A Better Way to Use That IMF Money: Debt for Democratic Development
Our world "leaders" have decided to pump $1.1 trillion into the International Monetary Fund (IMF) to allegedly help countries suffering from the global financial collapse. Seeing as the IMF has a 60-year track record of not effectively promoting development or democracy, we need a new way for this money to be used-not to enforce business as usual-but to empower grassroots democratic development.
We all know that dozens of governments in the global South are burdened by huge debt payments to the international banks and the rich country governments. So is there a way to use that IMF money to get these poor governments off the debt treadmill that is sucking crucial foreign exchange from their coffers?
Here are the broad outlines of how Debt-for-Democratic-Development Swaps could work. Debtor governments would pay local currency into a local People's Development Fund (or whatever name local people choose). The government's only access to the account would be to make deposits, not to make withdrawals or influence expenditures-this would limit patronage and influence peddling.
The Commission would have strict democratic requirements: It would be run by a board elected in free and fair elections with limits on campaign spending; the board would contain a large percentage of women; representation of workers and small farmers would be written into the charter; grassroots development organizations would figure prominently; and other requirements could be specified, all aimed at ensuring democratic accountability and popular control of the capital.
The precise details would need to be developed through a local, participatory process including diverse sectors of civil society with international observers. That said, the general principles-getting capital down to the grassroots and democratizing the process by which capital gets invested-would hold constant. As Jim Hightower says: capital is like cow manure; if you concentrate it in a pile it stinks, but if you spread it out evenly, it makes things grow.
The People's Development Commission would use the money deposited into its account to issue loans and grants to grassroots development efforts. These could include a wide range of small-scale enterprises and empowerment projects: women's production and marketing cooperatives, organic farming projects, craft production, provision of health, education, transportation services, grassroots infrastructure development such as solar power, water purification, sanitation, and the list could go on.
Putting a ceiling of a few thousand dollars on the size of grants and loans would tend to keep away the financial exploiters who are not interested in small amounts.
The Grameen Bank in Bangladesh and other micro-enterprise lenders provide useful lessons on how limits could be put on the size of loans, how the money could be paid back by groups rather than individuals, and how the process could go beyond mere financial transactions to social organizing.
The economic multiplier effect would be great because the poor spend most of their money in the local economy on basic things such as food, clothing, and shelter.
For each sum of local currency deposited into its People's Development Commission, the government of that nation would get their foreign debt reduced for an equivalent amount of hard currency at a mutually agreed exchange rate. This would stop one of the biggest problems of the debt crisis: the bleeding of hard currency from debtor countries. Talk to people about the economic crisis on the streets of Zimbabwe, Nicaragua, or Haiti, and eventually the discussion comes around to the problem of foreign exchange shortages.
The problem with most debt-for-equity swaps is that they fail to transfer ownership to the local people. This plan would seek to ensure that money gets down to the base of societies, to be controlled by grassroots institutions.
The poor have proven that they can develop enterprise skills if they have access to capital. This plan would create some hope that development capital and decision-making power would get into the hands of the people who need it most.