[stop-imf] clips on IMF/World Bank in Iraq

[Robert Weissman]

Will World Bank, IMF botch Iraq?
Some critics worry that, based on their track record, the World Bank, IMF
might do little good.
April 22, 2003: 5:00 PM EDT
By Mark Gongloff, CNN/Money Staff Writer

NEW YORK (CNN/Money) - Though the roles of the United States and the United
Nations in rebuilding Iraq are still unclear, two other groups, the World
Bank and the International Monetary Fund, are almost certain to take
part --
and some critics worry that might be bad news for the future of Iraq's
economy.

These critics, who come from various points on the political spectrum, cite
a long history of failure by the World Bank and IMF in helping poor and
rebuilding countries develop.

"Their over-all macro-economic record is horrible. After a 20-year
experiment in developing countries throughout the world, there are no
success stories; not in Asia, Russia, Brazil, Argentina -- the list is
endless," said Marc Weisbrot, co-director of the Center for Economic and
Policy Research, a left-leaning think tank in Washington, D.C. "Why would
you want them determining economic policy in postwar Iraq?"

While Weisbrot and other progressives think the World Bank and IMF go too
far in forcing privatization and open trade, critics on the right take the
Bank and IMF to task for forcing high tax rates and establishing an
unhealthy reliance on foreign aid, with equally disastrous results.

"Frankly, Iraq would probably be better off not to rely on their aid and
advice," said Ian Vasquez, director of the Project on Global Economic
Liberty at the Cato Institute, a libertarian think tank in Washington, D.C.

Though the IMF did not respond to requests for comment, the World Bank
pointed to a long list of its successful post-war reconstruction jobs,
including, most recently, Afghanistan.

"These places may not be completely out of the woods and are still facing
problems, but I can't point to any country where we could say, 'We did a ba=
d
job,'" said Ian Bannon, manager of the World Bank's Conflict Prevention and
Reconstruction unit. "That's a pretty long list, going all the way back to
Mozambique, Uganda, East Timor and even the West Bank and Gaza."

Bannon added that Iraq, a country with the world's second-largest proven
reserve of oil and a well-educated, highly skilled work force, will likely
take the lead role in setting its economy's course.

"We get criticized a lot for imposing conditions, but the truth is, we can'=
t
force countries to do anything -- our influence is vastly overstated,"
Bannon said.

Bank, fund likely to play 'normal' role

The reconstruction of Iraq following the U.S.-led war to oust Saddam Hussei=
n
from power could cost more than $100 billion, according to some estimates,
making it the most expensive rebuilding effort since World War II.

And Iraq owes anywhere from $60 billion to $300 billion in debt and
compensation from the first gulf war, according to some estimates. Though
the Bush administration hopes to convince Iraq's creditors to forgive or
restructure much of its debt, many of Iraq's obligations will have to be
paid, diverting funds from infrastructure and humanitarian relief.

Some observers hope Iraq's oil will pay for all this, but experts say it
will take months or years to get the oil fully flowing, and at the moment
most of Iraq's oil revenue is spent on food, medicine and other critical
humanitarian aid for most of its population.

Though the United States and other governments will chip in some cash for
the effort -- U.S. taxpayers are footing the bill for the early rebuilding
contracts, for example -- turning Iraq into a robust economy will
require up
to $20 billion a year for several years, according to a recent study by the
Council on Foreign Relations.

Once an Iraqi government is established, much of this cash seems likely to
come in the form of loans from the World Bank and the IMF, international
economic and financial institutions formed at a meeting in Bretton Woods,
N.H., in 1944 to help stabilize the post-war global economy.

"The World Bank and the IMF stand ready to play their normal role in Iraq's
re-development at the appropriate time," the groups said in a press
statement after its Spring Meetings, held April 12-13 in Washington, D.C.

Restructuring still needed

That "normal role" will certainly include extending loans and grants and
could involve guiding the new Iraqi government's economic policies -- the
very scenario critics most fear, since decades of such "guidance" have
produced no obvious, long-lasting benefit for Argentina, Russia, Bolivia,
Haiti and a host other struggling nations.

In 2000, a congressional commission headed by Allen Meltzer, a professor at
Carnegie Mellon University and a senior fellow at the American Enterprise
Institute, said the IMF and World Bank needed sweeping reforms to improve
their effectiveness.

