[corp-focus] IMF: The Times They Are A-Changin'

[robert weissman]

Friends,

The International Monetary Fund and World Bank just concluded their 
annual spring meetings. Without protests in the street, the meetings 
mostly pass quietly, with short references on the business pages to the 
agreements -- or lack thereof -- among the world's finance ministers.

But IMF/World Bank issues are no less important for the relative lack of 
attention. This is the first of three columns on IMF/Bank topics.

Robert Weissman

---

Extensive links and forum to comment on this and other columns at:
http://www.multinationalmonitor.org/editorsblog

IMF: The Times They Are A-Changin'
By Robert Weissman
April 14, 2008

Have things changed at the International Monetary Fund? Or is the world 
just witnessing yet another in a long series of global economic double 
standards?

IMF Managing Director Dominique Strauss-Kahn says that the "need for 
public intervention" to address the global financial crisis "is becoming 
more evident." Strauss-Kahn has urged 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." 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.

The support for government intervention runs directly counter to the 
IMF's longstanding support for strait-jacketing governments in poor 
countries, by demanding "structural adjustment" -- a series of market 
fundamentalist, corporate-friendly policies, including hyper-restrictive 
macro-economic policies.

So far, there is little evidence that the IMF is changing the way it 
operates in developing countries. But maybe the times are changing, 
whether the IMF likes it or not.

The IMF gets its power from a gatekeeper role in international finance 
and donor circles. International lenders and government aid donors 
commonly limit their lending and aid donations to countries in the IMF's 
good graces. The logic is that the IMF is competent to determine that 
the recipient countries are pursuing sensible economic policies, and 
therefore equipped to manage loans or aid.

The IMF has capitalized on its gatekeeper role to demand countries 
pursue a cookie cutter, market fundamentalist agenda of blind 
deregulation, sell-offs of public assets to corporations 
(privatization), opening up economies to foreign investors, tariff cuts, 
and government spending cuts.

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 expanded 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 has 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.

One thing has changed, however. Impressed by the IMF's repeated 
failures, 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.

Developing countries are not shedding tears over the IMF's financial 
distress. “At long last, the IMF is experiencing first hand serious 
budget cuts,” says Cheikh Tidiane Dieye of Environment and Development 
in Africa (ENDA), based in Senegal. “The poetic justice of this is 
palpable. In Senegal, the IMF has mandated budget cuts for years. As a 
result, we have been unable to invest in health care, education and 
other essential services. If the IMF’s loss of financial power is 
accompanied by a loss in political power, this could be good news for 
all Africans.”

The IMF's governing body has just approved a proposal that would involve 
cutting its staff by about 20 percent and selling some of its gold stock 
to create a trust fund that would fund administrative operations in the 
future.

The gold cannot be sold without U.S. approval, however, and the U.S. 
representative to the Fund cannot support gold sales without 
Congressional authorization.

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 says the Congress should require the IMF to: rescind the use 
of overly restrictive deficit-reduction and inflation-reduction targets; 
exempt expanded health and education spending in developing countries 
from IMF-imposed budget ceilings; permit developing countries to spend 
foreign aid for its intended purposes; delink debt cancellation from 
harmful economic policy conditions; and disclose crucial documents 
currently kept secret.

If the gold sales deal is approved, the IMF will become self-financing, 
and the U.S. Congress will lose much of its power to demand changes in 
how the IMF operates. So the present opportunity will not soon present 
itself again. There is no certainty about when the gold sales 
authorization will come before Congress, but it now seems as though it 
may be delayed until 2009.

Perhaps the IMF under the leadership of Strauss-Kahn, who took the helm 
of the institution only 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. This is perhaps a baby step forward.

But if the IMF is not ready on its own to jettison its long-standing 
policy demands for poor countries, it may soon find that it has no 
choice. Representative Barney Frank, D-Massachusetts, chairs the House 
Financial Services Committee, which must approve the gold sales proposal 
prior to the full House of Representatives considering the issue. At the 
20th anniversary celebration of the Bank Information Center last week, 
he strongly denounced structural adjustment, stated as a matter of fact 
that gold sales will only be authorized if additional IMF gold is sold 
to cancel poor country debt, and made clear that he intends to obtain 
policy changes from the IMF as a condition of permitting gold sales.


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

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