WHAT'S WRONG WITH THE IMF?
The International Monetary Fund and the World Bank were created in 1944, shortly before the end of World War II, at a conference in Bretton Woods, New Hampshire. Both institutions are now based in Washington, D.C. The IMF was designed to promote international economic cooperation and provide its member countries with short-term loans in order to trade with other countries (achieve balance of payments). During the 1980s, the IMF took on an expanded role of lending money to "bailout" countries during financial crises. This gave the IMF leverage to begin designing economic policies for over 60 countries. Countries have to follow these policies to get the IMF's "seal of approval" to get loans, international assistance, and even debt relief. Thus, the IMF has enormous influence, not only in structuring the global economy, but also on real-life issues such as poverty, environmental sustainability, and development. The IMF is one of the most powerful institutions on Earth-yet few know what it is.
TOP 10 REASONS TO OPPOSE THE IMF
1. The IMF has created a system of modern-day colonialism that saps the poor to fatten the rich. The IMF, along with the WTO and the World Bank, is directing the global economy on a path of greater inequality and environmental destruction. The IMF and World Bank's "structural adjustment policies" (SAPs) ensure debt repayment by requiring countries to cut spending on education and health; eliminate basic foods and transportation subsidies; devalue national currencies to make exports cheaper; privatize national assets; and freeze wages. These policies increase poverty, reduce countries' ability to develop strong domestic economies, and allow multinational corporations to exploit workers and pollute the environment.
2. The IMF caters to wealthy countries and Wall Street. Although industrialized countries have not borrowed from the IMF in twenty years, rich countries dominate decision-making. Voting power is determined by the amount of money that each country pays. The US is the largest shareholder with a quota of 18%. The US, Germany, Japan, France, and Great Britain together hold about 38% of the vote. Each of these countries appoints its own representative to the executive board, while other groups of countries elect a representative. The US Executive Director is Karin Lissakers, and she works closely with Lawrence Summers and the US Treasury Department to design policy for the IMF. The disproportional amount of power held by wealthy countries translates into decisions that benefit wealthy bankers, investors, and corporations from industrialized countries at the expense of sustainable development. Is it a surprise that the IMF then uses its leverage over cash-strapped developing countries to force them to open up to powerful transnational corporations?
3. The IMF is imposing a fundamentally flawed development model. Unlike the path followed by most industrialized countries, the IMF forces countries from the Global South to prioritize export production over the development of a diversified domestic economy. Nearly 80% of all malnourished children in the developing world live in countries where farmers have been forced to shift from food production for local consumption to the production of crops for export to the industrialized countries. The IMF also requires countries to eliminate tariffs and provide incentives for multinational corporations--such as reduced labor and environmental protections. Small businesses and farmers cannot compete with large multinational corporations, resulting in sweatshop conditions where workers are paid starvation wages, live in inhumane conditions, and are unable to provide for their families. The cycle of poverty is perpetuated, not eliminated.
4. The IMF is a secretive institution with no accountability. The IMF is funded with taxpayer money, yet it operates from behind a veil of secrecy. For the most part, members of affected communities do not participate in designing loan packages. The IMF works with a select group of central bankers and finance ministry staff to decide polices without input from other government agencies such as health, education, and environment departments. Furthermore, the IMF has resisted attempts to open up to public scrutiny and independent evaluation. The IMF has made elites from the Global South more accountable to First World elites than their own people.
5. IMF policies promote corporate welfare. To increase exports, countries are encouraged to give tax breaks and subsidies to export industries. Assets such as forestland and government utilities (phone, water, and electricity companies) are sold off to foreign investors at rock-bottom prices. Some examples: In Guyana, an Asian-owned timber company called Barama received a logging concession that was 1.5 times the total amount of land that all the indigenous communities were granted. Barama also received a five-year tax holiday. The IMF forced Haiti to open its market to imported, highly subsidized US rice at the same time it prohibited Haiti from subsidizing its own farmers. A US corporation called Early Rice now sells nearly 50% of the rice consumed in Haiti. Haitian farmers have been forced off their land to seek work in sweatshops, and people are poorer than ever.
