JUNE 1991 - VOLUME 12 - NUMBER 6
E D I T O R I A L
Reining In the IMF
By design, the International Monetary Fund (IMF) is not open to reform by citizen groups. Operating at the behest of the industrialized countries, most importantly the United States, and protected by thick layers of secrecy, the IMF pursues a mission of coercing Third World and now East European countries to liberalize their economies and orient them toward exports.
Now, however, with the Bush administration asking Congress to authorize a 50 percent increase in the U.S. monies available to the Fund, a rare opportunity exists to send a strong message to the IMF. Congressional refusal to approve the increase could put unprecedented pressure on the IMF to alter its policies to take social and environmental concerns meaningfully into account.
The IMF's power comes from its gatekeeper role. Private and governmental lenders alike are unwilling to provide funds to debtor nations which do not receive the IMF stamp of approval. Since most Third World countries maintain huge debts and need new loans to avoid default, the IMF is able to exert enormous influence even though it does not provide huge loans itself.
The Fund's policies are established by the creditors of the industrialized world, whose influence is proportional to the amount of money they provide the IMF. The United States holds an 18 percent voting share on the executive board. Since IMF lending and policy decisions must be approved by an 85 percent margin, the U.S. has veto power over all major decisions of the IMF. It is the only country with this power.
Urging Congress to support the funding increase, U.S. Secretary of Treasury Nicholas Brady said, "the IMF is serving vital U.S. interests throughout the world." In fact, the IMF serves only the vital interests of U.S. banks and multinational companies. Through loans that are used to pay interest and by helping propagate the myth that the Third World will eventually be able to pay back its debt, the IMF helps the commercial banks.
Multinational corporations benefit as well. The IMF demands that countries to which it makes loans undertake "structural adjustment" programs. These include privatization of state-owned enterprises and a variety of steps to promote exports and foreign investment, paving the way for foreign corporations to exploit debtor countries' labor forces and natural resources.
Though U.S. banks and corporations benefit from these policy changes, U.S. citizens do not. U.S. exports decline and U.S. workers' salaries are undercut by the low wages earned by their Third World compatriots.
For the people and the environment of countries undertaking IMF- encouraged structural adjustment programs, the consequences are devastating. Structural adjustment programs impact most severely on the poorest segment of societies. Governments cut back social services such as education and health care, fire large numbers of public sector workers and pursue policies that reward agricultural production for export, which most small farmers are unable to contemplate.
The environment suffers for many of the same reasons. As a recent Environmental Defense Fund case study of Costa Rica shows, indebted Third World countries are forced to look to their natural resource base as the easiest source of export revenues. And poor people in the countryside, pushed off land by large farmers or multinational agribusiness, frequently clear rainforest or other biologically diverse land even when that land is protected in national parks.
This pattern is repeated throughout the world, yet the IMF refuses to "adjust" its own policies to remedy these problems. It is necessary to take advantage of the current opportunity to send a strong message that the IMF cannot brush off.
Relatively mild efforts, such as conditioning Congressional approval of the funding increase on reform, have proved inadequate. Congressional directions must be passed on by the presidentially-appointed U.S. executive director to the IMF. Since the Bush administration is one of the strongest supporters of the IMF's current policies, it is not surprising that it refuses to take Congressional direction seriously. A 1989 law requiring the U.S. executive director to the IMF to push the IMF to "take into account in policy formation [the] projected impacts of each IMF lending agreement on the long-term sustainable management of natural resources, the environment, public health and poverty" in recipient countries has been virtually ignored by the Bush administration.
Stronger tonic is needed. Denial of funding is the IMF's greatest fear. Denial of a funding increase would signal the Fund that the social and environmental costs of the conditions it attaches to loans are unacceptable.
A display of citizen concern about the IMF could affect Congress' decision. Senator Patrick Leahy, D-VT, has already stated, "I think this IMF [funding] increase is going to be a hot issue," noting that not only liberals but conservatives, who oppose IMF support of big banks, distrust the Fund.
The people of the Third World have no sway over the IMF. U.S. citizens, through Congress, are the only ones with an opportunity to harness the IMF. It is incumbent on them to act.