[corp-focus] IMF: No Sex, Still a Scandal

[robert weissman]

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IMF: No Sex, Still a Scandal
By Robert Weissman
October 2, 2007

Because it did not come amidst a sex scandal and because the outgoing 
leader was not one of the architects of the Iraq War, the surprise June 
resignation of the International Monetary Fund's Managing Director 
Rodrigo de Rato did not garner the gleeful, gossipy headlines 
surrounding Paul Wolfowitz's disgraceful exit from the World Bank.

Last week, the IMF announced the selection of a new leader, Dominique 
Strauss-Kahn, a former French finance minister, with the world again 
barely taking notice.

But that doesn't mean there isn't scandal at the Fund, or that the 
Fund's policies are any less important than those of the Bank.

For decades, in various names, the IMF, along with the Bank, has imposed 
"structural adjustment" on developing countries -- a set of 
corporate-oriented, market fundamentalist policies including slashing of 
government budgets, sale of government assets to local elites and 
foreign corporations ("privatization"), deregulation of the economy, and 
promoting exports and trade at the expense of local needs.

IMF policies have left shattered economies around the world, consigned 
untold millions to poverty, and directly and indirectly destroyed social 
welfare systems, including healthcare and education systems, throughout 
much of the developing world.

In the last few years, the IMF has seen a remarkable, quiet revolt 
against its power, influence and policies. Middle-income countries in 
Asia and Latin America have paid off their debts to the Fund, and 
announced they won't borrow from the Fund any more. That move follows a 
string of high-profile Fund failures -- interventions in economic crises 
(caused in no small part by IMF recommendations for countries to 
deregulate their financial systems) made drastically worse by Fund advice.

But most African countries don't have the resources to pay off their 
debts to the IMF and other international lenders. They remain stuck in 
the debt trap, meaning they need new money from the IMF to pay off old 
loans, or at least the IMF stamp of approval to access capital from 
other sources. Which means they remain subject to IMF dictates.

Among other barbaric consequences, the IMF's obsession with conservative 
financial prescriptions have left the nations worst hit by the HIV/AIDS 
pandemic unable to mobilize resources -- or even to use donated monies 
-- to address the pandemic or other excruciating health needs.

In March, the IMF's Internal Evaluation Office (IEO) issued a report far 
more scandalous than anything connected to the Wolfowitz drama at the Bank.

The IEO found that IMF policy was preventing African countries from 
spending increased foreign aid on its intended purposes. Instead, the 
IMF was forcing countries to use increases in foreign aid to pay down 
debts or build currency reserves. Thanks to the IMF, more than 70 
percent in increased foreign aid was being diverted, according to the IEO.

Alongside this refusal to let countries spend aid for intended purposes, 
the IMF has capped countries' ability to spend more money on healthcare, 
including to hire more healthcare workers and pay them more. These are 
the key steps needed to address the healthcare infrastructure problem 
that almost everyone agrees is now the main impediment to further 
scaling up treating for people with HIV/AIDS and resuscitating 
countries' ability to deliver basic health services to all.

Underlying these restrictions on countries' ability to spend money to 
address pressing health needs is an IMF fixation on what it terms 
macroeconomic stability, by which it means very low inflation rates and 
no or limited deficit spending. Dressed up in the guise of technocratic 
economic advice, they are really policy decisions that restrain economic 
expansion, preventing countries from generating more resources for their 
own needs.

They are also policies that take no account of the special circumstances 
of countries facing the HIV/AIDS pandemic.

"The IMF doesn’t know what the hell it’s talking about," says former UN 
Special Envoy for HIV/AIDS in Africa Stephen Lewis in his trademark 
direct manner. "It never sufficiently takes into account the damage that 
is done to a country when you strip the social sectors."

In other words, failing to invest in healthcare and education not only 
is immoral, it actually weakens economies. The costs are particularly 
high when a deadly but treatable disease is ravaging people in the prime 
of their working years.

Urging an abandonment of these failed policies, more than 100 health and 
development organizations in a letter today called on Strauss-Kahn to 
change course. (My organization, Essential Action, was an initiator of 
the letter sent by the groups to Strauss-Kahn.)

The civil society organizations called on Strauss-Kahn, in his first 100 
days after assuming office November 1, to ensure that the IMF:

* Changes policies on foreign aid spending, so that the IMF does not 
stand in the way of increased spending on health, HIV/AIDS and education.

* Abandons low inflation and deficit-reduction targets, so that the IMF 
does not stand in the way of policymakers in developing countries 
exploring and adopting more expansive fiscal and monetary policy options.

* Publicly states that it will cease and desist with its demands for 
wage bill ceilings that prevent the hiring of more healthcare workers.

* Provide immediate debt cancellation for all impoverished nations 
without harmful and unnecessarily restrictive policy conditions attached.

The odds of Strauss-Kahn adopting this agenda, on this timeframe, are, 
of course, slim.

But there is a reasonable chance that a concerted push from civil 
society -- especially if joined by developing country governments -- can 
make a difference.

The decision by middle-income countries to end their dependence on the 
Fund has left the IMF with a crisis of legitimacy, not to mention its 
own fiscal crisis (the interest payments on loans from middle-income 
countries were a key source of revenue).

Strauss-Kahn, who comes from the left side of the French political 
spectrum, takes office as a self-proclaimed reformer with a special 
interest in low-income countries. Most of his talk about reform has 
focused on giving developing countries a greater say in the governing 
process, not on the substance of Fund policy, however.

It is too much to hold out hope that Strauss-Kahn may assist with the 
transformation of the IMF -- he won't have the power, even on the off 
chance that he secretly harbors the desire -- but he might lessen the 
harm caused by the institution, and give the world's poorest countries 
more policy space.

Whether that happens will depend in no small part on whether the world 
pays attention and demands change. Can some fraction of the attention 
devoted to whether Paul Wolfowitz improperly helped deliver a big 
paycheck to his partner be devoted in the months and years ahead to how 
IMF policies impact the lives and well-being of hundreds of millions of 
people?


Robert Weissman is editor of the Washington, D.C.-based Multinational
Monitor, <http://www.multinationalmonitor.org> and director of Essential
Action <http://www.essentialaction.org>.

(c) Robert Weissman

This article is posted at:
<http://lists.essential.org/pipermail/corp-focus/2007/000268.html>.