[stop-imf] Reason No. 3 to Come to DC for A16: The IMF has helped foster a
severe depression in Russia (fwd)
Robert Weissman
rob@essential.org
Wed, 12 Apr 2000 19:16:32 -0400 (EDT)
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This is one of a series of one pagers on "Reasons to Come to DC for April
16." A version formatted in MS Word is attached. Please spread these
widely, and feel free to lift from them for your own use.
For more on the demonstrations, go to www.a16.org
Robert Weissman
Essential Information | Internet: rob@essential.org
Essential Action
P.O. Box 19405 Washington, D.C. 20036
TELEPHONE: 202-387-8030 o FAX: 202-234-5176 o E-MAIL: ACTION@ESSENTIAL.ORG
Reason No. 3 to Come to DC for April 16:
The IMF has helped foster a severe depression in Russia
Russia in the 1990s has witnessed a peacetime economic contraction of
unprecedented scale. Many believe much of the blame for the social and
economic catastrophe rests with the IMF, which has had a central role in
designing and supervising Russia's economic policy since 1992.
The number of Russians in poverty has risen from 2 million to 60 million since
the IMF came to post-Communist Russia. Male life expectancy has dropped
sharply from 65 years to 57. Economic output is down by at least 40 percent.
The IMF's shock therapy -- sudden and intense structural adjustment -- helped
bring about this disaster.
"In retrospect, its hard to see what could have been done wrong that wasn't,"
Mark Weisbrot of the Center for Economic and Policy Research told a
Congressional committee in late 1998. "First there was an immediate de-control
of prices. Given the monopoly structure of the economy, as well as the large
amount of cash savings accumulated by Russian households, inflation soared 520
percent in the first three months. Millions of people saw their savings and
pensions reduced tocrumbs."
"Then the IMF and Russian policymakers compounded their mistakes," Weisbrot
explained. "In order to push inflation down, the authorities slammed on the
monetary and fiscal brakes, bringing about a depression. Privatization was
carried out in a way that enriched a small class of people, while the average
persons income fell by about half within four years."
Meanwhile, Russia kept its economy functioning with an influx of foreign
funds, lent at astronomically high interest rates because of the strong
possibility of default. In 1998, with the Asian crisis still unfolding and
with Russian default seemingly near, the IMF agreed to a $23 billion loan
package to Russia, seeking to maintain the rubles overvalued exchange rate. An
initial $4.8 billion portion of the loan left the country immediately -- some
used to pay off foreign lenders, much of it stolen by Russian politicians.
Soon after that fiasco, the ruble collapsed -- with none of the horrible
consequences predicted.
For the IMF, the prospect of Russia deciding to continue not to repay loans
was extremely worrisome. To avert this problem, the Fund continued its loan
program, but its loans to Russia dont actually go to Russia; all IMF money
disbursed to Russia is held at the IMF -- and used to pay off prior IMF loans
to Russia.
Does the IMF think it made fundamental mistakes in Russia? No. From the IMF's
perspective, the problem has been not enough IMF-style reform. Here's how
former IMF Managing Director Michel Camdessus put it in September 1999:
"[Russias economic] shortcomings represent not so much the failure of reform
as the effects of 70 years of central planning and the incomplete
implementation of reform policies -- itself a result of a lack of domestic
political consensus on reform."
FOR INFORMATION ON THE APRIL 16 PROTESTS IN DC, GO TO WWW.A16.ORG
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