Vultures in The International Monetary Fund

Vultures in...

The International
Monetary Fund

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From wikipedia:

International Monetary Fund

From Wikipedia, the free encyclopedia

The International Monetary Fund was created in 1944 [1], with a goal to stabilize exchange rates and assist the reconstruction of the world's international payment system. Countries contributed to a pool which could be borrowed from, on a temporary basis, by countries with payment imbalances. (Condon, 2007)

The IMF describes itself as "an organization of 185 countries (Montenegro being the 185th, as of January 18, 2007), working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty".

With the exception of Taiwan, North Korea, Cuba, Andorra, Monaco, Liechtenstein, Tuvalu, and Nauru, all UN member states participate directly in the IMF. Most are represented by other member states on a 24-member Executive Board but all member countries belong to the IMF's Board of Governors.

History

The International Monetary Fund was formally created in July 1944 during the United Nations Monetary and Financial Conference. The representatives of 45 governments met in the Mount Washington Hotel in the area of Bretton Woods, New Hampshire, United States of America, with the delegates to the conference agreeing on a framework for international economic cooperation. The IMF was formally organised on December 27, 1945, when the first 29 countries signed its Articles of Agreement. The statutory purposes of the IMF today are the same as when they were formulated in 1944

Today

The IMF's influence in the global economy steadily increased as it accumulated more members. The number of IMF member countries has more than quadrupled from the 44 states involved in its establishment, reflecting in particular the attainment of political independence by many developing countries and more recently the collapse of the Soviet bloc. The expansion of the IMF's membership, together with the changes in the world economy, have required the IMF to adapt in a variety of ways to continue serving its purposes effectively.

In 2008, faced with a shortfall in revenue, the International Monetary Fund's executive board agreed to sell part of the IMF's gold reserves. On April 27, 2008, IMF Managing Director Dominique Strauss-Kahn welcomed the board's decision April 7, 2008 to propose a new framework for the fund, designed to close a projected $400 million budget deficit over the next few years. The budget proposal includes sharp spending cuts of $100 million until 2011 that will include up to 380 staff dismissals.

At the 2009 G-20 London summit, it was decided that the IMF budget will be tripled to $750 billion, to better meet the needs of the global community amidst the late 2000s recession....

Membership qualifications

Any country may apply for membership to the IMF. The application will be considered first by the IMF's Executive Board. After its consideration, the Executive Board will submit a report to the Board of Governors of the IMF with recommendations in the form of a "Membership Resolution." These recommendations cover the amount of quota in the IMF, the form of payment of the subscription, and other customary terms and conditions of membership.

After the Board of Governors has adopted the "Membership Resolution," the applicant state needs to take the legal steps required under its own law to enable it to sign the IMF's Articles of Agreement and to fulfil the obligations of IMF membership. Similarly, any member country can withdraw from the Fund, although that is rare.

For example, in April 2007, the president of Ecuador, Rafael Correa announced the expulsion of the World Bank representative in the country.

A few days later, at the end of April, Venezuelan president Hugo Chavez announced that the country would withdraw from the IMF and the World Bank. Chavez dubbed both organisations as “the tools of the empire” that “serve the interests of the North”. As of April 2008, both countries remain as members of both organisations. Venezuela was forced to back down because a withdrawal would have triggered default clauses in the country's sovereign bonds....

Assistance and reforms

The primary mission of the IMF is to provide financial assistance to countries that experience serious financial and economic difficulties using funds deposited with the IMF from the institution's 185 member countries. Member states with balance of payments problems, which often arise from these difficulties, may request loans to help fill gaps between what countries earn and/or are able to borrow from other official lenders and what countries must spend to operate, including to cover the cost of importing basic goods and services.

In return, countries are usually required to launch certain reforms, which have often been dubbed the "Washington Consensus". These reforms are generally required because countries with fixed exchange rate policies can engage in fiscal, monetary, and political practices which may lead to the crisis itself. For example, nations with severe budget deficits, rampant inflation, strict price controls, or significantly over-valued or under-valued currencies run the risk of facing balance of payment crises. Thus, the structural adjustment programs are at least ostensibly intended to ensure that the IMF is actually helping to prevent financial crises rather than merely funding financial recklessness.

