[stop-imf] IMF: The Times They Are A-Changin'

[robert weissman]

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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. =93At long last, the IMF is experiencing first hand serious
budget cuts,=94 says Cheikh Tidiane Dieye of Environment and Development
in Africa (ENDA), based in Senegal. =93The 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=92s loss of financial power is
accompanied by a loss in political power, this could be good news for
all Africans.=94

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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