12 July 2007
With each new resignation at the helm of the 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 or of the WB 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, 180 members in 1997), 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.
http://worldbank.org (and these are increasingly frequent: Köhler in 2004, Wolfowitz in 2007, De Rato in 2007), the issue of the famous tacit agreement that the WB’s Chair should go to the US and the IMF’s Director should belong to the EU is raised again.
There is no written text to support this intolerable rule that has, however, been implemented since the twin institutions were created in 1944. During the talks that led to the appointment of Robert Zoellick as president of the WB last May it is well known that the principle of this outrageous division was reasserted.
This means that Dominique Strauss-Kahn’s candidacy for managing director of the IMF, supported as it is by the EU, stands good chances of being accepted even though names from other continents can be put forward as diversions. The EU has in fact responded with great alacrity and reached a unanimous agreement within a very short time to avoid accusations of antidemocratic dealings.
The CADTM would like to remind people that the IMF is an institution that for over 60 years has been demanding with the utmost brutality that leaders of so-called developing countries implement economic measures serving the interests of rich creditors and TNCs. To this end, over the last decades the IMF has given crucial support to several corrupt and dictatorial regimes, from Pinochet in Chile to Suharto in Indonesia, from Mobutu in Zaire to Videla in Argentina, and still currently from Sassou Nguesso in Congo-Brazzaville to Déby in the Chad, and ever so many others. Since the crisis of the debt in the early 1980s the IMF has enforced 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). programs with tragic consequences for peoples in the South: drastic reduction of social budgets and of subsidies for essential survival commodities Commodities The goods exchanged on the commodities market, traditionally raw materials such as metals and fuels, and cereals. ; opening up of markets, thus introducing unfair competition between small producers and TNCs; export-geared production and relinquishing of the principle of food sovereignty; massive privatisations, taxes that deepen social inequalities, etc.
This is why many countries now refuse the tutelage of the IMF since its tainted remedies no longer deceive third-world peoples who know all too well the sufferings they entail and have bled themselves dry to pay back an immoral and largely odious debt.
In such conditions the CADTM demands a democratic debate on the international financial architecture that is needed to provide fair and sustainable solutions to the hundreds of thousands of people who are stuck in utter poverty because of the economic orientations the IMF has decided on. Of course choosing an IMF director from a country of the South would not in itself provide any assurance that things would change. But for us, choosing Dominique Strauss-Kahn, or indeed any other executive who would run the institution on the same ultraliberal basis, is in no way acceptable.
For the CADTM the priority is to abolish the current IMF that has largely proved that it could only fail in terms of human development, and to replace it with a transparent and democratic institution, whose main mission would be the guarantee of fundamental rights. Its director’s nationality would then be irrelevant.
Translated by Christine Pagnoulle with the collaboration of Vicki Briault