IMF/World Bank support of military dictatorships

The role of the Bretton Woods institutions has been controversial since the late Cold War period, as the IMF policy makers supported military dictatorships friendly to American and European corporations. Critics also claim that the IMF is generally apathetic or hostile to their views of democracy, human rights, and labor rights. The controversy has helped spark the anti-globalisation movement. Arguments in favor of the IMF say that economic stability is a precursor to democracy; however, critics highlight various examples in which democratized countries fell after receiving IMF loans.

In the 1960s, the IMF and the World Bank supported the government of Brazil’s military dictator Castello Branco with tens of millions of dollars of loans and credit that were denied to previous democratically-elected governments.

Criticism

"The interests of the IMF represent the big international interests
that seem to be established and concentrated in Wall Street."

— Che Guevara, Marxist revolutionary, 1959

Two criticisms from economists have been that financial aid is always bound to so-called "Conditionalities", including Structural Adjustment Programs. It is claimed that conditionalities (economic performance targets established as a precondition for IMF loans) retard social stability and hence inhibit the stated goals of the IMF, while Structural Adjustment Programs lead to an increase in poverty in recipient countries.

One of the main SAP conditions placed on troubled countries is that the governments sell up as much of their national assets as they can, normally to western corporations at heavily discounted prices.

That said, the IMF sometimes advocates "austerity programmes," increasing taxes even when the economy is weak, in order to generate government revenue and balance budget deficits, which is Keynesian policy. Countries are often advised to lower their corporate tax rate. These policies were criticised by Joseph E. Stiglitz, former chief economist and Senior Vice President at the World Bank, in his book Globalization and Its Discontents. He argued that by converting to a more Monetarist approach, the fund no longer had a valid purpose, as it was designed to provide funds for countries to carry out Keynesian reflations, and that the IMF "was not participating in a conspiracy, but it was reflecting the interests and ideology of the Western financial community.".

Argentina, which had been considered by the IMF to be a model country in its compliance to policy proposals by the Bretton Woods institutions, experienced a catastrophic economic crisis in 2001, which some believe to have been caused by IMF-induced budget restrictions — which undercut the government's ability to sustain national infrastructure even in crucial areas such as health, education, and security — and privatization of strategically vital national resources.

Others attribute the crisis to Argentina's misdesigned fiscal federalism, which caused subnational spending to increase rapidly. The crisis added to widespread hatred of this institution in Argentina and other South American countries, with many blaming the IMF for the region's economic problems. The current — as of early 2006 — trend towards moderate left-wing governments in the region and a growing concern with the development of a regional economic policy largely independent of big business pressures has been ascribed to this crisis.

Another example of where IMF Structural Adjustment Programmes aggravated the problem was in Kenya. Before the IMF got involved in the country, the Kenyan central bank oversaw all currency movements in and out of the country. The IMF mandated that the Kenyan central bank had to allow easier currency movement. However, the adjustment resulted in very little foreign investment, but allowed Kamlesh Manusuklal Damji Pattni, with the help of corrupt government officials, to siphon off billions of Kenyan shillings in what came to be known as the Goldenberg scandal, leaving the country worse off than it was before the IMF reforms were implemented.... In an interview, the former Romanian Prime Minister Tăriceanu stated that "Since 2005, IMF is constantly making mistakes when it appreciates the country's economic performances". l

Overall the IMF success record is perceived as limited. While it was created to help stabilize the global economy, since 1980 critics claim over 100 countries (or reputedly most of the Fund's membership) have experienced a banking collapse that they claim have reduced GDP by four percent or more, far more than at any time in Post-Depression history. The considerable delay in the IMF's response to any crisis, and the fact that it tends to only respond to them or even create them rather than prevent them, has led many economists to argue for reform. In 2006, an IMF reform agenda called the Medium Term Strategy was widely endorsed by the institution's member countries. The agenda includes changes in IMF governance to enhance the role of developing countries in the institution's decision-making process and steps to deepen the effectiveness of its core mandate, which is known as economic surveillance or helping member countries adopt macroeconomic policies that will sustain global growth and reduce poverty. On June 15, 2007, the Executive Board of the IMF adopted the 2007 Decision on Bilateral Surveillance, a landmark measure that replaced a 30-year-old decision of the Fund's member countries on how the IMF should analyse economic outcomes at the country level.

