Multinational Monitor

APR 2000
VOL 21 No. 4


The IMF on the Run: The International Monetary Fund Tries to Outrun its Critics
by Robert Weissman

Twenty Questions on the IMF
by the Monitor Staff


Unraveling the Washington Consensus
An Interview with Joseph Stiglitz

Globalization, Regionalism and Democracy
An Interview with Samir Amin


Behind the Lines

Against IMF "Realism"
- Brutal Banking

The Front
BHP's Big Mining Mess - The U'wa/Oxy Standoff

The Lawrence Summers Memorial Award

Book and Video Notes

Names In the News



Against IMF "Realism"

It is very hard to say anything new and interesting about structural adjustment.

The sadistically cruel impact on the developing countries of International Monetary Fund (IMF) and World Bank-administered structural adjustment Ð the Reaganomics-like economic policy package including measures such as privatization, government budget slashing and opening up to foreign investment -- has long been evident. Indeed, when we editorialized about this topic 10 years ago ["Brutal Banking," Multinational Monitor, April 1990 -- reprinted on the next page], we began by asking "How many times does it have to be said? Structural adjustment doesn't work."

Another decade's toll of babies dead before age one due to preventable disease, people suffering from malnutrition, adults' economically productive time wasted due to high rates of unemployment, clearcut rainforests and growing income and wealth inequality only serves to reiterate what has long been evident. Structural adjustment kills, and sustainable development policies require rejection of the basic tenets of structural adjustment.

But while the evidence of the failure of structural adjustment has long been available for those who care to look, and is certainly well understood among non-governmental organizations working on development issues, a disturbing number of these organizations in the United States have begun to downplay the importance of structural adjustment issues. Some have even begun to waver on the bottom-line question of whether structural adjustment policies should be rejected.

In the last two years, and following the lead of campaigners in the United Kingdom, dozens of religious and development groups in the United States -- including Presbyterian Church/USA, Catholic Relief Services, Oxfam and Bread for the World -- have participated in a coalition, Jubilee 2000 USA, calling for debt relief for the world's poorest nations.

In contrast to other Jubilee organizations around the world, Jubilee 2000 USA has subordinated any concern about structural adjustment -- and the interrelated question of IMF power -- to an overriding concern to achieve modest debt relief gains.

The coalition stood on the sidelines as Congress debated allocating $18 billion to the IMF in 1998, and refused to support an amendment offered by Cynthia McKinney, D-Georgia, mandating a cap on poor countries' debt payments. It took a pass on the HOPE for Africa bill, introduced by Representative Jesse Jackson, Jr., D-Illinois -- the most far-reaching debt cancellation bill ever to obtain significant support in Congress. The coalition was nowhere to be seen when Representative Bernie Sanders, I-Vermont, last year introduced an amendment in the House Banking Committee that would have instructed the U.S. president to work to delink IMF-provided debt relief from structural adjustment.

Instead, the coalition devoted all of its substantial mobilization and lobbying efforts to pushing the "Leach bill" (named after lead sponsor Jim Leach, R-Iowa), a bill to provide funding for the IMF to carry out debt relief under its Enhanced Structural Adjustment Facility, and also to provide relief of debts owed by developing countries to the United States ("bilateral debt"). Under a complicated administrative formula, this debt relief would provide only modest reductions in debt payments for approximately 15 countries -- but only on the condition that they implement structural adjustment programs to the IMF's manic satisfaction for three years. Although the bill itself was never considered by the full House or Senate, a version of the Leach bill was eventually included in an appropriations bill covering many government agencies and programs.

Why would campaigners to relieve the Third World debt burden settle for such modest gains on debt relief? At the end of the day, the argument came to one reason: "Be realistic."

But this IMF realism was misguided tactically, strategically and substantively, with tragic consequences.

Tactically, the Jubilee coalition, which played a lead role in drafting the Leach legislation, erred by including so many compromises in the original bill, rather than sticking closer to what they actually wanted, and waiting to see if opponents would water it down.

Strategically, the Jubilee coalition failed to see the possibility of aligning with numerous Republican factions that dislike the IMF to advance a program that would have granted much more far-reaching debt relief in combination with a major scale-back of IMF authority and including an end to structural adjustment conditions. If Jubilee 2000 USA had supported this program, there is a better than even chance it would have been able to pass at least the House of Representatives. Failing to stake out this position has left Republicans (along with a relative handful of progressive Democrats) as the leading Congressional critics of the IMF.

