Press release

As Dominique Strauss-Kahn takes up his post in Washington, CADTM demands full acknowledgement of the consequences of IMF operations since its creation

31 October 2007


Today, November 1 2007, Dominique Strauss-Kahn takes up his post as managing director of the the IMF IMF
International Monetary Fund
Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.

http://imf.org
after a long, skilfully orchestrated process: nomination by Nicolas Sarkozy in order to further weaken political opposition in France; swift approval of his nomination by the 27 countries of the EU so as to silence criticism of the tacit rule that systematically awards the directorship of the IMF to a European (in exchange for directorship of the World Bank World Bank
WB
The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 189 members in 2017), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.

by an American); a campaign through dozens of countries driven by a costly communications agency on the theme of the “reform” of the IMF and its support of poor countries; the surprise appearance of another candidate (the Czech Josef Tosovsky) who had not the slightest chance of being selected but who helped create the semblance of a democratic process; and finally, the selection by unanimous agreement of Dominique Strauss-Kahn.

CADTM denounces this much-publicized hat trick aimed at concealing the IMF’s very real legitimacy crisis. The countries of the South no longer want to call on the IMF because of the inevitable and brutal after-effects they will have to suffer. Many of these countries (including Brazil, Argentina and Indonesia) have even paid off their debt to the IMF in advance to rid themselves of its burdensome protection – to such an extent that the IMF can no longer cover its operating expenses and sees its very future at risk. This explains the necessary “reform” which, rather than bring democratic change that would benefit the poorest, is designed to ensure the IMF’s survival and counter the strong opposition now being voiced all over the globe.

For CADTM, there is no doubt than an exhaustive audit of the IMF is long due. As an institution, the IMF has, for over 60 years, been co-ercing the heads of so-called “developing” countries to implement economic measures that serve the interests of rich creditors and major corporations. For several decades, the IMF has given vital support to many despotic and corrupt regimes, from Pinochet in Chile to Suharto in Indonesia, from Mobutu in Zaire to Videla in Argentina, and still today from Sassou Nguesso in Congo-Brazzaville to Idris Deby in Chad, to mention only some. Since the debt crisis of the early 1980s, the IMF has ruthlessly imposed structural adjustment Structural Adjustment Economic policies imposed by the IMF in exchange of new loans or the rescheduling of old loans.

Structural Adjustments policies were enforced in the early 1980 to qualify countries for new loans or for debt rescheduling by the IMF and the World Bank. The requested kind of adjustment aims at ensuring that the country can again service its external debt. Structural adjustment usually combines the following elements : devaluation of the national currency (in order to bring down the prices of exported goods and attract strong currencies), rise in interest rates (in order to attract international capital), reduction of public expenditure (’streamlining’ of public services staff, reduction of budgets devoted to education and the health sector, etc.), massive privatisations, reduction of public subsidies to some companies or products, freezing of salaries (to avoid inflation as a consequence of deflation). These SAPs have not only substantially contributed to higher and higher levels of indebtedness in the affected countries ; they have simultaneously led to higher prices (because of a high VAT rate and of the free market prices) and to a dramatic fall in the income of local populations (as a consequence of rising unemployment and of the dismantling of public services, among other factors).

IMF : http://www.worldbank.org/
programmes with dramatic consequences for the people of the South: drastic cuts in social spending and subsidies for products of basic necessity, the opening up of markets and the introduction of unfair competition between small producers and multinationals, export-oriented production, forfeiture of the principle of food sovereignty, massive privatization, taxation that widens the gap between rich and poor, etc.

The time has come for the IMF to be called to account. No institution can place itself above the authority of international documents and treaties, and yet the IMF, through its Articles of Agreement, grants itself total legal immunity. No reform of the IMF can be undertaken without the approval of the United States, which possesses an absolutely unacceptable power of veto. Therefore any proposed reform that would modify the international balance Balance End of year statement of a company’s assets (what the company possesses) and liabilities (what it owes). In other words, the assets provide information about how the funds collected by the company have been used; and the liabilities, about the origins of those funds. of power will be blocked by those who represent the financial heavyweights. In the view of CADTM, these factors preclude any possibility of acceptable change within the IMF.

In this context, there can be only one solution: since the IMF has clearly demonstrated its failure to deliver in terms of human development, but cannot be made to account for its actions over the last 60 years, CADTM demands its abolition and its replacement by a transparent and democratic institution whose mission will center on the guaranteed respect of fundamental rights.




Translated by Judith Harris.

CADTM

COMMITTEE FOR THE ABOLITION OF ILLEGITIMATE DEBT

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