Impact on Public Health

In 2008, a study by analysts from Cambridge and Yale universities published on the open-access Public Library of Science concluded that strict conditions on the international loans by the IMF resulted in thousands of deaths in Eastern Europe by tuberculosis as public health care had to be weakened. In the 21 countries which the IMF had given loans, tuberculosis deaths rose by 16.6 %.

Criticism from free-market advocates

Typically the IMF and its supporters advocate a monetarist approach. As such, adherents of supply-side economics generally find themselves in open disagreement with the IMF. The IMF frequently advocates currency devaluation, criticized by proponents of supply-side economics as inflationary. Secondly they link higher taxes under "austerity programmes" with economic contraction.

Currency devaluation is recommended by the IMF to the governments of poor nations with struggling economies. Some economists claim these IMF policies are destructive to economic prosperity.

Complaints are also directed toward International Monetary Fund gold reserve being undervalued. At its inception in 1945, the IMF pegged gold at US$35 per Troy ounce of gold. In 1973 the Nixon administration lifted the fixed asset value of gold in favor of a world market price. Hence the fixed exchange rates of currencies tied to gold were switched to a floating rate, also based on market price and exchange. This largely came about because Petrodollars outside the United States were more than could be backed by the gold at Fort Knox under the fixed exchange rate system. The fixed rate system only served to limit the amount of assistance the organisation could use to help debt-ridden countries. Current IMF rules prohibit members from linking their currencies to gold.

Media representation of the IMF

Life and Debt, a documentary film, deals with the IMF's policies' influence on Jamaica and its economy from a critical point of view. In 1978, one year after Jamaica first entered a borrowing relationship with the IMF, the Jamaican dollar was still worth more on the open exchange than the US dollar; by 1995, when Jamaica terminated that relationship, the Jamaican dollar had eroded to less than 2 cents US. Such observations lead to skepticism that IMF involvement is not necessarily helpful to a third world economy.

The Debt of Dictators explores the lending of billions of dollars by the IMF, World Bank multinational banks and other international financial institutions to brutal dictators throughout the world....

Radiohead mentions the IMF in their song "Electioneering" on their 1997 release, OK Computer. The lyrics state, "It's just business/Cattle prods and the IMF/I trust I can rely on your vote". Bruce Cockburn mentions the IMF in his song "Call It Democracy". The lyrics state "IMF dirty MF/takes away everything it can get/always making certain that there's one thing left/keep them on the hook with insupportable debt".

http://en.wikipedia.org/wiki/International_Monetary_Fund

From Global Exchange:

The World Bank and
International Monetary Fund

Created after World War II to help avoid Great Depression-like economic disasters, the World Bank and the IMF are the world's largest public lenders, with the Bank managing a total portfolio of $200 billion and the Fund supplying member governments with money to overcome short-term credit crunches.

But when the Bank and the Fund lend money to debtor countries, the money comes with strings attached. These strings come in the form of policy prescriptions called "structural adjustment policies." These policies—or SAPs, as they are sometimes called—require debtor governments to open their economies to penetration by foreign corporations, allowing access to the country's workers and environment at bargain basement prices.

Structural adjustment policies mean across-the-board privatization of public utilities and publicly owned industries. They mean the slashing of government budgets, leading to cutbacks in spending on health care and education. They mean focusing resources on growing export crops for industrial countries rather than supporting family farms and growing food for local communities. And, as their imposition in country after country in Latin America, Africa, and Asia has shown, they lead to deeper inequality and environmental destruction.

