[stop-imf] Policy.com: Does the IMF Need More Than a New Boss?
Robert Weissman
rob@essential.org
Fri, 10 Mar 2000 14:22:11 -0500 (EST)
This story comes from Policy.Com, which has a very nice set of links on
IMF-related issues at http://www.policy.com/news/dbrief/dbriefarc558.asp.
The page also features a link to the dissenting view of the Meltzer
Commission (at least one of them), which you can go to directly at
http://www.iie.com/TESTMONY/reform.htm.
Robert Weissman
Essential Information | Internet: rob@essential.org
Updated: Friday, March 10, 2000, 12:31:38 PM EDT
Does the IMF Need More Than a New Boss?
by April Pedersen, Policy.com
March 10, 2000 -- These are tough times for the
International
Money Fund. With public disputes over its
leadership and
Seattle-like demonstrations being planned for its
spring
meetings, the IMF is facing unprecedented
scrutiny.
In addition, on Wednesday, a special
congressional commission
released a report saying the IMF and the World
Bank largely
have failed their primary task: bringing
financial stability and
economic growth to the developing world. The
report suggested
that the organizations sharply curtail their
lending.
The report, issued by the International Financial
Institution
Advisory Commission, an 11-member bipartisan
congressional
panel chaired by economist Allan Meltzer, has
intensified a
simmering debate over the future of the global
financial
institutions that came under attack
two-and-a-half years ago for
their performance in the 1997-98 Asian economic
crisis. Besides
recommending a radical overhaul of the
institutions, the
"Meltzer Commission" urged full cancellation of
the debts owed
by heavily indebted poor countries to the IMF and
World Bank.
The Meltzer Commission report is the most
dramatic
endorsement yet for outright debt cancellation,
as well as for an
end to the IMF's economic policies and control
over developing
countries, and for increased aid to the world's
poorest countries.
The panel, which split 8-3 on its primary
recommendation,
concluded that both the IMF and the World Bank
are wasting
billions of dollars in loans to countries that
have access to
lending by private commercial banks.
"The IMF has given too little attention to
improving financial
structures in developing countries and too much
to expensive
rescue operations," the report says. "Its system
of short-term crisis
management is too costly, its responses too slow,
its advice often
incorrect and its efforts to influence policy and
practice too
intrusive."
The report further comments that "international
financial
institutions have often achieved results at
extremely high cost to
the citizens of the crisis countries, or failed
to achieve their
missions, and that the rhetoric of their
leadership is often
distinctly different from the institutions'
accomplishments."
The commission said the IMF should limit future
activities to
providing short-term emergency loans to tide
countries over
during times of financial crisis. It further
recommended that the
World Bank scrap most of its current loan
activities in favor of
supplying grants to the world's poorest nations.
These recommendations have unleashed a strong
reaction in
Congress with many Republicans strongly endorsing
them while
some Democrats have attacked the proposals as too
radical.
House Speaker J. Dennis Hastert, R-Ill., and
Majority Leader Dick
Armey, R-Texas, both praised the group for
recommending
radical changes in the two agencies, which long
have been
criticized by conservatives for wasting taxpayer
dollars.
"The IMF, as it now functions, is a destructive
institution [that]
usually does more harm than good to countries it
is purporting to
help," Sen. Jesse Helms, R-N.C., said. "There is
growing
sentiment that perhaps the time has come to
simply abolish the
IMF."
Sen. Phil Gramm, R-Texas, chairman of the Senate
Banking
Committee, told the panel members during a
hearing that he
hopes to use legislation providing more debt
relief for the world's
poorest countries as a vehicle to implement many
of the panel's
reform recommendations for the IMF and World
Bank.
On the other hand, House Minority Leader Richard
Gephardt,
D-Mo., said the Meltzer report "illustrates an
extreme,
neo-isolationist attitude" toward the fund and
the bank. "Instead
of proposing thoughtful reform, the report takes
a slash-and-burn
approach," he argued.
Meanwhile, economist Fred Bergsten, one of the
three
commission members who issued a dissenting
opinion, said the
suggestions would undermine the world economy and
hurt U.S.
economic interests. "The majority proposals would
sharply
increase the risk of international economic
disorder and dash the
prospects of economic development for millions of
poor
people," he said.
Development groups welcomed the idea of debt
relief but said
the report failed to address fundamental problems
at the bank
and the fund. "Until the IMF's chronic lack of
accountability and
democracy are also dealt with, any reforms are
unlikely to have
a lasting positive impact," said Carol Welch of
Friends of the
Earth.
The Treasury now has 90 days to consider the
commission's
report and draft a response to Congress on what
reforms it will
urge upon the IMF and the World Bank in the
official lending
community. The IMF's deputy managing director,
Stanley
Fischer, said the fund already was considering
changes.