The doublespeak of a discredited IMF

12 March 2009 by Eric Toussaint , Damien Millet


The international crisis that broke in summer 2008 demolished all the neo-liberal dogmas and exposed the deception behind them. Unable to deny their failure, 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.

and the International Monetary Fund 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
claim they no longer uphold the set of neo-liberal policies known as the Washington Consensus. Yet, discredited though they may be, these two institutions are using the international crisis to return to the limelight.

For decades they have enforced the deregulation measures and 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 that have led to the current impasse. After this total fiasco the WB and the IMF must now account for their decisions before world opinion.

In addition, their economic forecasts are less than reliable. In November 2008 the IMF predicted a 2.2% global growth in 2009, then downsized it to 0.5% in January, finally acknowledging it would be negative in March. The reality, its experts are siding with major creditors against citizens whose fundamental rights are less and less respected.

While the economic context is fast deteriorating, the world’s big moneylenders are trying to keep the upper hand while placing a discredited and delegitimized IMF in the role of white knight — helping the poor and downtrodden to face the damages wrought by this current crisis. But the opposite is true. The principles defended by the IMF since the 1980s and denounced by CADTM since its inception are still the same. Governments that sign an agreement with the IMF in order to obtain a loan must still implement the same toxic recipes that aggravate the living conditions of their country’s people.

Responding to pressure from the IMF under the leadership of Dominique Strauss-Kahn, several countries faced with the consequences of the crisis have sliced workers’ wages and social benefits. Latvia reduced its civil servants’ incomes by 15%, Hungary suppressed their 13th month (after reducing retirement benefits as part of a former agreement) and Romania is about to move in the same direction. The potion is so bitter that some governments are reluctant to administer it. The Ukraine recently declared the conditions imposed by the IMF to be ‘unacceptable’, especially the gradual raising of retirement age and increased housing costs.

It is high time to expose the doublespeak of the IMF and of Dominique Strauss-Kahn, who on the one hand expect the international commununity to increase its efforts to reach the unambitious Millenium Development Goals, and on the other, compel governments calling upon IMF help to reduce the salaries of their civil servants. This is the opposite of a policy genuinely aimed at facing the crisis while protecting the interests of its victims.

To respond to the crisis of the 1930s and pressured by social mobilization, the US president Franklin Roosevelt reduced working hours while maintaining salaries, social benefits and workers’ rights, such as the right to join trade unions. With the New Deal, Roosevelt set up a tax reform that raised levies on capital. Dominique Strauss-Kahn, a so-called “socialist”, hardly measures up to Roosevelt’s stature and persists against all odds in protecting the interests of the creditors who appointed him to this handsomely paid position.

Once more the IMF is shown to be a compliant instrument in the hands of those who are responsible for the current crisis. In a period of severe monetary destabilization (as evidenced by the huge variations in parity between the dollar and the euro over the past year), the IMF proves incapable of implementing a tax of the Tobin-Spahn kind that would reduce exchange rate variations by controlling speculation, and that would provide the funds needed to put an end to poverty and make development possible. Since the IMF was founded in 1944, its missions explicitly include promoting full employment, which means that the institution is in breach of its own statutes.

The global economic and financial crisis highlights the failure of the deregulated financial markets and freewheeling capital flow advocated by the IMF. A new international architecture is called for, based on the International Covenant on Economic, Social and Cultural Rights (1966) and the UN Declaration on the Right to Development (1986). Yet this logic will not prevail while the 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 remains unchanged. Unless a sufficient number of governments respond to popular pressure and set up such an alternative, the World Bank and the IMF will be able to get over the current crisis, taking advantage of falling export commodity prices to bring weakened poor countries into a new state of loan dependency, with a central aim of saving the system, and not of meeting human and environmental criteria.

For all these reasons, the only acceptable solution is the immediate abolition of the IMF and the WB, and their replacement by radically different institutions that focus on satisfying fundamental human needs.

Translated by Christine Pagnoulle and Judith Harris




Eric Toussaint

is a historian and political scientist who completed his Ph.D. at the universities of Paris VIII and Liège, is the spokesperson of the CADTM International, and sits on the Scientific Council of ATTAC France.
He is the author of Debt System (Haymarket books, Chicago, 2019), Bankocracy (2015); The Life and Crimes of an Exemplary Man (2014); Glance in the Rear View Mirror. Neoliberal Ideology From its Origins to the Present, Haymarket books, Chicago, 2012 (see here), etc.
See his bibliography: https://en.wikipedia.org/wiki/%C3%89ric_Toussaint
He co-authored World debt figures 2015 with Pierre Gottiniaux, Daniel Munevar and Antonio Sanabria (2015); and with Damien Millet Debt, the IMF, and the World Bank: Sixty Questions, Sixty Answers, Monthly Review Books, New York, 2010. He was the scientific coordinator of the Greek Truth Commission on Public Debt from April 2015 to November 2015.

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Damien Millet

professeur de mathématiques en classes préparatoires scientifiques à Orléans, porte-parole du CADTM France (Comité pour l’Annulation de la Dette du Tiers Monde), auteur de L’Afrique sans dette (CADTM-Syllepse, 2005), co-auteur avec Frédéric Chauvreau des bandes dessinées Dette odieuse (CADTM-Syllepse, 2006) et Le système Dette (CADTM-Syllepse, 2009), co-auteur avec Eric Toussaint du livre Les tsunamis de la dette (CADTM-Syllepse, 2005), co-auteur avec François Mauger de La Jamaïque dans l’étau du FMI (L’esprit frappeur, 2004).

Other articles in English by Damien Millet (46)

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