For decades people in the Third World have protested the way the IMF and World Bank undemocratically impose such policies on their countries. In just the last year, those protests have spread to the power centers of the developed world. In April, some 20,000 people gathered in Washington, DC during the institutions' spring meetings to demand a more democratic kind of international decision-making. Similar protests took place in Prague, Czech Republic in September of that year.

By dragging the Fund and the Bank into the light of public scrutiny, the Washington protests re-invigorated a public dialogue about the growing wealth inequalities within and among nations, and they put the institutions on notice that they can't continue business as usual.

http://www.globalexchange.org/campaigns/wbimf/

April 2, 2009

G-20 to infuse funds into International Monetary Fund

By David J. Lynch, USA TODAY

Leaders of the G-20 agreed Thursday to massively re-arm the International Monetary Fund for its fight against economic contagion, providing significant new financing and a broad mandate for action.

President Obama and other world leaders meeting in London said they would triple the IMF's war chest to $750 billion. And they will back the IMF, effectively creating an additional $250 billion by issuing "special drawing rights," the agency's own quasi-currency that borrowing nations can draw upon if needed.

"It's much bigger than the market expected," said Marc Chandler, senior vice president for currency strategy at Brown Bros. Harriman.

But first, Congress must approve plans for the U.S. to contribute $100 billion in credit. Fund observers say they expect lawmakers' OK, after a tussle. "It will not be an easy sell," says Eswar Prasad, a former fund economist at Cornell University.

If the new IMF money is to prevent further global deterioration, borrowers must use it. Especially in Asia, where memories of the fund's "tough love" role in the 1997 financial crisis are fresh, nations are reluctant to tap IMF aid. One positive sign: Mexico earlier this week said it would seek a $47 billion credit line from the IMF.

The new initiative, along with an additional $100 billion for other lending, is expected to ease concerns about a looming financing shortage in developing countries, as global banks and other investors retrench. The World Bank says the shortfall this year will be $270 billion to $700 billion.

"If we can't get the emerging markets going, it's going to be harder for us to get out of this," said Morris Goldstein, a former fund economist at the Peterson Institute for International Economics.

Already, countries from Ukraine to Pakistan have turned to the IMF for multibillion-dollar rescues. More are expected to follow as the global recession deepens. Potential candidates include Turkey, Spain, Greece and possibly G-20 summit host the United Kingdom, said Simon Johnson, ex-IMF chief economist.

The G-20 also tasked the IMF with monitoring countries' economic and regulatory moves and opened the door to potentially historic shifts at the top of the fund and World Bank. Since their founding 63 years ago, the institutions' top jobs have been limited to Europeans and Americans. The G-20, however, says future leadership picks should be "merit-based," a signal that the next leaders could come from the developing world.

USA Today

BLOWBACK!

... For any empire, including an unacknowledged one, there is a kind of balance sheet that builds up over time. Military crimes, accidents, and atrocities make up only one category on the debit side of the balance sheet that the United States has been accumulating, especially since the Cold War ended.

To take an example of quite a different kind of debit, consider South Korea, a longtime ally. On Christmas Eve 1997, it declared itself financially bankrupt and put itits economy under the guidance of the International Monetary Fund, which is basically an institutional surrogate of the United States government.

Most Americans were surprised by the economic disaster that overtook Thailand, South Korea, Malaysia, and Indonesia in 1997 and that then spread around the world, crippling the Russian and Brazilian economies. They could hardly imagine that the U.S. government might have had a hand in causing them, even though various American pundits and economists expressed open delight in these disasters, which threw millions of people, who had previously had hopes of achieving economic prosperity and security, into the most abysmal poverty.

At worst, Americans took the economic meltdown of places like Indonesia and Brazil to mean that beneficial American-supported policies of “globalization” were working – that we were effectively helping restructure various economies around the world so that they would look and work more like ours....

As the global crisis deepened, the thing our government most seemed to fear was that contracts to buy our weapons might now not be honored. That winter, Secretary of Defense William Cohen made special trips to Jakarta, Bangkok, and Seoul to cajole the governments of those countries to use increasingly scarce foreign exchange funds to pay of the American fighter jets, missiles, warships, and other hardware the Pentagon had sold them before the economic collapse.