To date, Meltzer told CNN/Money, only some of the recommended reforms have
been adopted by the groups, and he's worried that putting Iraq's developmen=
t
totally in their hands could be dangerous.

"Leaving it to them would certainly be a big mistake until they're
restructured and much more effective than they currently are," Meltzer said=
.

The case for optimism

Still, Meltzer said he was optimistic that Iraq had at least two things
going for it that could help it avoid some of the disasters that have
befallen other World Bank and IMF clients -- namely its vast oil reserves
and its highly skilled labor force.

"Assuming you can get some political stability, the rule of law and the
protection of property rights ... the oil and the work force are things tha=
t
make Iraq different from, say, some sub-Saharan country where the World Ban=
k
has been unsuccessful," Meltzer said.

Supporters of the groups' involvement in post-war Iraq also say the groups
could, at the very least, spread around the heavy lifting -- and heavy
spending -- necessary to turn Iraq into an economic success.

"In a situation where no single actor has more than 20 percent of the
answers, it makes a lot of sense to pool efforts and to work
multilaterally," said Oliver Buston of Oxfam International, a global
development group headquartered in Oxford, England.

Buston pointed out the many good things the World Bank and IMF do, includin=
g
pouring money into education and health care around the world. Even the
groups' critics on the right and left note they could at least help with
giving Iraq some relief from its debts.

"The bank and the fund do rightly take a lot of criticism, but we have to
look at things on a case-by-case basis, and I think this is a case where
it's a completely new situation and nobody has all the answers," Buston
said. TOPTOP

-------


This article will appear in the March/April 2003 edition of Third World
Resurgence, published by Third World Network (Malaysia).


The Second Invastion: The IMF, the World Bank, & Iraq
By Soren Ambrose & Njoki Njoroge Njehu
50 Years Is Enough: U.S. Network for Global Economic Justice

At the African Social Forum in January, we were approached by a Somali
who has been working doggedly for the last 15 years to maintain a
non-foreign civil society presence in Mogadishu.  He said to us =93Given
our circumstances, I haven=92t spent much time learning about the IMF and
World Bank, but I=92ve decided to start, because I know that once we do
have a government, they will be our next challenge.=94

Alas, he is probably correct.  Misfortune is seldom visited upon a
people in only one form.  In recent years, the World Bank, eager to try its
hand at any task, has sought to project itself as the financial guardian
of =93post-conflict=94 societies.  In Bosnia, Serbia, East Timor, Mozambiqu=
e,
Rwanda, and most recently Sri Lanka and Afghanistan, the World Bank has
honed its approach to states that have endured destruction of
infrastructure, large-scale killings, and mass migration.  Now it
appears that the Bank will be thrust into the spotlight in Iraq, charged wi=
th
putting back together what United Nations sanctions, authoritarian
neglect, and U.S. military action have broken.

But while the Bank has been eager to jump into those other countries,
Iraq seems to have made its top officials think twice about their role.
 They are not accustomed to dealing with situations where their masters
-- the G7 governments -- are seriously split.  The divisions between
the U.S. and U.K. on the one hand and France and Germany on the other
over the war in Iraq have for once made the Bank nervous about
becoming a central player.  World Bank president James Wolfensohn
apparently sees no benefit in having the trans-Atlantic split play out
on his Board of
Directors; the potential for the Bank to become a punching-bag or
scapegoat is great.

The tussle over whether the World Bank and the IMF would get involved in
Iraq before U.N. recognition of a successor regime was staged at the instit=
utions=92
just-concluded spring meetings (April 12-13), and by all accounts the
U.S. won everything it wanted.  While the weekend started with
representatives of the G24
(developing countries) rejecting the idea and insisting that the U.N.
was the only source of legitimacy in Iraq, by the end of the weekend,
IMF and World Bank
officials were assuring reporters that they would be taking on the Iraq
challenge, and would leave the worrying about technical niceties like
U.N. recognition to
others.

And that, apparently, was what the U.S. wanted.  A European Union
finance ministers=92 meeting the previous weekend had elicited statements f=
rom
both sides of the divide -- Spain and Germany -- calling for a
significant role for the IFIs in Iraq.  A few days later, U.S. Treasury
Secretary John
Snow was calling for World Bank involvement too, and staged a meeting on
April 11 with his French counterpart at which the two made public
their agreement on the matter.  Although the French continued to talk
about U.N. leadership, attention began to shift to the World Bank=92s role.

