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FINANCE: ‘Bank and Fund Won’t Change Their Spots’

Analysis by Anil Netto

PENANG, Malaysia, Sep 25 2006 (IPS) - Can the World Bank (WB) and the International Monetary Fund (IMF) be reformed or should they both be boycotted and dismantled? This is the growing debate that has been fuelled in the aftermath of the organisations’ annual meetings in Singapore last week.

Both these international financial institutions attempted a ‘make-over’ of sorts to overcome a crisis of legitimacy, budgetary constraints and an identity crisis over their heavily criticised roles in the global economy.

Under siege, the IMF tinkered with its member nations’ voting structure as a prelude to further minor adjustments, leaving richer nations still firmly in control even as the Fund’s neo-liberal policies continue to have disastrous implications for poorer nations.

The WB, on the other hand, launched a public relations offensive, with its good governance and anti-corruption drive. Critics say this drive is misguided and could hurt aid to poorer countries while allowing the Bank to sidestep national democratic institutions.

Some analysts were not buying these ‘reforms’, pointing out that both these global financial institutions are part and parcel of the same controlling system of disciplinarian neo-liberalism hailed by Wall Street.

‘‘There’s no doubt in my mind that the Fund and Bank cannot be reconstructed,” said Glasgow-based political scientist and author John Hilley, who has written about neo-liberal militarism, the Fund and the Bank, in e-mailed comments to IPS. ‘‘Both need to be replaced by bodies concerned with people and planet rather than austerity prescriptions and business values.”

Critics said the elite closure and containment of dissident voices in Singapore should serve as a reminder that these bodies cannot be ‘constructively engaged’.

Hundreds of civil society activists were forced to divide their numbers between Singapore, where accredited activists were ‘constructively engaged’ inside the convention centre, and neighbouring Batam in Indonesia, where others held protests and parallel meetings. This divide-and-rule tactic may have weakened the overall impact of the usual civil society protests surrounding such meetings.

‘‘The Singapore meetings really showed how undemocratic the Bank and the Fund were,” said Achmad Ya’kub of the Indonesian Federation of Peasant Unions (FSPI), who was deported after being interrogated for 14 hours in Singapore. ‘‘They lost the very little credibility that they still had.”

The sentiment in some activist circles is that civil society organisations should boycott all future meetings with the Bank. Civil society ‘engagement’ in the consultative process, it is argued, indirectly helps to legitimise the WB-IMF annual proceedings..

Hilley warned that no one should be taken in by the supposedly more benign face of the Bank. ‘‘The Wolfowitz presidency, the IFC’s business agenda and the resolute adherence to growth-based policies are all testament to the Bank’s real priorities,” he said. The IFC (International Finance Corporation) is the private sector arm of the Bank, whose president, Paul Wolfowitz, is widely seen as an architect of aggressive U.S. foreign policy in Iraq and the Middle-East.

Former Indonesian president Abdurrahman Wahid said that globalisation had entered people’s lives and they had to find different ways of dealing with it. ‘‘You have taken the path of resistance and I respect that,” he told a conference in Jakarta organised by the international peasants’ movement, La Via Campesina to protest against the WB-IMF meetings.

Many grassroots activists regard public demonstrations as the most effective pressure tactic against the WB-IMF. Even though there was an effective ban on outdoor protests in Batam and Singapore, activists and farmers held rallies and protest marches in the streets of Jakarta on Sep. 18-20.

Some 1,000 activists marched to the office of the Indonesian finance minister and the presidential palace calling for the ouster of the WB-IMF from their lives. In other events, farmers turned out in numbers to protest against rice imports and call for agrarian reforms while Indonesian women’s groups and social movements also held a march.

In Singapore, key IMF participants such as Britain’s Chancellor of the Exchequer Gordon Brown made strenuous efforts to reshape the Fund’s agenda and profile. These were broadened to include supposedly closer involvement in World Trade Organisation-related trade issues rather than just debt, aid and structural adjustment programmes.

‘‘But like Brown’s inability to disguise his own lust for privatisation and his Treasury’s funding of the slaughter in Iraq, WB-IMF is now witnessing the exposure and fallout of its own disastrous neo-liberal interventions,” said Hilley.

These two organisations now rely heavily on developing countries to finance their operating and administrative costs. That’s not all: the Bank itself recognises that developing countries are net lenders to the most industrialised countries.

The IMF, for its part, is not the global financial juggernaut it used to be. It only has the equivalent of about 9 billion US dollars directly in circulation at its disposal, notes Eric Toussaint, president of the Committee for the Cancellation of Third World Debt (CATDM), in a preliminary conference paper published on the organisation’s website. CATDM is a network of individuals and local committees in four continents that was founded in Belgium.

Moreover, the IMF’s lending portfolio is no more than 35 billion dollars, making it look like a dwarf next to twenty developing countries, he pointed out.

This is in sharp contract with the foreign reserves of developing countries, which have surged in recent years on the back of higher prices for exports of oil, raw material and certain agricultural products. Not surprisingly, developing countries now have more than double the foreign exchange reserves of the most industrialised countries at their disposal, observed Toussaint.

But absurdly, he added, these developing countries are using their reserves to repay debts, to lend to U.S. and Western European treasuries, or to contract new debts with private foreign banks or financial markets – instead of using them to invest in education, health care, and agrarian reform.

Activists feel that with the Fund and Bank in such a relatively weak financial position, the time is right for developing countries to push for alternatives such as a ‘Bank of the South’ or alternative regional trade agreements such as the Bolivarian Alternative involving Venezuela, Bolivia and Cuba.

But this may not be enough. They are also questioning whether capitalism as a system is capable of promoting a just distribution of wealth in the South, pointing out that elites have benefited from the system even as income disparities within their countries widen. Major structural reforms looking into the ownership of common goods and public resources may be required.