He also stopped in Tokyo to urge on a worried Japanese government a big sale not yet agreed to. He wanted Japan to invest in the theatre missile defense system, or TMD, anti-missile missiles that the Pentagon has been trying to get the Japanese to by for a decade. No one knew then or knows now whether the TMD will even work – in fifteen years of intercept attempts only a few missiles in essentially doctored tests have hit their targets – but it is unquestionably expensive, and arms sales, both domestic and foreign, have become one of the Pentagon’s most important missions.

I believe the profligate waste of our resources on irrelevant weapons systems and the Asian economic meltdown, as well as the continuous trail of military “accidents” and of terrorist attacks on American installations and embassies, are all portents of a twenty-first-century crisis in America’s informal empire, an empire base on the projection of military power to every corner of the world and on the use of American capital and markets to force global economic integration on our terms, at whatever costs to others....

MELTDOWN

Each year approximately ten thousand American troops descend on Thailand for a joint military exercise, called Cobra Gold. The military part of these visits is largely make-work for the American and Thai staffs, but the troops love Cobra Gold because of the sex.

According to the newspaper Pacific Stars and Stripes, some three thousand prostitutes wait for the sailors and marines at the South Pattaya waterfront, close to Utapao air base. An equal number of young Thai girls from the country-side, many of whom have been raped and then impressed into the “sex industry,” are available downtown in Bangkok’s Patpang district. They are virtually all infected with AIDS, but the condom-equipped American forces seem not to worry.

At the time of the 1997 war games, just before the economic crisis broke, sex with a Thai prostitute cost around fifteen hundred Thai baht, or sixty dollars at its then pegged rate of twenty-five baht to one U.S. dollar. By the time of the next year’s Cobra Gold the price had been more than halved. This is just one of many market benefits Americans gained through their rollback operation against the “Asian model” of capitalism.

Th global economic crisis that began in Thailand in July 1997 had two causes. First, the built-in contradictions of the American satellite system in East Asia had heightened to such a degree that the system itself unexpectedly began to splinter and threatened to blow apart. Second, the United States, relieved of the prudence imposed on it by the Cold War ... launched a campaign to force the rest of the world to adopt its form of capitalism. This effort went under the rubric of “globalization.”...

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Perhaps the first important blow to the East Asian model of capitalism came in 1971, when President Nixon abolished the Bretton Woods system of fixed exchange rates, created by the United Nations Monetary and Financial Conference in the summer of 1944 at Bretton Woods, New Hampshire. The treaties that resulted from Bretton Woods were the most important efforts of the victorious Allies of World War II to create a better global financial system that the one that existed in the 1930s.

The Allies intended to prevent a recurrence of the protectionism and competitive devaluation of national currencies that had deepened the Great Depression and fueled the rise of Nazism. To do these things, the Bretton Woods conference established a system of fixed exchange rates among the world’s currencies. It also created the International Monetary Fund, to help countries whose economic conditions forced them to alter the value of their currencies, and the World Bank, to help finance post-war rebuilding. The value of every currency was tied to the value of the U.S. dollar, which was in turn backed by the U.S. government’s guarantee that it would covert dollars into gold on demand.

Nixon decided to end the Bretton Woods system because the Vietnam War had imposed such excessive expenditures on the United States that it was hemorrhaging money. He concluded that the government could no longer afford to exchange its currency for a fixed value of gold. A more effective answer would have been to end the Vietnam War and balance the federal budget. Instead, what actually occurred was that the dollar and other currencies were allowed to “float” – that is, to be converted into other currencies at whatever rate the market determined.

The historian, business executive, and novelist John Ralston Saul describe Nixon’s action as “perhaps the single most destructive act of the postwar world. The West was returned to the monetary barbarism and instability of the 19^th century.” Floating exchange rates introduced a major element of instability into the international trading system. They stimulated the growth of so-called finance capitalism – which refers to making money from trading stocks, bonds, currencies, and other forms of securities as well as lending money to companies, governments, and consumers rather that manufacturing products and selling them at prices determined by unfettered markets.

