‘IMF Meddlers Go Home’ is a catchy bit of Third World graffiti which is at last gaining political weight. The International Monetary Fund, shy twinbrother of the World Bank and godfather to three generations of subservient Finance Ministers is being challenged to come clean or get out.
Michael Manley, Prime Minister of Jamaica, and President Julius Nyerere of Tanzania lent their angry support to the July ‘South-North’ Conference which aimed to provide hard evidence to backup the IMF-bashing. Both leaders have been put through the mill by IMF negotiators demanding political concessions in return for hard cash. For a long time individual countries have been left complaining in the financial cold. But now a 40-strong group of eminent politicians, planners and economists from 20 different countries have agreed that the IMF makes unreasonable, sometimes impossible demands on Third World countries.
The conference, drably billed ‘The International Monetary System and the New International Order’ packs quite a punch in its critique of the IMF. Its major conclusions were condensed in the ‘Arusha Initiative’, taking its name from the Tanzanian town where the conference was held. Now the background research is published in Development Dialogue by the Dag Hammarskjold Foundation.
The initiative, calling for a UN conference on International Money and Finance, came after a full-blooded indictment of the existing world monetary system - of which the IMF is a major pillar. The conference dismissed the IMF claim to be an ‘objective’ and ‘neutral’ institution providing only technical help in times of financial need. The charges the IMF faces are:
• Rigid adherence to outmoded economic thinking which ignores the problems of Third World development.
• Double standards; some countries getting soft treatment for political reasons while others face stiff terms and penalties.
• Its policy enshrines the free market. State intervention is labelled ‘inefficient’ and ruled out in loan agreements.
• The US and other rich countries with balance of payments deficits escape blame while poor countries are penalised. ‘The IMF,’ argued conference participants ‘has perversely combined a policy of deflation for the weak and inaction for the strong.’
• At worst the IMF is accused of forcing on governments measures which ‘destabilize’ the economy and may result in political upheaval. Whether this is deliberate, or just incompetent remains unclear. But, concluded the conference, ‘IMF medicine systematically favours conservative sectors of society and traditional centres of power’. The net result is discrimination against efforts for structural change, self-reliance and alternative development.
Ismail-Sabri Abdalla, formerly the Egyptian Cabinet’s planning chief and now chairman of the Third World Forum put together the case against the IMF. His argument, knife-edged but couched in economic language, runs like this:
When the IMF and the World Bank were spawned at the 1944 Bretton Woods conference, the Third World was granted only token participation, and Western delegates were preoccupied with the problems of rebuilding Europe after World War Two. With the USSR and other communist countries pulling out, and most of the Third World still under colonial rule, the IMF lacked global support right from the start. The US still has 20 per cent of the governing votes: an effective veto. And Third World exclusion from IMF policy-making is reflected in the policies themselves. Designed to cope with the problems of industrialised economies, they don’t acknowledge the fact that balance of payments deficits are part and parcel of development. There must be a breathing space - and a bank overdraft - for development projects to show a return on investment. Increased production can’t simply be ‘turned on’ like an industrialised country emerging from recession. And faced with drought or a slump in export prices developing countries can’t balance their books overnight. Wipe out corruption, luxurious consumption, and inappropriate technology, yes. But try to ‘correct’ the development deficit and you halt the development effort itself.
‘The IMF persists in its desire,’ argues Abdalla ‘to apply to the Third World remedies conceived for other diseases’. And the side-effects of its prescriptions, like a drop in real wages and cutbacks in welfare services, fall hardest on the weak and the poor - those least organised to oppose government acceptance of the IMF’s hard line.
Less than three per cent of loans to the Third World actually come from the IMF. But the fund acts as private detective for commercial banks, imperiously checkingout the bank balances and housekeeping rules of independent states before ‘giving the green light to purveyors of commercial credit’. As things stand, Third World countries in need of cash have no alternative but to turn to the IMF, and submit to its draconian ‘performance tests’.
Jamaica and Tanzania have both said no to ‘IMF meddling’. Rejecting the IMF’s standard prescription of public expenditure cuts, Nyerere grimly told the diplomatic corps in his 1980 New Year message ‘My Government is not prepared to give up our national endeavour to provide primary education for every child … nor are we prepared to deal with inflation by relying only on monetary policy regardless of its effect on the poorest’. The problems facing the Third World, concluded Nyerere, ‘are grave enough without the political interference of IMF officials’.
The aim of the South-North Conference, and the hope of its participants, was to ‘blow wide open’ IMF handling of Third World finances and ‘break the decision-making monopoly’ hitherto enjoyed by major Western powers. A UN conference would be only the first step in forcing the IMF into the open and getting public debate moving. But to continue living with the present system, laments the Arusha Initiative ‘does no credit to human rationality’.