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TechnoratiThe IMF's Dwindling Fortunes
Thanks to disasters of its own making, the agency is losing money and influence.
"The IMF is back," declared the International Monetary Fund's managing director, Dominique Strauss-Kahn, at its annual spring meeting earlier this month in Washington. And not a moment too soon either. To hear the organization's economists tell it (as they mingled in five-star hotels, long black limos and posh restaurants with bankers, businessmen and finance ministers from around the globe), they've arrived on the scene just in time to help solve the world's financial crisis.
But despite the bravado, the reality is that today's IMF is not what it once was. These days, the world's most famous deficit police force is running a whopping small-country-size $400-million annual deficit of its own and is being forced into some of the same kinds of "structural adjustments" it used to impose on indebted Third World nations. In just the last four years, the IMF's total loan portfolio has shrunk from $105 billion to less than $10 billion; over half of the current portfolio consists of loans to Turkey and Pakistan. To cut costs, the agency is reducing staff and closing offices.
The IMF's loss of influence is probably the most important change in the international financial system in more than half a century. Until just a few years ago, the IMF -- originally created at the Bretton Woods conference on international economic cooperation in 1944 -- was one of the most powerful financial institutions in the world and the major avenue of influence for the United States in developing countries.
This wasn't so much a result of the money that it lent -- the World Bank loans much more -- but because of its position at the top of a hierarchy of official creditors. Until a few years ago, a developing-country government that did not meet IMF conditions risked being economically strangled. The World Bank, regional banks such as the Inter-American Development Bank, rich lender governments and sometimes even the private sector would withhold lending until the government reached agreement with the IMF.
At the top of this powerful creditors cartel sat the U.S. Treasury Department, which holds a formal veto over many of the IMF's decisions and is an informal power within the organization that marginalizes even the other rich countries. Developing countries -- the ones that have historically borne the brunt of IMF decisions -- have little or no effective voice in the decision-making of the organization, where the majority of votes of the 185 member nations are assigned to the rich members.
But the IMF lost credibility after presiding over a series of economic disasters. Latin America, for example, suffered its worst long-term growth failure in modern history under the IMF's tutelage since 1980. The IMF's "shock therapy" program in Russia vastly underestimated the time it would take to transition from a planned to a capitalist economy in the early '90s. The result was a lot of shock and no therapy, and tens of millions were pushed into poverty as the economy collapsed.
The Asian financial crisis in the late 1990s was a tipping point. The IMF and the U.S. Treasury helped cause the crisis by pushing for the removal of important regulations on foreign capital flows. Then they made it worse with their policy recommendations, prompting economist Jeffrey Sachs -- now head of Columbia University's Earth Institute -- to say that "the IMF has become the Typhoid Mary of emerging markets, spreading recessions in country after country."
Some of these mistakes were because of incompetence; others were driven by ideological or special interests. But the result was that developing countries began voting with their feet, piling up international reserves so that they would never have to borrow again from the IMF cartel.
The IMF-supervised Argentine disaster from 1998 to 2002, which pushed the majority of Argentines below the official poverty line in a country that was previously one of the richest in the region, further sullied the fund's reputation. Argentina then defied the IMF, refused its conditions, got no international help and rapidly transformed itself into the fastest-growing economy in the hemisphere. This too was noticed.
The collapse of the IMF creditors cartel has been a huge blow to U.S. influence. It was most pronounced in Latin America, where most of a region that used to be referred to as the United States' "backyard" is now governed by states that are more independent of Washington than Europe is.
The problem is that poorer developing countries, especially in Africa, remain dependent on foreign aid from the IMF (and the World Bank and other sources) to fund their basic budget and import needs. This can be harmful to their development and their people. In recent years, the IMF -- insisting that such measures are necessary to hold down inflation -- has imposed conditions that limit their public spending and, according to the fund's own internal evaluation, have prevented these countries from spending aid money on urgent needs, such as healthcare and education.
