----- Original Message ----- From: Max Sawicky <sawicky at epinet.org> To: PEN-L (E-mail) <PEN-L at galaxy.csuchico.edu>; Lbo-Talk (E-mail) <lbo-talk at lists.panix.com> Sent: Tuesday, April 11, 2000 2:25 PM Subject: [PEN-L:17987] FW: [stop-imf] Bello: Close the IMF and World Bank
>
>
> FOCUS ON TRADE
> Number 48, April 2000
>
> Focus-on-Trade is a regular electronic bulletin providing updates and
> analysis of trends in regional and world trade and finance, with an
> emphasis on analysis of these trends from an integrative,
> interdisciplinary viewpoint that is sensitive not only to economic issues,
> but also to ecological, political, gender and social issues.
>
> Your contributions and comments are welcome. Please contact us c/o
> CUSRI, Wisit Prachuabmoh Building, Chulalongkorn University,
> Bangkok 10330 Thailand. Tel: (66 2) 218 7363/7364/7365, Fax: (66
> 2) 255 9976, E-Mail: admin at focusweb.org, Website:
> http://focusweb.org. Focus on the Global South is an autonomous
> programme of policy research and action of the Chulalongkorn
> University Social Research Institute (CUSRI) based in Bangkok.
>
> *****************************************************
>
> Pushing Meltzer to the Max!
>
> AS thousands of protestors descend on Washington for the 16 April
> action against the World Bank and the International Monetary Fund,
> they can take comfort in the fact that a growing number of people in
> high places share their views.
>
> In the latest issue of The New Republic (17 April), former World
> Bank chief economist Joseph Stiglitz aired his unflattering assessment
> of the IMF, accusing the Fund of secrecy AND bad economics. (To
> Stiglitz's credit, secrecy is the greater sin.) And just last month, the
US
> Congressional International Financial Institution Advisory Commission
> (the Meltzer Committee) released its findings, capturing headlines with
> its unanimous call to radically downsize the IMF and the Bank and to
> immediately cancel large amounts of debt. While the report was
> saying nothing more than what many critics have been saying for years
> -- that these institutions are deeply flawed and are doing more harm
> than good -- it has revived the languishing debate on the international
> financial architecture.
>
> In this issue of Focus on Trade, Walden Bello looks closely at the
> Meltzer Report, and concludes by calling on those gathering in
> Washington to pick up where the Meltzer Committee left off by calling
> for the Bank and the Fund to be closed down.
>
> Solidarity or Sanctions?
> Trade and labour linkages is one of those issues guaranteed to
> provoke strong reactions, which is not surprising because it cuts to the
> heart of ideology. In this issue of Focus on Trade, Mike Waghorne
> from the international trade secretariat Public Service International
> writes a letter to the editor, Peter Waterman writes an letter to
> ICFTU general secretary Bill Jordan, Patrick Bond writes about the
> dilemmas facing civil society in South Africa (an everywhere else) and
> David Bacon writes about the many views on labour linkages inside
> the trade unions. Enjoy the debate but don't expect a happy ending!
>
> In the final (and related) article, Walden Bello provides a stock-take
> of the 'third wave of democratisation.' Is it really happening, or is it
> just part of the globalisation hype?
>
> *****************************************************
> IN THIS ISSUE
>
> Meltzer Report on Bretton Woods Twins Builds Case for Abolition
> but Hesitates
> Walden Bello
>
> Letter to the Editor
> Mike Waghorne
>
> Time for the ICFTU to move from anti-social (inter)national
> partnerships to a real global social partnership?
> Peter Waterman
>
> No time for reform
> Patrick Bond
>
> Can workers beat globalisation?
> David Bacon
>
> Washington and the Demise of the "Third Wave" of Democratisation
> Walden Bello
>
> *****************************************************
> Meltzer Report on Bretton Woods Twins Builds Case for Abolition
> but Hesitates
> Walden Bello
>
> During the heated debate on whether or not to raise the US quota in
> the IMF in 1998, the US Congress voted for the quota increase but
> attached several conditions, including the creation of an independent
> body to look at the missions and performance of the World Bank and
> the International Monetary Fund.
