You'll probably find the excellent analysis by Leo Panitch and Sam Gindin on the US regime's interests/capacities to be seminal. I'm not sure of their very latest so will cc them.
Given the tightness of Treasury/BWIs at the end of the Clinton regime at the last stage of system-threatening financial crises (which you saw up close), and - subsequently- the way that de Rato/Wolfowitz fuse neocon backgrounds/interests with BWI neoliberalism, I'd bet that we haven't seen the last of the bailouts arranged by the US for its emerging market friends, whichever they still have left. This was hard to tell during the Bush regime's first six years given the global economic upswing but it can't last too much longer before the business cycle does its dirty work.
And it also brings up the problem I think Mark Weisbrot may be getting himself into: declaring victory a bit early in the long march. His recent column (below) strikes me as fabulous were it true, but I'm worried it's not, given how much power the BWIs retain in this part of the world. In Zimbabwe, they're planning on recolonisation as soon as Mugabe kicks out, perhaps within a year if we're lucky. (My spin on this is forthcoming in the M&G in a couple of weeks and is below.)
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The IMF at Sixty-Three — An Early Retirement?
By Mark Weisbrot
This column was distributed to newspapers by McClatchy-Tribune Information Services on April 4, 2007 and ran in the The Charlotte Observer and will continue to be published throughout the country over the coming days. If anyone wants to reprint it, please let me know.
It's a rite of Spring in Washington: as winter fades and the cherry blossoms burst into their pale pink splendor, the International Monetary Fund (IMF) and World Bank hold their annual Spring Meetings. It was not so long ago, in the pre-9/11 world, that the event attracted protestors, police crackdowns, and pre-emptive strikes against them. "Better the finance meeting had been held offshore, like other nefarious cartels do, than to reinforce the image of our nation's capital as a two-bit capitalist dictatorship," wrote Washington Post columnist Courtland Milloy in 2000, after the police rounded up scores of bystanders, including tourists, and threw them in jail.
Today the IMF attracts relatively little attention, mostly because it has become a shadow of its former self. The protests - among many others throughout the developing world - helped bring about this historic change by shining some light on an organization that has spent most of its 63 years operating under the radar.
The Fund's portfolio of loans has been sharply reduced: from $96 billion as recently as 2004 to just $20 billion today. About half of that $20 billion is owed by Turkey. But much more importantly, the Fund has lost its enormous power to pressure middle-income developing countries to adopt a whole set of economic policies that were often not in their interests.
The IMF's power was based on an informal arrangement that put the Fund at the head of a powerful creditors' cartel. A government that didn't meet the Fund's conditions wouldn't be eligible for most loans from the World Bank, other multilateral lenders such as the Inter-American Development Bank, rich country governments, and sometimes even the private sector. This gave the IMF enormous leverage: often it could present governments with an "offer they couldn't refuse."
Since the US Treasury Department holds a veto over IMF decisions, this power was even more concentrated, and was in fact the major avenue of US influence over the economic policies of developing countries. This power began to erode after the East Asian Financial crisis in the late 1990s, where the IMF's intervention was widely seen as having increased the regional economic damage and imposing unwanted conditions on the affected countries, such as South Korea, Indonesia, and Thailand. These countries and others have since accumulated large international reserves and will never have to go back to the Fund.
The Fund's contribution to Argentina's economic collapse (1998-2002) and its unwillingness to help with the country's recovery further damaged the IMF's reputation. Argentina also showed that the IMF and associates' "help" was unnecessary, disregarding their advice to become the fastest-growing economy in the Western Hemisphere over the last five years.
Then Venezuela began to make billions of dollars of its international reserves available to neighboring countries such as Argentina, Bolivia, Ecuador, and others. This broke the back of the creditors' cartel by offering an alternative source of credit with no strings attached.
The Fund sees itself as a victim of its own success - the world hasn't had any major financial crises in recent years and developing countries can borrow from private sources at relatively low interest rates. Some economists think the Fund will regain its power when the next crisis hits.
But it won't. The IMF has lost power because its policy prescriptions didn't work. The areas where it had the most influence, such as Latin America and Africa, have experienced profound economic growth failures. The fastest growing countries in the world over the last 25 years - e.g. China, Vietnam, and India - were free from the Fund's influence. The next important step will be for the poorest countries in the world, which are still in the grip of the IMF's cartel, to become independent.
Mark Weisbrot is co-director of the Center for Economic and Policy Research, in Washington, D.C. (www.cepr.net), and co-author of Political Forecasting: The IMF's Flawed Growth Projections for Argentina and Venezuela."
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Whose Zimbabwe economy?
For Zimbabwe’s first post-Mugabe government, perhaps as early as next March if elite deal-making unfolds as promised, job number two (after restoring a semblance of democracy) is economic.
Given the meltdown of Robert Mugabe’s version of crony-statist-capitalism, a system terribly hostile to the country’s poor and working people, the new model chosen will reverberate across the world.
