AWSJ: IMF 1, Indon Democracy 0

[Robert Weissman <rob@essential.org>]

For some reason the text did not come through on my prior effort to send
out this important editorial. Hopefully, things will work better this
time.

Robert Weissman
Essential Information			|   Internet:	rob@essential.org

Asian Wall Street Journal
June 20, 1999
AWSJ: Editorial: IMF 1, Democracy 0
(Editor's Note: This editorial appeared in Monday's Asian Wall Street
Journal.)
HONG KONG -- Back when President Suharto still ruled the roost in
Indonesia,
he grasped the bright idea of adopting a currency board system to stabilize
the rupiah and restore confidence in the country's free-falling economy.
But
it was not to be. The IMF, infatuated as ever with devaluation as a facile
solution for every problem, came down on Mr. Suharto like a ton of bricks.
Though the Fund never said so explicitly, it also spread a story through
its
minions that the president was interested in a currency board only as a
means
of protecting his own fortune, so the IMF was doing the world a favor by
blocking his survival efforts.
As we said at the time, it was inappropriate for an unelected,
unaccountable
organization such as the IMF to be acting as king-unmaker. Such was the
animus against Mr. Suharto abroad, and the urge for democracy in Indonesia,
however, that many people didn't care who pulled the plug on him, or how.
Yet now it appears that even democratic Indonesians don't have the right to
set their own monetary policy. Two of the parties that won seats in recent
elections - most notably front-runner Megawati's Indonesian Democratic
Party
- campaigned on a platform that included the possibility of a fixed
currency
regime. Perhaps not every voter understood the implications. But the
pro-fixed regime candidates and their economic advisers displayed a
laudable
desire to impose on themselves or any future government a discipline that
was
sorely missing in the past and to erect a firewall against the kind of
shenanigans that characterized crony reign.
No way, says the IMF, which brought in big gun Deputy Managing Director
Stanley Fisher to make clear exactly how hard the bricks are going to fall
if
any of Indonesia's democrats tries to anchor the rupiah. Making the rounds
in
Jakarta this weekend, Mr. Fisher told Ms. Megawati et al that deviation
from
the IMF's prescription in any realm will be punished by a delay in the
disbursement of bailout funds. No matter that the $45 billion deal was made
with a banished dictator; the albatross just landed on a new neck.
We've all heard of politicians breaking their campaign promises. This may
be
the first time in history that an international agency did it. Perhaps that
is one reason why IMF Asia-Pacific Director Hubert Neiss dangled the hope
that if its economy recovers, Indonesia might be allowed to consider a
currency board, or its ilk, "maybe . . . later."
To be fair, it must be said that some of the pegging rates mentioned during
the campaign - in the area of 5,000 rupiah to the dollar, for instance -
were
low enough to raise legitimate fears about deflation. But why the blanket
ban
on fixed regimes? Some might argue that the IMF has reason to call the
shots
in Indonesia while it has $45 billion on the line. To that, we'd say read
the
article above this one, which details how the Fund will never lose a penny
as
long as it keeps getting the world's taxpayers to reimburse it every time
an
IMF loan goes bad.
Why there should be conditions for IMF aid to other countries but virtually
none for bailouts for the IMF itself when it makes mistakes is one of the
great mysteries of our time. That is something the U.S. Senate may want to
ask Larry Summers before it votes on his confirmation for the post of U.S.
Treasury Secretary. Since the IMF will be taking orders from Treasury, Mr.
Summers should be held responsible for the Fund's latest ukase in
Indonesia,
where the arrival of democracy means that locals can go through the motions
of an election, but outsiders still get to set monetary policy.