6. The IMF hurts workers. Many SAPs require changes in labor laws, such as eliminating collective bargaining laws and lowering wages in order to provide conditions favorable to attracting foreign investors. The IMF's mantra of "labor flexibility" permits corporations to fire at whim and move where wages are cheapest. According to the 1995 UN Trade and Development Report, employers are using this extra "flexibility" in labor laws to shed workers, rather than create jobs. In Haiti, the government was told to eliminate a statute in their labor code that mandated increases in the minimum wage when inflation exceeded 10%. By the end of 1997, Haiti's minimum wage was only $2.40 a day, just one-fifth of the minimum wage in 1971 in real terms. Workers in the US are also hurt by IMF policies by having to compete with cheap, exploited labor. Two years ago, the IMF's mismanagement of the Asian financial crisis plunged South Korea, Indonesia, Thailand, and other countries into deep depression that led to the creation of 200 million "newly poor." The IMF advised countries to "export their way out of the crisis." Consequently, the dumping of Asian steel in US markets resulted in the layoffs of over 12,000 steelworkers.
7. The IMF's policies hurt women the most. SAPs make it much more difficult for women to meet their families' basic needs. When education costs rise due to user fees, girls are the first to be withdrawn from schools. User fees in public health facilities make it unaffordable to those who need it most. The shift to export agriculture also makes feeding one's family increasingly difficult. Women have also become more exploited in the private sector workforce as regulations are rolled back and sweatshops abound. The general lack of economic opportunity has meant an increase in prostitution and other black market jobs and indentured servitude.
8. IMF policies hurt the environment. IMF loans and bailout packages are paving the way for natural resource exploitation on a staggering scale. The IMF does not consider environmental impacts of lending policies; and environmental ministries and groups are not included in policy making. The focus on export growth to earn hard currency to pay back loans means unsustainable liquidation of natural resources. Government cutbacks inevitably target the environmental ministry as one of the first agencies to come under the budget axe. This happened with the bailouts of Brazil, Indonesia, and Russia--countries that are renowned for their great biodiversity.
9. The IMF bails out rich bankers, creating a moral hazard and greater instability in the global economy. The IMF pushes countries to dismantle trade and investment rules, as well as raise interest rates in order to lower inflation. The removal of regulations that might limit speculation has greatly increased capital investment in developing country financial markets. More than $1.5 trillion cross borders every day. This capital is short-term and unstable, and puts countries at the whim of financial speculators. The Mexican 1995 peso crisis was partly a result of these IMF policies. When the bubble popped, the IMF and US government stepped in to prop up interest and exchange rates, using taxpayer money to bail out Wall Street bankers for their high-risk investment. This encourages investors to continue making risky, speculative bets, increasing the instability of national economies. Furthermore, during the bailout of Asian countries, the IMF restored rich people's profits while implementing policies that threw people out of work and increased poverty. Asian governments were required to assume the bad debts of private banks, thus making the public pay the costs and draining yet more resources away from social programs and real development.
10. IMF bailouts deepen, rather then solve, economic crisis. During financial crises, such as with Mexico in 1995 and South Korea, Indonesia, Thailand, Brazil, and Russia in 1997, the IMF stepped in as the lender of last resort to "bail out" countries with huge loan packages. Yet the IMF bailouts in the Asian financial crisis did not stop the financial panic--instead, the crisis deepened and spread to more countries. The policies imposed as conditions of these loans were bad medicine, causing layoffs in the short run and undermining development in the long run. In South Korea, the IMF sparked a recession by raising interest rates and lowering the value of currency, resulting in more bankruptcies, increased unemployment, and government spending cuts. Under the IMF-imposed economic reforms after the peso bailout in 1995, the number of Mexicans living in extreme poverty increased more than 50% and the national average minimum wage fell 20%.
--From GLOBAL EXCHANGE/FIFTY YEARS IS ENOUGH