>
> The report of the International Financial Institution Advisory
> Commission, better known as the "Meltzer Report" after its chairman
> Alan Meltzer, serves as a striking confirmation from the mainstream of
> what progressive critics of the Bretton Woods Institutions have been
> saying for the last 25 years. Among the most important claims in the
> corpus of critical literature that the report supports are the following:
>
> - instead of promoting economic growth, the International Monetary
> Fund institutionalises economic stagnation;
>
> - the World Bank is irrelevant rather than central to the goal of
> eliminating global poverty;
>
> - both institutions are to a great extent driven by the interests of key
> political and economic institutions in the G-7 countries-particularly, in
> the case of the IMF, the US government and US financial interests;
>
> - the dynamics of both institutions derive not so much from the
> external demands of poverty alleviation or promoting growth but to
> the internal imperative of bureaucratic expansionism or empire-
> building.
>
> There is little in the report that was not earlier documented in such
> works as Cheryl Payer's The Debt Trap, Bruce Rich's Mortgaging the
> Future, Susan George's Faith and Credit, and the Food First trilogy
> Aid as Obstacle, Development Debacle: The World Bank in the
> Philippines, and Dark Victory: The US, Structural Adjustment, and
> Global Poverty. But then the importance of the document lies not only
> in its critique but in the fact that a significant part of the
establishment
> has embraced much of the progressive analysis, and, even more
> significantly, has made fairly radical proposals for the future of the
> Bretton Woods twins.
>
> Criticisms of the IMF have found a very receptive global audience
> recently owing to the devastating performance of the Fund during the
> Asian financial crisis. To the credit of its authors, the Meltzer Report
> was not taken in by the World Bank's propaganda that, in contrast to
> the IMF, it has turned a new leaf. The report shows that the much
> vaunted Poverty Reduction Strategy or Comprehensive Development
> Framework articulated by ideological entrepreneur James Wolfensohn
> is largely a public relations effort to save the Bank and that, although
it
> is billed as a new development paradigm, it is largely devoid of
> substance.
>
> The IMF: No Redeeming Value
>
> While diplomatic in its language when discussing the IMF, the report
> finds little of redeeming value in the institution. It shows that the
Fund's
> foray into macroeconomic reform via structural adjustment
> institutionalised economic stagnation, poverty, and inequality in Africa
> and Latin America in the 1980's and 1990's-precisely what we had
> documented in detail in our 1994 book Dark Victory: the US,
> Structural Adjustment, and Global Poverty.
>
> It confirms that the Fund's duty of ensuring a stable global financial
> order was derailed by its prescription of indiscriminate capital account
> liberalisation for developing countries, its habit of assembling financial
> rescue packages that simply encouraged moral hazard or irresponsible
> lending and speculative investment, and its prescribing tight fiscal and
> monetary policies that merely worsened the situation in the crisis
> countries instead of reversing it.
>
> The report is on the right track when it recommends the closure of the
> structural and extended structural adjustment programs, now renamed
> the "Poverty and Growth Facility." And it is correct in recommending
> downsizing the IMF in both size and its scope of responsibilities,
> though as we shall argue below, it would do better to recommend an
> outright abolition of the Fund.
>
> The report is, however, wrong in its recommendation that the IMF
> should serve as a "quasi-lender of last resort" to countries suffering a
> liquidity crisis. The IMF, by the Commission's own account, has
> handled this function badly in the past. Moreover, the Commission's
> recommending of strict conditions under which the IMF may extend
> credit contradicts its own criticism of "the use of IMF resources and
> conditionality to control the economies of developing nations."
>
> Particularly objectionable is the Commission's proposal that the Fund
> provide liquidity assistance only to those countries that "permit
> freedom of entry and operation for foreign financial institutions" on the
> ground that these entities would, among other things, "stabilise and
> develop the local financial system." This recommendation is
> problematic for two reasons. First, foreign financial institutions such as
> hedge funds, which have taken full advantage of "free entry and
> operation," have helped precipitate one financial crisis after another.
> Second, forcing countries to adopt western-style free market norms
> governing ownership of foreign financial subsidiaries and their local
> operations violates the first core principle it proposes for IMF reform-
> that is, "sovereignty-the desire to ensure that democratic processes
> and sovereign authority are respected in both borrowing and lending
> countries."
>
> This contradiction between the logic of the analysis and the
> prescription reminds us that the Commission is, after all, a US
> government-appointed body, many of whose members come from the
> banking sector, conservative think tanks, and establishment
> universities who are very wary about placing significant restrictions on
> the free flow of finance capital globally, even when the evidence they
> are staring at underline the destructiveness of unchecked capital
> mobility.
