˇ Bovˇ as a hero, but you don't acknowledge
that Western farmers like him hurt the farmers of the developing
world by demanding subsidies from Western governments and trade
barriers and quotas to prevent developing nations from being able
to sell their products in the industrialized countries.
A: We don't acknowledge the imbalances in global agriculture and
food production? In fact this is a big part of our movement's critique
(some of the best analysis coming from Food First: www.foodfirst.org).
In general we are for domestic production for domestic consumption,
although of course the situation is much more complicated than that.
Bove is certainly not so rustic or na•ve as you portray him; he
is a full-fledged, highly-educated (partly at Berkeley!) advocate
of labor rights and equitable food production and supplies.
Q: You should spend more time developing and proposing and implementing
viable alternatives, rather than simply trying to tear down the
status quo by yelling in the street.
A: When someone is hitting you on the head with a hammer, the first
order of business is to get her to stop or to take away her hammer.
The complaint that our movement is "negative" because
it's against the status quo is an empty one. A system with all the
money, power, and guns is destroying communities and lives - is
it more imperative to come up with the idea of a different system
or to find ways to curb the destruction and reduce the power of
the destroyers? Yes, we need to talk about alternatives, but we've
got some distance to go yet in terms of stopping the immediate problem.
Pretending we can develop theories so beautiful that those who benefit
from the wealth and power will be persuaded to give up some of their
privileges and wealth is probably na•ve. To move toward that day
when the power dynamic is changed, we have to demonstrate the enormous
problems with things as they are, and motivate and mobilize a broader
public to wake up and consider doing something about it.
50 Years Is Enough: U.S. Network for Global
Economic Justice
3628 12th St., N.E.
Washington, DC 20017 USA
tel: 202/463_2265 fax: 202/636_4238 email:
info@50years.org
web: www.50years.org
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