Banking on Poverty - Aziz Choudry on S26
Today, Michael Cullen attends the annual meetings of the World Bank and International Monetary Fund in Prague. It’s September 26 - thousands of people will take to Prague’s streets and in cities worldwide, including Wellington, in a ‘Global Day of Action’ against economic globalisation. This follows last year’s mass mobilisations against the WTO in Seattle, April’s Washington demonstrations during the IMF/World Bank’s midyear meetings, and the recent World Economic Forum protests in Melbourne.
The stark polarisation of views about these institutions and the economic agenda they promote is hardly surprising. It mirrors the growing gap between rich and poor at national and global levels.
US policy analyst Mark Weisbrot describes the IMF/World Bank record on economic growth as “their most spectacular failure”. Over the last 20 years low and middle income countries have implemented the economic policies of the World Bank and the IMF. Russia and the former Soviet states lost more than 40 % of their national income in the 1990s. Income per person in sub-Saharan Africa has declined about 20% while in Latin America it has grown only around 7%. Yet both regions showed vastly superior economic growth in the previous two decades, before IMF/World Bank “structural adjustment” policies became the norm. From 1960 to 1980, income per person grew 34% in Africa and 73% in Latin America.
APEC, the WTO, and the Singapore free trade agreement have focussed much of the local opposition to globalisation. But the IMF and World Bank have played a longer, more dominant role in shaping the global economy. Liberalisation of trade, finance and investment as well as privatisation and deregulation were implemented mainly through IMF/World Bank structural adjustment programmes for many developing countries.
For many, trade and investment liberalisation has not been adopted because of any demonstrated success in reinvigorating national economies, but as an IMF/World Bank requirement for obtaining desperately-needed credit. These institutions’ enormous leverage creates a mistaken impression that deregulation and liberalisation form the only possible path of development.
The opposition movements against this economic model were not born at Seattle or on the Internet. In the Third World, there have been mass movements against IMF/World Bank policies and globalisation for years, backed by rigorous independent research and community education campaigns. Economic austerity programmes imposed as loan conditionalities have resulted in massive lay-offs, cuts to social services and wages, dramatic hikes in living costs and a raft of other harsh “shock therapy” measures, undermining national development initiatives.
Last month I attended a research conference on poverty and financing development in Jakarta on behalf of GATT Watchdog. Academics, unionists and activists swapped alternative acronyms, capturing popular sentiments about the impact of the IMF in Asia. In Thailand – it stands for “I’m Finished”. In South Korea – it’s “I’m Fired”. In Indonesia it’s “Indonesia Mati Felan-felan” (Indonesia dying slowly). One Indonesian speaker told us: “The impact is clear: people have to pay more for health and educational facilities. We find it an irony, that while development is meant to attack poverty, it has resulted in creating more poverty”.
With intensified scrutiny of these financial institutions have come much-vaunted promises of reform and greater transparency from within. But the continued intolerance of critics inside the World Bank suggests that such commitments are merely cosmetic. Former World Bank chief economist Joseph Stiglitz repeatedly criticised the free market economic policy prescriptions of both the Bank and the IMF. He resigned under pressure last November. His subsequent contract as a consultant was terminated in May, shortly after his article in The New Republic which claimed:”[t]he older men who staff the fund… act as if they are shouldering Rudyard Kipling’s white man’s burden. IMF experts believe they are brighter, more educated, and less politically motivated than the economists in the countries they visit.” In June, fellow Bank economist Ravi Kanbur felt forced to resign when ordered to rewrite its annual World Development Report to be more “pro-growth”.
An August report on globalisation’s impact on human rights to the UN Sub-Commission on Human Rights maintains that even after the wide-ranging criticism of the IMF’s approach to the Asian financial crisis, its policies remain virtually unchanged. “It is still a case of counselling the swallowing of a bitter pill for the present with the promise of recovery and robust health in the future,” it said.
While news crews scour Prague’s streets for sensational images and 30-second soundbites let’s hope there is some serious coverage of the many substantive studies on the negative impacts of economic liberalisation and the efforts to build alternative models of development around the world. Or is that too much to ask?
Choudry works for GATT Watchdog