The Beef With the IMF
If ever there was an institution to study in order to see how slaves are made it is the International Monetary Fund. Of course, the classic example of a human being in physical servitude is not what is meant here. Rather, the IMF makes servants out of entire nations, presidents and prime ministers by offering money in exchange for obedience to its policy dictates. And one after another countries line up to trade their sovereignty for an IMF loan.
While some of the protesters gathering in Washington D.C. are doing so simply because it is the hip thing to do, there do exist alarming and legitimate concerns regarding the undue influence that IMF policies are having around the globe. Take the Philippines for instance where the IMF has given the country until the end of June to privatize its national bank and state-run power company in order to qualify for $ 500 million in loans. In order to take these actions the Philippine House of Representatives has to approve a bill that legally changes the structure of its power industry.
The country needs the $500 million dollars so that it can offset a nearly $1.5 billion deficit. Not only is the IMF loan riding on the vote in the country's congress, but so is the confidence of investors worldwide. Sadly, investors use an economically struggling country's relationship with the IMF as a litmus test. If the IMF aids a country many investors see that as a green light to pour money into the country and if the IMF does not it can result in a dramatic amount of money being taken out of a country by foreign investors.
The President of the Philippines, Joseph Estrada does not wish to see foreigners, including many Americans, pull badly needed capital out of his country. So he is willing to end government control of his power industry and banks just to get a quick infusion of cash. But IMF money comes with a heavy price tag.
Think of an IMF loan as an emergency loan from a loan shark who instead of charging you a high rate of interest, asks for full-decision making power over your household. Before you get a dime he wants the authority to tell you how much you can spend each month on food, your telephone calls and what style of clothes you can wear. He even wants to tell you where to work and how much money you can spend on a health care plan. Imagine how you would feel under these circumstances and think over what you have given up just because you needed some quick cash. And that is always how it works with the IMF.
They are the collection agency and insurance policy of the international banking community. Whenever a country is coming up short and owes these banks and other countries money, the IMF works out a plan by which the country can obtain just enough money to pay those they owe. But the approach never results in the best long-term interests of the nation. They eventually end up back where they were prior to accepting the IMF's help.
Because the IMF represents the interests of creditor nations and the banking community it can't possibly prescribe what is in the best interests of the debtor nations. The motive behind an IMF loan isn't to evolve a struggling nation into one that is rapidly moving toward economic growth. Rather, the motive is to get money that has been lost by the debtor nation back into the hands of the people who have the most equity in that country's stock market or who have loaned it the most cash.
So the IMF prescription places top priority on getting the country out of debt first and at virtually all costs. Fixing the economy is not a real concern. And to add insult to injury, the IMF demands that the country drastically alter its monetary and fiscal policies in a way that results in the country selling its natural resources to economically developed countries as a means of paying back the new debt it now owes to the IMF. The country is usually forced to raise taxes and devalue its currency; two actions that result in an unbearable burden being placed upon the poorest citizens of the country.
After the IMF does what it does best, it is the people that suffer on two counts: first, they do not have the extra money to pay a higher tax rate and second, they are crushed by the soaring inflation rate that accompanies the devaluation of a currency. The double-blow of higher taxation and higher inflation means that people must pay more for food, clothing and shelter and that they have less money in their pockets with which to do so. In recent months, the IMF has come under so much criticism for its policies that it is considering revising its formula of policy prescriptions but until the institution no longer represents the interests of wealthy and creditor nations it will cause more damage than it helps to alleviate.
Wednesday, April 12, 2000
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