Substantively, Jubilee 2000 USA lost sight of the fundamental importance of shrinking the IMF's power and ending its ability to impose structural adjustment on the developing world.

At a time when the IMF has been politically vulnerable as never before, IMF realism has enabled the IMF to maintain its power and authority, and its ability to decree that millions should suffer the entirely preventable pain of structural adjustment.

Brutal Banking

(Reprinted from Multinational Monitor, April 1990)

Structural adjustment doesn't work. Structural adjustment doesn't work. Structural adjustment doesn't work.

How many times does it have to be said? Structural adjustment doesn't work.

"Structural adjustment" is the name the IMF and World Bank give to the austerity measures they require countries to implement in order to receive loans desperately needed to meet payments on their debt. The measures range widely, from trade liberalization and currency devaluation to raising interest rates to cutting government expenditures and privatizing state-owned enterprises.

Structural adjustment packages are premised on the notion that relying on market forces is the most efficient way to distribute resources. By freeing up market forces and correcting distortions in the economy, the IMF and World Bank expect poor countries to increase export earnings and cut expenditures so that they can reduce their balance of payments deficits.

Structural adjustment plans gained prominence in the early 1980s, with the onset of the debt crisis. Third World debtor nations found themselves without the money to repay commercial bank loans taken out in the 1970s. The primary solution available to them was to borrow more, and the only financial institutions willing to lend more were the IMF and the World Bank.

In fiscal year 1989, the IMF had structural adjustment arrangements in effect with 46 countries; in the same year, the World Bank made structural adjustment loans to 26 countries.

The conditions attached to these loans have wreaked havoc with Third World economies and taken a devastating human toll. In the 1980s, per capita incomes declined slightly in Latin America and more sharply in Africa. Infant mortality rates rose throughout Africa in the 1980s, and now range between 100 and 170 for every 1,000 live births.

These consequences should not be surprising, as critics of the austerity measures have repeatedly pointed out. Currency devaluations in less developed countries do make exports cheaper, but they also make imports-- which usually include machinery, energy resources, medicines and food--more expensive, thereby squeezing import-reliant domestic industries and causing severe social ills. Higher interest rates, which are supposed to encourage savings, deter the investment needed to create jobs. Cuts in government spending, designed to eliminate waste and save money, create further unemployment and devastate vital social services, including healthcare and education.

Proponents of structural adjustment claim that these sacrifices will be offset by the economic growth generated by exports. But with almost all of Africa and Latin America caught in the structural adjustment trap, Third World countries are trying to export similar, and often identical, agricultural products and mineral resources to the industrialized nations. The result is a glut. Staple export prices collapse and people in the Third World suffer.

Yet because structural adjustment fulfills the International Monetary Fund (IMF) and the World Bank's fundamental, but unarticulated, mission to serve the corporate powers of the industrialized nations, they remain committed to it.

By forcing poor countries to open their borders to foreign investment from multinational corporations, to orient their economies to exports and to privatize state-owned enterprises, structural adjustment ensures that these countries stay enslaved to the industrialized world.

Structural adjustment guarantees the continued exploitation of the Third World by the First. The abolition of all protective trade barriers and the orientation of economies to exports thwarts efforts of Third World nations to escape from their dependence on the industrialized nations and to become economically self-sufficient. The reliance on exports forces the poor countries to provide their raw resources to the developed world. And the continued efforts of Third World debtors to repay their loans have led to the irony -- despite IMF and World bank loans -- of poor countries engaging in a net transfer of wealth to the rich nations.

The multilateral lending institutions view mass impoverishment as an unfortunate consequence of structural adjustment programs, but it is not their concern. Poverty is a peripheral issue to them. The IMF's most recent annual report notes, for example, that "in a discussion of poverty issues in economic adjustment, the [Fund's Executive] Board reiterated that questions of income distribution should not form part of Fund conditionality."

While IMF officials can ignore widespread suffering, the victims of structural adjustment policies cannot. They see the impact of austerity measures in human terms: babies dying of preventable disease, children starving, adults unable to find work. These are not short-term problems associated with "adjustment," as IMF and World Bank officials assert; these tragedies are the natural outcome of unmitigated free enterprise policies.

Because structural adjustment programs are working to promote the IMF and World Bank's real agenda of keeping the Third World locked into dependent status, they are not open to reform.

Only the joint renunciation of their debt by Third World governments can put an end to the human carnage wrought by the IMF and World Bank loan policies.

Mailing List


Editor's Blog

Archived Issues

Subscribe Online

Donate Online


Send Letter to the Editor

Writers' Guidelines