‘Our programmes are like medicine. Some of the medicine has harmful side-effects, and there are real questions about what the dosage ought to be. The best that can be hoped for is that we’re prescribing more or less the right medicine in more or less the right dosage.’ – Michael Mussa, Former Chief Economist, IMF
HERE’S a prescription to be liberally applied as needed.
Downsize and economize
The World Bank and the IMF together employ approximately 13,000 staff worldwide. This is almost the same number as the whole of the UN. Meanwhile the Bank and Fund often encourage mass layoffs in the public sector of developing countries in order to ‘trim’ the workforce and ‘maximize efficiency’. Another common policy is to encourage governments to introduce labour ‘flexibility’ provisions (translation: less pay, no benefits, no security).
The average World Bank staff member makes in excess of $150,000 a year in gross salary plus a generous benefits package. As former Bank/IMF economist Davison Budhoo remarked over 10 years ago in NI 214: ‘How can a middle-level economist with five years’ experience justify receiving what amounts to more than 300 times the per capita income of more than half of humankind?’
Applying the same logic to the dynamic duo of the global economy, their first order of business should be to ‘shed workers’ and ‘slash’ wages. They should then introduce temporary contracts for all their remaining staff, dissolve pensions and dismantle their benefits packages. Charge them for stationery use too.
Outsource and asset strip
Once the workforce has been trimmed with no severance pay to speak of, the Bank and Fund should be encouraged to ‘liquidate’ loss-making initiatives and, wherever possible, outsource the rest to external contractors – such as some UN agencies, community-based organizations and communities themselves. Such ‘asset stripping’ should be taken up with the same fervour expected from their client governments whom they often advise to sell off ‘inefficient’ state entities such as water and energy utilities, banks, telephone companies and transport systems.
The World Bank has a low project success rate of 30-40 per cent by its own estimation. To remedy this inefficiency, it should either close down operations altogether or outsource the viable projects to those with better success rates. External actors such as the World Bank Bonds Boycott and other divestment initiatives will be able to assist in the stripping of assets, reducing the institutional accounting burden and freeing up resources for more efficient allocation of funds.
Stamp out corruption
The Bank and Fund pride themselves on their efforts to stamp out corruption in the Majority World. However, they’ve rarely turned their eye on themselves to assess just what sort of dirty dealing may be going on in-house. Over the years, a number of activists have outed these agents of globalization on numerous occasions over conflicts of interest and cosiness to corporations.
For example, the World Bank’s SHARE programme encourages exchange between World Bank staff and employees of the world’s largest transnational corporations. Biotech giant Aventis has staff members actively involved in shaping the Bank’s agricultural development strategy and policy on biotechnology, while Shell staff are developing recommendations on investment and fossil fuel regulation for poor countries. Meanwhile Bank staff get an ‘education’ working for the corporate sector. As World Bank head James Wolfensohn put it when he launched the programme, SHARE is intended to ‘foster closer partnerships with external organizations, particularly the private sector, so as to introduce fresh perspectives and new approaches to deliver better services to our clients’. Given that nearly half of all World Bank funds are distributed directly to transnational corporations, this approach seems very fresh indeed.
Applying the standard formula, the Bank and Fund need to undergo heavy scrutiny from independent corruption investigators in order to determine the gravity of the problem. Progress in the implementation of anti-corruption measures would then become mandatory before they were trusted with any future money. Disbursements might be withheld if widespread corruption continued unabated. Regular unannounced fraud inspections replete with menacing characters in flak jackets with three-letter yellow acronyms on their backs would not go amiss either.
The neoliberal economists in Washington view government regulation as a ‘barrier’ to growth which needs to be whittled away to inspire ‘investor confidence’. But governments often need to apply the brakes on trade and investment flows such as currency speculation, hedge fund activity or dumping of subsidized agricultural goods if they want to protect their economy and citizens from meltdown. Nine out of ten Economist readers nonetheless agree that non-interventionism in the economy is good policy. If that is correct, then the World Bank and IMF are flagrant violators. Constant interference with the economic affairs and budget priorities of the world’s poorest countries has constrained these economies.