There seems to be little doubt now (at the end of April) that the U.S.
will govern Iraq, though the showdown at the Security Council has yet to
take place.  By occupying a middleman position in a still-simmering
high-stakes political feud, Mr. Wolfensohn=92s anxieties are no doubt still
acute.  And they should be:  what he most fears, we suspect, is having
the international spotlight shine on long-overdue questions of power,
domination, and legitimacy at the World Bank and IMF.  While the
confrontation between the U.S. neo-imperialists and their rivals in Europe
probably belongs in the Security Council, playing it out at the IFIs
would have the salubrious effect of exposing the uses to which those
institutions are put, and at whose behest.

That the conflict was downplayed in Washington suggests, alas, that the
IFIs may represent a comfortable compromise for both sides --
=93multilateral=94 enough both to shield the U.S. from the sharpest charges
of outright colonialism while still ensuring U.S. control, and to shield th=
e
French from charges of total capitulation to U.S. power.  And as things
go wrong, the IFIs can serve as handy scapegoats -- for after all, diffusin=
g
responsibility is one of their core functions in service to the G7.

The U.S. in particular may be in the market for a scapegoat, as its
pledges to make both Afghanistan and Iraq whole again fall victim to
President Bush=92s -- and the rest of the U.S.=92s -=96 short attention spa=
n.
At the spring meetings the U.S. made the surprise, though not very
consequential, announcement that it would contribute an extra $100
million to the International Development Agency (IDA), the World Bank
department that makes low-interest loans to the poorest governments.  Do
not be surprised if, as Iraqi reconstruction or political recovery
falters, President Bush points to support for the work of the World Bank
as evidence of the U.S.=92s good faith.

The U.S. has already tried to make a case for the cancellation of the
debt burden accumulated during the Ba=92athist regime in Iraq.  The
stunning hypocrisy required to make this claim -- we should recall that
the U.S. did not protest when the IMF greeted the downfall of Mobutu
by suggesting that whatever new government was established should get
working on its $14 billion external debt -- should not blind us to
the fact that the Iraqi people indeed should not be forced to pay that
illegitimate debt.  Even if this gambit by Treasury Secretary Snow and
Assistant Secretary of Defense Paul Wolfowitz was motivated more by
spite toward Iraq=92s biggest creditors (Russia, Germany, and France)
than by a recognition that the U.S.=92s task as conqueror of restoring
Iraq to economic health would be greatly hampered by the debt, the
precedent established would be sufficient to make the demand for
cancellation of illegitimate debt around the world unopposable.

There is still some wrangling to be done over whose multinational
corporations get to carry out the reconstruction of Iraq, though it appears
clear that the U.S. will defend its right to make the final decisions.
What is not in dispute is what kind of economic future awaits Iraq.  Neithe=
r
the French nor the U.S., nor the Russians, nor the South Koreans for
that matter, are likely to have any hesitation about entrusting the
imposition of a market economy on Iraq to the IMF and World Bank.  They
have performed ably in other post-conflict countries and in the
=93transition=94 countries of the former Soviet bloc, giving advice to
inexperienced governments grappling with the cascade of choices and plans
that must be made as they re-make their countries and confront the
challenges of devastated infrastructure and lives.  Vulnerable
governments are easier to coerce into accepting the full menu of
neo-liberal economic measures, and none of the G7 countries have had
occasion to complain about the creation of market economies open to
exploitation by their multinationals and investors.  The people in Russia,
Romania, Bosnia, East Timor, Mozambique, and other beneficiaries of the
IFIs=92 generosity may have complaints, but as the IFIs will gladly point
out, they do not appreciate how much worse things might have been had
the IMF and World Bank not been there to help.

Revolution, civil war, enduring invasion and conquest, or, in the
unintentionally ironic phrase used by the U.S. military to describe one
of their
operations, =93enduring democracy=94 (whether the fall of undemocratic
governments or the imposition from outside of a more =93democratic=94 one):
 none of these will purchase a country=92s exit from the today=92s universa=
l
economic standard: neo-liberalism -- freedom redefined as the freedom
to consume and the freedom to be exploited by foreigners.