These countries need to join the rest of the developing world in breaking free of the IMF's policy conditions. The U.S. Congress may consider legislation that would pressure the IMF to use some of its huge gold reserves for debt cancellation and to limit the IMF's control over policy in poor countries. These would be important steps forward for the world's poor.
Mark Weisbrot is co-director of the Center for Economic and Policy Research in Washington. ( www.cepr.net).
Copyright 2008 Los Angeles Times
13 Comments so far
Show AllRemember the Bruce Cockburn lyric: "I M F ! Dirty M F's!"
It'd be nice if they'd waste away to nothing, dry up, and
blow away. I don't think Tyrannosaurus is going to go down
without thrashing about and killing whatever it can. Maybe
the MERCOSUR countries will be able to protect themselves;
Africa is directly in its path, however. Asia's going to
have to deal with its own brand of tyrants. As for us in
West, we're going to have to find a new paradigm of sustainability.
From the link:
"The U.S. Navy has been planning to build up its forces in the region. Admiral James Stavridis, who oversees military affairs for Latin America, told Congress on March 6 that he backs plans to designate a new fleet, led by a nuclear aircraft carrier, to patrol the waters of the Caribbean and Latin America in support of counter-terrorism operations."
Talk about delusional. Oh well, every dollar wasted on this crap brings us closer to the collapse of the U.S. empire and hopefully the development of a true democracy in this country to replace it. We'll get our country back when the rest of the world kicks us out of theirs.
Good comments :-)
The collapse of the IMF creditors cartel has been a huge blow to U.S. influence. It was most pronounced in Latin America...
I would just like to emphasize the importance of Chavez of Venezuela in pushing the IMF out of South America, with the billions he lent to Argentina, Ecuador and Bolivia freeing them from the 'structural adjustments' the U.S. used to keep them in their place. For example, during the 'Argentine disaster of 1998 to 2002' , the 'economic helpers' of the U.S. wanted to spur Argentina's growth by forcing them to lower trade barriers, cut taxes and deregulate the labor market (i.e., allow the multinationals in, lower their cost of doing business, and allow them to trash unions to get the lowest possible labor costs). Chavez and his oil billions allowed the Argentinians to follow their own economic plans, to great success (for Argentinians, not for U.S. bankers). Just one more reason the United States hates Chavez, and would like to see him overthrown or assassinated.
But in the meantime, since American economic power is waning, they are going to their final remaining strength: military force.
U.S. Navy Reviving Fleet for Latin America, Caribbean
They haven't needed this raw display of power since 1950. Here is a snippet from the April 24th, 2008 Bloomberg story:
...Ecuador, an ally of Venezuelan President Hugo Chavez, who is leading efforts to counter U.S. influence in Latin America.
Rear Admiral James Stevenson, commander of U.S. Naval Forces Southern Command, said the re-establishment of the Fourth Fleet will send a message to the entire region, not just Venezuela. The focus will probably be on security, he said.
Sure, 'security', or 'counter terrorism', or 'anti narcotics', whatever. Just as long as Chavez realizes the U.S. has a new fleet, led by a nuclear aircraft carrier right off his coast. Call this 'the Iranian diplomatic approach'.
a very informative article. His comment about Africa makes me think of Obama. If he's the president I think he might have other ideas about economics there - NOT including the IMF.
since1492: That was about as terse, economical, and TRUE a statement as I have heard in a long time.
I feel very sorry for you all - as Thoughts_Into_Action pionts out - the gunsites are now turning inwards.
They have the laws and they have the camps and they can make you all pay for your own destruction- this can very well be the end of all freedom in U.S.A - or are you ready to fight?
Before you vote, please check out Ron Paul and his position.
Try something else - to fight together for freedom!
The prime instrument of U.S. hegemony is this economic IMF-World Bank "system." Under it, the lending institutions dictate the government policies of debtor nations. It's worked better than military invasions, allowing U.S. businesses to buy up country assets at fire-sale prices, robbing the locals and destroying community-owned assets for generations.