So if it is true that ‘overly burdensome bureaucracy’ prevents Majority World countries from lifting themselves out of poverty, the Bank and IMF should take action. They should cut the red tape of their regulations, conditionalities and structural adjustment programmes in order to help dramatically ‘unencumber’ the economies of the global South. Such a move will help foster global economic stability and inspire protestor confidence.
All client governments are expected to keep inflation in check. Ego inflation at the Bretton Woods institutions themselves though is at an all-time high. Despite years of evidence highlighting their failings, dogmatic adherence to dated ideology persists. The IMF is beginning to realize its policies are up the fiscal creek. Just last year it admitted, in an internal review, that prying open vulnerable economies to the vagaries of the market has ‘been accompanied in some cases by increased vulnerability to crises’. They go on to say: ‘If financial integration has a positive effect on growth, there is as yet no clear and robust empirical proof that the effect is quantitatively significant.’
Ego inflation has a dramatic impact on the stability of the global economy as government ministers are wooed by the hubris of Bank and Fund officials. Modernization of the Bank and Fund must become a central priority if continued support is to be expected. Clinging adherence to old neoliberal dogma and accountancy tricks will no longer be tolerated as a greater emphasis on real measurable improvements in the human condition becomes central policy. Consultants and economists perpetuating Jurassic economic policies must be replaced with imported dynamic expertise from the grassroots sector.
Cut anti-social spending
Rather than force countries to cut social spending it would seem sensible that an esteemed organization such as the World Bank – with its motto ‘dreaming of a world free of poverty’ – should instead be cutting anti-social spending. However, both the IMF and the World Bank seem unclear about their core objectives. Angola, which was recognized by the IMF as facing ‘pressing economic and social problems’, was nonetheless admonished by the Fund for putting ‘insufficient controls on public spending’. The Fund executives stressed ‘the need to curtail non-priority expenditures at all levels of government’ and insisted on ‘adherence to a prudent wage policy’ and ‘keeping overall public spending in check’.
The Bank and Fund spend excessively on wasteful anti-social spending provisions. Instead of forcing poor nations to cut funding for healthcare, education and pensions, they should be promoting cuts in ‘non-priority expenditures’ such as in privatization spending, debt servicing, investment ‘incentivization’ schemes and corporate contracts. Cutting spending on corporate welfare programmes alone will bring huge cost savings. For example, wasteful spending on agrochemicals can be dramatically reduced. From 1988-95 the Bank financed $250.75 million worth of pesticide purchases from around the world. Most of these were from only six corporations, all of whom have staff in the SHARE programme advising the Bank on agricultural policy. Eliminating such wasteful spending should become a core priority.
While we should recognize that such dramatic cuts may not be well received in the corporate world, they must learn to realize that the huge benefits of this programme will ultimately trickle down to them.
Highly Irrelevant to Countries Under Poverty Initiative
The G8’s Highly Indebted Poor Countries Initiative (HIPC) is supposed to have made an impact on debt levels of the poorest countries by now. Unfortunately seven years later there is still no sign of progress and, in fact, things are getting worse. So perhaps HIPC needs a rethink.
Given the unsustainable levels of irrelevancy of the Bank and Fund in the fight against global poverty, the G77 – which despite its name is actually a group of 135 countries from the Majority World – should commit to a new Highly Irrelevant to Countries Under Poverty Initiative (HICUP). This will provide special assistance to neoliberal institutions beginning with the most severely irrelevant. The World Bank and IMF should be the first candidates to qualify for this initiative and as a result should be slated for numerous relief packages over the next five years. The World Trade Organization and Regional Development Banks can also qualify for HICUP relief provided they meet certain criteria. These should be reviewed at regular G77 summits and World Social Forums.
The HICUP initiative would demonstrate that the global justice movement is committed to providing relief to the world’s most irrelevant neoliberal institutions. Of course, a key platform of the HICUP initiative will be to ensure that the above macroeconomic adjustments are implemented. It is envisioned that after the initial phase, an enhanced Highly Irrelevant to Countries Under Poverty initiative will be agreed. The enhanced HICUP will review the progress achieved so far and determine whether further reforms need to implemented.
Liberal application of the above formula should result in an improved global economic condition. If symptoms persist, increase dosage and/or consult your community.
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