>
> The World Bank: Hype versus Substance
>
> When it comes to the World Bank, the report is equally devastating.
> The rhetoric about focusing on poverty alleviation, it says, is
> contradicted by the reality that 70 per cent of the Bank's non-aid
> lending is concentrated in 11 countries, while the Bank's 145 other
> member countries are left to divide the remaining 30 per cent.
> Moreover, 80 per cent of World Bank resources have gone, not to
> poor countries with poor credit ratings and investment ratings, but to
> countries that could have raised the money in international private
> capital markets owing to their having investment grade or high yield
> ratings.
>
> In terms of achieving a positive development impact, the Bank's own
> evaluation of its projects shows an outstanding 55-60 per cent failure
> rate. The failure rate is particularly high in the poorest countries,
> where it ranges from 65 per cent to 70 per cent. And these are the
> very countries that are supposed to be the main targets of the Bank's
> anti-poverty approach.
>
> The picture that is drawn of the World Bank is that of a massive
> institution that is driven to lend more by institutional imperatives than
> actual need in the recipient countries, that is burdened by high failure
> rates both in its project lending and its program (adjustment) lending,
> that has poor monitoring capabilities of the sustainability of its
> projects, that competes with rather than supplements the regional
> development banks (Asian Development Bank, Inter-American
> Development Bank, and African Development Bank). The stark
> reality is that of a dinosaur that is slowly sinking in a bog of its own
> making but which flags a "new approach" of "Poverty Reduction" or
> "Comprehensive Development" to mask a fundamental crisis of
> identity and direction.
>
> Reform or Abolition?
>
> The Meltzer Report's basic conclusion is that the IMF and the Bank
> are monolithic institutions that have outlived their usefulness. Now,
> institutions should be saved and reformed if their functioning, while
> defective, nevertheless broadly achieves their basic objectives. They
> should be abolished if they have become fundamentally dysfunctional
> in achieving their basic objectives. The IMF, in the Report's view, has
> become part of the problem rather than part of the solution in global
> development and financial governance. The World Bank likewise has
> become irrelevant rather than central to the alleviation of poverty.
> Despite adjustments here and there, the two institutions are
> imprisoned within paradigms and structures that cannot handle the
> multiple problems confronting the world economy during this phase of
> globalisation.
>
> To borrow the language of Thomas Kuhn's classic Structure of
> Scientific Revolutions, both institutions are like paradigms in crisis,
and
> the solution when a paradigm is in fundamental crisis is not to try to
> reform it with endless minute adjustments that merely prolong its
> inevitable demise, but to cut cleanly from it in favour of a simpler,
> more relevant, and more useful paradigm-in a manner similar to the
> way the founders of early modern science simply junked the old,
> hopelessly complex Ptolemaic paradigm for explaining the cosmos
> (the sun and other celestial bodies moving around the earth) in favour
> of the simpler Copernican paradigm (the earth moving around the sun).
>
> In other words, rather trying to find a function for the Fund and
> assigning to it the role of being a lender of last resort, we would do
> better to scrap it totally and create a new institution that does not have
> the baggage of institutional failure and an obsolete institutional mindset
> and is thus better positioned to manage financial crises in this era.
> Rather than expect the highly paid World Bank technocrats who live
> in the affluent suburbs of Northern Virginia to do the impossible-
> designing anti-poverty programs for folks from another planet: poor
> people in the Sahel - it would be more effective to abolish an
> institution that has made a big business out of "ending poverty," and
> completely devolve the work to local, national and regional institutions
> better equipped to attack the causes of poverty. And this task should
> not fall to the regional development banks so long as they are
> imprisoned by World Bank-type structures.
>
> The Meltzer Report does not go far enough. It does not follow the
> logic of its analysis to its inevitable conclusion: the abolition of the
> Jurassic Bretton Woods institutions. It is up to the masses of people
> gathering in Washington, DC, on the occasion of the IMF-World
> Bank spring meetings in mid-April, to uncompromisingly deliver that
> message to the powers that be.
>
> *Walden Bello is executive director of Focus on the Global South and
> professor of sociology and public administration at the University of
> the Philippines.
>
> Focus on the Global South (FOCUS)
> c/o CUSRI, Chulalongkorn University
> Bangkok 10330 THAILAND
> Tel: 662 218 7363/7364/7365
> Fax: 662 255 9976
> E-mail: admin at focusweb.org
> Web Page http://www.focusweb.org
>
>
>
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