On the one hand, The Economist spells out why Zimbabwe should take ‘Washington Consensus’ advice: ‘Nowhere has withdrawn so swiftly from the global economy, nor seen such a thorough reversal of neo-liberal policies. The results—an economy that has contracted by 35% in five years, and half the population in need of food aid—are hard to paper over.’
On the other hand, countries like Argentina, Venezuela, Brazil, Turkey, Indonesia, and the Philippines are throwing off the yoke of the International Monetary Fund (IMF), repaying loans early and thus pushing it into serious financial crisis.
With several Latin American countries veering sharply leftwards, out of Washington’s orbit, little Zimbabwe could become the IMF’s next big ideological battle ground.
To illustrate, SA Communist Party leader Blade Nzimande last month attacked the ‘superficial’ analysis dominant in the African National Congress: ‘During the first decade of Zimbabwe’s freedom (1980-1990), the government legitimately spent vast amounts of money on social services (health, education, welfare, etc), but without due regard to the fiscus and therefore the sustainability of such spending, [hence] government was forced to turn to the IMF’.
Not only is such analysis incorrect, for Mugabe adopted structural adjustment at a time of relative economic health, and by 1995 received the World Bank’s highest possible rating for following the Washington Consensus: ‘highly satisfactory’.
Just as grating, says Nzimande, is that, ‘In our ranks this argument was also used to justify our own [neoliberal] macro-economic policy.’
Mugabe’s spindoctors typically blame the 2000-07 economic crisis upon Western states and institutions angry about land reform, or mythical ‘sanctions’ (aside from loan blacklisting due to nonpayment, there are only minor smart sanctions against a few dozen individuals in operation).
In fact, per person Gross Domestic Product has been falling since 1974, due to the constraints of a racially-biased small economy which under anti-Rhodesian sanctions overproduced beyond local buying power.
In contrast, the US State Department’s lead Africa official lists ‘poor fiscal policies and rampant government spending - including the cost of Zimbabwe’s military involvement in the Congo – [and] … an illegal and chaotic “fast track” land reform programme.’
Local economist Rob Davies mainly blames the crisis on wealth accumulation – ‘a peculiarly rampant form of absolute extraction’ - by the ruling party.
Though the majority MDC faction guided by former labour leader Morgan Tsvangirai has declared itself social democratic not neoliberal, suspicions remain that – like Zambia’s first post-Kaunda regime in 1991, presided over by trade unionist Frederick Chiluba, in the wake of late 1980s mass riots against IMF dictates - it may revert to the Washington Consensus.
Mugabe, meanwhile, painfully and wastefully spent $150 million to partially clear IMF arrears in 2005-06 (leaving $130 million still to repay plus $4+ billion in other foreign credits). But there is no hint of any fresh loans until he departs – and then the searing strings attached to an IMF programme might generate new riots.
According to the last IMF statement on Zimbabwe, in December: ‘Going forward, the key will be first to ensure that sharp cuts are made in real terms in fiscal spending… Strong fiscal adjustment will need to be supported by moving a unified exchange rate towards market-determined levels, removing restrictions on current account payments and transfers, liberalizing price controls and imposing hard budget constraints on public enterprises.’
The last time the IMF exerted real power over Zimbabwe was when it lent $53 million in 1999, which was meant to release another $800 million from other creditors. According to leading IMF negotiator Michael Nowak: ‘We want the government to reduce the tariffs slapped on luxury goods last September, and second, we also want the government to give us a clear timetable as to when and how they will remove the price controls they have imposed on some goods.’
Five months later, the IMF agreed to increase the loan amount to $200 million, but more conditions were reportedly added: access to classified DRC war information and a commitment to pay new war expenditure from the existing budget.
This meant the IMF encouraged Mugabe to penalise health, education and other badly-defended sectors on behalf of military adventures and business cronies, and also ordered Mugabe to immediately reverse the only redistributive policies he had adopted in a long time: a) a ban on holding foreign exchange accounts in local banks (which immediately halted the easiest form of capital flight by the country’s elites); b) a 100% customs tax on imported luxury goods; and c) price controls on staple foods in the wake of several urban riots.
That deal quickly fell apart, however, when fiscal targets were missed. Harare was, quite simply, broke. The previous year, Mugabe had spent an historically-unprecedented 38% of export earnings on servicing foreign loans, exceeded that year only by Brazil and Burundi.
To be sure, last December’s IMF statement also called for social security protections, but the IMF’s most essential medicine – ‘sharp cuts’ in an already broken state – will not cure this wretched patient.
Instead, the last time Zimbabwean civil society generated an analysis was 2000, alongside a progressive group within the UN Development Programme. Its strategy was developmental, basic-needs driven and patriotic – and now needs urgent fleshing out by organisations like the Zimbabwe Social Forum, trade unions, Women of Zimbabwe Arise and churches.
SA’s Mass Democratic Movement rose to a similar challenge in 1993, producing the Reconstruction and Development Programme. Then the really tough job looms: ensuring accountability of the state to the people.
Patrick Bond is director of the University of KwaZulu-Natal Centre for Civil Society and coauthor of Zimbabwe’s Plunge: Exhausted Nationalism, Neoliberalism and the Search for Social Justice (UKZN Press).
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