Naomi Klein chronicles how the economic shock is typically a secondary attack after coups or other turmoil to bring a country to its knees. John Perkins described how local oligarchs are cultivated through this system, while impoverishing the nation. Waldon Bello has written about how structural adjustment policies have destroy local organizational strengths, such as labor unions and other means of resisting invading corporate powers.
The world needs economic help, but capitalism is its own ideology with decidedly antisocial aims. It's predicated on the extraction of personal profits at somebody else's expense.
The gunsites are turning inward now. The U.S. housing bubble was a devised thing. To deal with a U.S. population that may resist, the economic screws will be tightened at home. People need to learn what happened abroad (read the authors cited above, for instance) to know what's in store for us. You can only try to resist the coersion when you can see it.
Is your favorite Presidential candidate sucking down money from those who profit from this system? Yes, they are.
We should all be against the undemocratic and imperial intentions of the IMF and the WTO, but that doesn't mean we are against all international institutions.
I'm not anti-globalization. I just think we can live in our global community in respectful and democratic ways. For the monopoly media to label us as anti-globalization for opposing the IMF and WTO is reason enough to turn off our monopoly media outlets and spend more time online and outside.
The author seems to think that the IMF is there to help the world's poor. The IMF is there to help the empire (The United States of Everything) to expand its control. Poor people are irrelevant.
Hoa binh
Not mentioned by Weisbrot but just as telling is the deevelopment of Banco del Sur (the Bank of the South) by Hugo Chavez as an alternative to the World Bank and IMF for Latin America. THere is no reason that similar institutioins cannot develope in places like South Asia and Africa.
As for the demise of the IMF, I'm so sad I think I'll cry tears of joy. Wait till the rest of the world finally imposes "structural readjustments" on the financially profligate US and you will really understand why everyone connected with this institution needs to be exiled to some remote Pacific island for the rest of their miserable lives.
Finally, an article with GOOD news!
sLiMsHaDy ... nice!
My take on it is this .... given the situation you so accurately describe, why would anyone expect that a corporate owned political party and the corporate media will present this savior to you? Do you expect them to act against their own interests? If there is a savior coming, you won't see a favorable word about them on the TV. That 'savior' will have to be something we build on our own. That's how we will know the false prophets from the real ones. The only real ones are the ones we'll build for ourselves.
HELLO? Knock Knock!! HELLO???
Let's see- we all agree that bushco is out to destroy the present world order. There is some consensus that these plans have been decades in the making, if not longer.
Because the neo-cons are unable to stifle all news and commentary from the world, we do know that there are governments that are actively working to decouple themselves from this evil empire.
We know that there is trouble looming due to abuse of the earth with USA being responsible for the majority of it up until now, and the developing nations zooming ahead with their efforts to emulate or replace the USA's rampant consumerism. We are told by our neo-cons that this is not happening and that we all need to continue as always. We know that this is bad policy, but we are really just awakening to this fact from our stupifaction (the majority of citizens anyway).
There has been launched a war on terror- a war that will have no end, as our modern day fuerher put it. All ready there have been trillions of dollars spent, probably a million lives extinguished.
The uber-rich have managed to greatly increase their wealth at the expense of everyone else. Corporations run rampant over law, people, and planet. The USA spends more than ALL others on the planet combined to maintain its hegemony over everything. Yada yada yada, etc etc etc, and on and on and on...
How does there exist then any chorus that says "one man can save us"? "The woman and the old man are in league with these luciferians, but if we all vote for Barack Obama maybe it won't come true"? How can there possibly be anyone- at this site at least- who would truly believe that?
IF the plan and the power are in place, then NO ONE is going to be allowed to alter the path towards that NWO; not via the PTBs own "system" (read- elections)anyway! Come on now! Barack Obama is part and parcel of this dog-n-pony show, or they will take him out.
There is no escape from this situation via the present political set up. You may have heard the expression "thinking outside the box"- the answer to our quandries will not come from within the very system that gave birth to our present situation.