By T.K. Maloy
United Press InternationalApril 29, 2001
The World Bank and International Monetary Fund, whose spring meetings in Washington continue Monday, have created a world that many activists say is unfair to the world's poor countries. But what economic policies would the various opposition groups prefer to see instead?
For many of the groups, the problem with the bank and the IMF is"systemic": Countries, the Third World in particular, are saddled with oppressively large amounts of debt from loans from the two international financial institutions. The debt question is one of the main issues cited by activist groups for opposing the bank and the IMF. Then there are questions regarding the effect of bank and IMF policies on a debtor nation's domestic industries,economies, workers and environmental regulations.
"On the occasion of the first meetings of the governing bodies of the International Monetary Fund and the World Bank in the 21st century, we call for the immediate suspension of the policies and practices that have caused widespread poverty, inequality and suffering among the world's peoples and damage to the world's environment," the advocacy group 50 Years Is Enough said in a statement. "We assert the responsibility of these anti-democratic institutions, together with the World Trade Organization, for an unjust world economic system."
50 Years is Enough, formed on the half-century anniversary of the founding of the World Bank and the IMF, advocates the two institutions' abolition. It says it speaks for 185 partner organizations in more than 65 countries. A key demand made by 50 Years is Enough is for the IMF and the World Bank cancel all debts owed them from the poorest nations. The group said the loss can be absorbed by the institutions' existing resources, without forcing taxpayers to pay for it.
"Any funds required for this purpose should come from positive net capital and assets held by those institutions," its statement adds. "We are here while the most powerful people in the global economy are meeting in that building over there," 50 Years activist Soren Ambrose said outside the IMF headquarters in downtown Washington. "We are telling them that they have the resources and they have the capacity as decision makers to cancel 100 percent of the debt to the poor countries of the world."
Ambrose was among some 400 people protesting World Bank and IMF policies outside their joint meetings Sunday. According to Ambrose and other protesters, full-scale debt relief is necessary for the economic recovery and growth of poor nations. Debt reduction -- though not 100 percent debt forgiveness - to the world's poorest nations is an idea that has gained wide support among policy-makers in both the IMF and the World Bank. But questions remain over whether to grant relief to less impoverished nations.
The obvious objection, from the standpoint of the two international lenders, is that if too much debt is simply excused, neither institution will have enough funds for future lending - to poor and developed nations alike.
"As a poor country, I would be very happy to get 100 percent debt relief,"Tanzania's Finance Minister Basil Mramba told reporters recently. "But if 100 percent debt relief would lead to the bankruptcy of these institutions,that would be killing the hen that lays the golden eggs."In a teleconference with reporters Friday, activist and rock musician Bob Geldof, organizer of the Live Aid benefit concert in 1985, called the issue of debt relief for the Third World a "matter of life or death," since the money spent paying off the debt might better be used for urgent social services such as AIDS treatment. The IMF and the World Bank began a program two years ago to provide debt relief to so-called Heavily Indebted Poor Countries (HIPCs). The initiative currently applies to 22 developing nations, meaning they are eligible for debt relief totaling $34 billion. An additional 13 countries are waiting to be approved for the program.
Activists, however, say that even with HIPC, the level of debt repayment still removes too much money from potential use for social services. In meetings last week ahead of the bank-IMF meetings, the finance ministers of the so-called G-24 developing nations said in a statement that the group recognized the need to ensure that any potential debt relief was targeted at reducing poverty, with priority given to social and health spending, especially in combating HIV and AIDS and other pandemics.
World Bank President James Wolfensohn announced Friday that the bank will provide $500 million to the fight against HIV and AIDS in Africa, in addition to an earlier allocation of $500 million that he said is "virtually used up." Wolfensohn added that his institution has thus far spent $1.8 billion to fight the disease.
Protesters at the weekend meetings also demanded that the two financial bodies "immediately cease imposing the economic austerity measures known as structural adjustment and/or other macroeconomic reform, which have exacerbated poverty and inequality, as conditions of loans, credits or debt relief," according to a statement from 50 Years is Enough.
Critics of this demand say the protesters are mistaken in the assumption that the conditions are "imposed" by the World Bank or the IMF. Defenders of the two lenders note that while it is true that the institutions often demand austerity measures, there is a good reason for doing so -- to maintain a degree of economic discipline for debtor countries. In the recent case of Turkey (or in the past, Bolivia, Argentina or Brazil), the country received help (with strings attached) from the IMF when it was fighting inflation.
The IMF and the bank give money to a government only if it has or adopts policies that will improve their economies over the long term. What is problematic, many economists say, is that no matter what policies are undertaken, the underclass in a debtor country cannot be made better off overnight. Opponents of the World Bank and the IMF call on the institutions to accept responsibility for the "disastrous impact of structural adjustment policies by paying reparations to the peoples and communities who have borne that impact. These funds should come from the positive net capital and assets of these institutions, and should be distributed through democratically-determined mechanisms."
But, again, there is the question of the long-term economic usefulness of reparations, and of whether the two lending bodies should be held responsible for the ripple effect of structural reforms. The 50 Years group also demands that the "agencies and individuals within the World Bank Group and IMF complicit in abetting corruption, as well as their accomplices in borrowing countries, be prosecuted, and that those responsible, including the institutions involved, provide compensation for resources stolen and damage done," according to a statement from the group.
On this issue, there is an agreement within the WB/IMF community, and among international finance policymakers that corruption is a huge problem,particularly in the developing countries where small elites have a huge share of power and the mass of the population has little ability to discipline the behavior of the elite. While there have been proved instances of corruption within the World Bank or IMF, there have been accusations and reports that the bank had a tangled relationship with the Suharto regime in Indonesia.
According to a World Bank internal report, the institution criticized itself for tolerating corruption, given factual credence to false government statistics and for complacency about the state of human rights in the country. Activists also have criticized the lack of transparency in bank and IMF policy-making, with the 50 Years group calling for policy considerations that are "determined through a democratic, participatory and transparent process. The process must accord full consideration of the interests of the peoples most affected by the policies and practices of the institutions, and include a significant role for all parts of civil society."
This, it should be noted, would involve a significant change to the World Bank and International Monetary Fund, neither of which is configured to be run as an elected body but rather, in the manner of any financial institution, by a staff with varied, specialized expertise. In addition to street activists, the bank and the IMF have been the subject of criticism from academia and government as well.
The U.S. Congress formed a commission in the late 1990s to study needed changes at the institutions. Headed by Alan Meltzer, a prominent banker, the commission was tasked with creating a blueprint of reform for the two bodies, whose track record of predicting world financial crisis and making useful loans has been less then stellar, according to a host of critics. The Meltzer Commission reported that both the bank and the IMF had markedly expanded their original purpose since their founding in 1944 via the Bretton Woods agreement to include a great deal of development work instead of simply helping maintain monetary liquidity during national financial crises
In recent testimony before the Joint Economic Committee of Congress, Meltzer reemphasized many of the findings in his study from a year before. "Last year, the commission described the (World) Bank as costly, inefficient, bureaucratic, ineffective and lacking in clear objectives,"Meltzer told the committee. "The facts are clear and simple to relate. Between 1987 and 1998 the number of people living on less than $1 a day, the bank's measure of extreme poverty, remained the same. The proportion of the population (in poverty) declined modestly, from 28 percent to 24 percent. This is not much of an accomplishment for an expenditure of about $200 billion (in) current dollars.
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