The notion that the IMF and World Bank have for decades served as the
modern-day instruments of imperialism, or neo-colonialism, is not
new.  But in each instance where a country, by persuasion or force,
turns away from politics or economic policy that fails to submit to the
U.S.-led global market economy, it is always these institutions that
serve as the instruments of homogenization, yawning gaps between rich
and poor, decapitated public sectors, and the sanctification of the
profit motive.

The example of Sri Lanka is instructive.  Although a brutal civil war
has raged for nearly 20 years there, the country has been relatively
lucky in
that the infrastructure of all but the conflict zones has been
relatively unscathed.  It has a functioning democracy (complete with a two-=
party
system that offers choices as undifferentiated -- and as unsavory -- as
those in the U.S.) and a well-established civil society sector.  It is, in
other words, not as devastated, on the whole, as most =93post-conflict
societies.=94  And yet the eagerness of its government and people to
make good on the apparent success of the peace process has left it
vulnerable to the agenda of the IFIs.  Of the 20 or so countries that have
gone through the IFIs=92 new =93participatory=94 process of designing a
=93poverty reduction and growth=94 program, Sri Lanka=92s has been the most
egregiously flawed.  None of the required civil society consultation
took place, and World Bank officials have simply lied in a lame attempt to
cover up the fact.  Once the program was published, the Sri Lankan
parliament was asked to approve 36 separate pieces of legislation in two
months in order to demonstrate the country=92s eagerness to comply with
IMF/World Bank recommendations on privatization, land titling,
urbanization, mining, and much more.

Fortunately civil society organizations in Sri Lanka were able to stall
over half of the legislation, and stir up a political debate about the
conditions.  Afghanistan and Iraq, with no civil society experienced in
interpreting IFI documents or in advocacy, are likely to be far more
vulnerable than even Sri Lanka.

Privatization has become the highest priority for the IMF and the World
Bank over the last few years -- a development that is both natural for
the institutions and a reflection of U.S. policy.  The reconstruction of
Iraq, with most of the work being decided on by a U.S. military
government without Iraqi involvement, will be carried out by companies
chosen by the U.S. and paid at rates determined by the U.S., at least
some of which the U.S. intends to recoup from Iraq=92s oil profits in the
future.  While to some the U.S.-dominated reconstruction project after
the U.S.-led war may seem like rewarding the window-replacement company
that sends out people by night to break windows, the
reconstruction of Iraq, managed by President Bush=92s and Vice President
Cheney=92s old comrades at Bechtel, Halliburton, and other
multinationals, may well emerge as the leading example of privatized
development yet seen.  The transition to an economy open to, and
probably largely controlled by, foreign private companies, may start to
seem natural.  The World Bank will likely be left with three tasks after
the U.S. ships out: 1) overseeing, with the IMF, the adherence of a new
Iraqi government to the neo-liberal conditions they will have signed
onto; 2) managing, with non-profit organizations or others, the
provision of services not deemed profitable by private interests; and 3)
guaranteeing the re-development of oil production, a specialty of the
World Bank, which funds a significant portion of the developing world=92s
fossil fuel production.

The conquest of Iraq and its impending turn-over to the IFIs takes place
against a backdrop of increased resistance to IMF/World Bank
policies, particularly in Latin America.  Brazil has elected an anti-IMF
president (though Lula, so far at least, has had to pander to the IMF);
Argentina, having endured perhaps the most extreme IMF-caused crisis of
any country, has a population determined to break with neo-liberal
policies; Paraguay, El Salvador, and Peru have seen mass protests
against privatization resulting in significant victories; Bolivia=92s anti-=
privatization
movement has generated broader anti-neo-liberal uprisings, and
threatened to overthrow the government, much as the indigenous-led
movements in Ecuador did
a few years ago, before the election of an anti-IMF president there.
The people of South America, the first to be plunged full force into
structural adjustment
and neo-liberalism, have recognized after 20 years that it does not
work, that its promised =93short-term pain for long-term gain=94  is
actually just long-term pain.
 Employment levels, prices, wages, and living conditions have all
tightened.  It seems the sad fate of the Iraqi people to emerge from one au=
thoritarian
dictatorship only to face the imposition of another, more amorphous one.
 Perhaps, however, the more egregiously imperialistic process that has
led Iraq to this
point will help spur Iraqis and others around the world to reject a
system that will turn a recent conquest into a source of cheap oil and
cheap labor, and the
site of hopes of =93liberation=94 dashed on the sharp edges of poverty and =
disenfranchisement.