Finance capitalism, as its name implies, means making money by manipulating money, not trying to achieve a balance between the producers and consumers of goods. On the contrary, finance capitalism aggravates the problems of equilibrium within and among capitalist economies in order to profit from the discrepancies.

During the nineteenth century the appearance, and then dominance, of finance capitalism was widely recognized as a defect of improperly regulated capitalist systems. Theorists from Adam Smith to John Hobson observed that capitalists do not really like being capitalists. They would much rather be monopolists, retiers, inside traders, or usurers or in some other way achieve an unfair advantage that might allow them to profit more easily from the mental and physical work of others.

Smith and Hobson both believed that finance capitalism produced the pathologies of the global economy they called mercantilism and imperialism: that is, true economic exploitation of others rather than mutually beneficial exchanges among economic actors.

Opponents of capitalism, such as Marxists, viewed such problems as inescapable and the ultimate reason capitalist systems must sooner or later implode. Supporters of capitalism, such as Smith and Hobson, thought that its problems could be solved by imposing social controls on the monetary system, as did the Bretton Woods agreement. As they saw it, lack of such controls led to the maldistribution of purchasing power. Too few rich people and too many poor people resulted in an insufficient demand for goods and services. The “excess capital” thus generated had to find some place to go.

In the maturing capitalist countries of the nineteenth century, financiers pressured their governments to create colonies in which they could invest and obtain profits of a sort no longer available to them at home. The nineteenth-century theorists believed this was the root cause of imperialism and that its specific antidote was the use of state power to raise the ability of the domestic public to consume.

After the United States ended the Bretton Woods system, these kinds of problems once again returned to haunt the world....

STEALTH IMPERIALISM

... Indonesia is the world’s fourth most populous country and the world’s largest Islamic nation. During its early years, after fighting for its independence from the Netherlands, when its founder and leader was President Sukarno (like many Indonesians, including General Suharto, he has only one name), it was a champion of neutralism and a thorn in the side of American foreign policy. Many CIA covert operations were mounted against Indonesia in that period, including during the revolution of 1965, when Suharto came to power, ousted Sukarno, and in a bloody program eliminated leftist forces throughout the islands. Suharto and the army ruled with a strong authoritarian hand until May 1998.

During this period and with considerable American and Japanese support, Suharto overcame starvation on the main island of Java and led the country into sustained economic growth. However, Indonesia was clobbered by the 1997 financial crisis that depressed its stock and currency values to as much as 80 percent below precrisis levels.

Because of the misguided policies by the United States and the International Monetary Fund ... the number of people in Indonesia living below the poverty line grew in a matter of months from twenty-seven million to over a hundred million (half of the population), and thirty years of economic gains were wiped out. Hundreds of thousands of workers lost their jobs. The country remains destitute and threatened with possible disintegration, even though its political life has been invigorated by the return of democracy after thirty-two years of one-man rule.

Thus far, the blowback from American policies in Indonesia has affected primarily Indonesians and, in particular, the Chinese minority in the country, which is also the entrepreneurial elite. Americans have not been affected, but this is unlikely to last as Indonesia emerges from its present trauma and starts to assess what happened to it and who was responsible.

The bloody ouster of General Suharto as president of Indonesia and as one of America’s favorite dictators in East Asia is a case study in the dangers of JCET programs. Between May 13 and May 15, 1998, nearly 1,200 people were killed in Jakarta in rioting that led to the resignation of General Suharto. It was subsequently revealed that during this “rioting” at least 168 women and girls, most of them of Chinese ancestry, had been raped by “organized groups of up to a dozen men” and that 20 had died during or after the assaults....

The Indonesian armed forces, known as ABRI, have long been the chosen instrument of American foreign policy in the area, bolstering Suharto’s stoutly andi-Communist regime. In 1965, when General Suharto was in the process of coming to power, the United States provided ABRI with lists of suspected Communists, over half a million of whom were slaughtered. It also publicly endorsed ABRI’s 1975 invasion of East Timor and the subsequent elimination of two hundred thousand East Timorese through what the State Department in its 1996 Human Rights Report calls “extrajudicial killings.”...

When the 1997 financial crisis spread to Indonesia and it became apparent that the International Monetary Fund’s bailout policies wer likely to end the seventy-six-year-old Suharto’s further usefulness to the United States, American policy remained focused on maintaining control inside Indonesia through its backing of the 465,000-man-strong ABRI. Indonesia totally lacks external enemies. Its armed forces are therefore devoted almost entirely to maintaining “internal security.”

During most of the Suharto years, the United States actively trained ABRI special forces in a variety of what the New York Times calls “specialized acts of warfare and counterinsurgency.” The CIA and the Defense Intelligence Agency have long maintained close ties with ABRI, which has often been implicated in cases of torture, kidnapping, and assassination....

After November 12, 1991, when Indonesian troops killed 271 people allegedly demonstration for independence in Dili, the capital of East Timor, Congress cut off financial support for further training, although it did not end arms sales to Indonesia. The Pentagon has nonetheless expanded its ABRI training programs under cover of JCET. At least forty-one exercises involving fully armed U.S. combat troops – including Green Berets, Air Force commandos, and marines – transported to Indonesia from Okinawa have taken place since 1995. The American 1^st Special Forces Group is permanently deployed at Torii, Okinawa.

The primary Indonesian beneficiary of this effort was evidently intended to be forty-seven-year-old Lieutenant General Prabowo, Suharto’s son-in-law and business paratner. Prabowo’s wife, who is Suharto’s second daughter, owned a sizable piece of Merrill Lynch, Indonesia.

Prabowo, a graduate of elite military training courses at Fort Bening, Georgia, and Fort Bragg, North Carolina, spent ten years fighting guerrillas in East Timor, where he earned a reputation for cruelty and ruthlessness. In 1995, donning the red beret of Kopassus, he managed to enlarge the special forces corps from 3,500 to 6,000 troops. He worked closely with his American supporters; of the forty-one JCET training exercises conducted since Congress ordered all training stopped, at least twenty-four wer with Kopassus. According to the Nation magazine’s Indonesian correspondent Allan Naim, one Kopassus unit received twenty-six days of American instruction in “military operations in urban terrain” after the economic crisis began....

There were good reasons why the United States would want to keep General Suharto in power. In the early years of his rule, Suharto contributed greatly to regional stability, while bringing at lease a modicum of prosperity and optimism to the Indonesian people...

Like the government of another American-supported autocrat, Ferdinand Marcos of the Philippines, Suharto’s government developed over time into a kleptocracy – firms still controlled by members of his family are said to be worth many billions of dollars; but unlike Marcos his achievements were formidable... Th current decline of Indonesian economic and, possibly, political power certainly means that China is more likely to assert its political primacy in the region.

The U.S. government was aware of these dangers, and therefore when, in 1997, international financiers began to exploit the Indonesian currency and foreclose on their short-term loans, leading American officials loudly proclaimed their backing of Suharto, signaling their lack of desire to see him overthrown. This position was, however, undercut by a politically uncoordinated agent of American power, the International Monetary Fund (IMF), which agreed to lend huge amounts of money to Indonesia to help meet its debts, but only if it imposed economics-textbook prescriptions for reordering its economy.

The IMF, it must be noted, is staffed primarily with holders of PH.D.s in economics from American universities, who are both illiterate about and contemptuous of cultures that do not conform to what they call the “American way of life.” They offer only “one size (or, rather, one capitalism) fits all” remedies for ailing economic institutions. The IMF has applied these over the years to countries in Latin America, Russia, and East Asia without ever achieving a single notable success. ... They ignored the fact that Suharto, while enriching members of his own extended family and firms that cultivated their good graces, also granted ordinary Indonesians food and fuel subsidies. On May 4, 2998, the IMF ordered these subsidies stopped. This alone made political instability inevitable.

On May 8, the United States ordered JCET activities suspended in Indonesia after the Nation’s Allan Nairn, at this potentially embarrassing moment, exposed the nature of the Pentagon’s covert assistance program for Kopassus. My mid-May 1998, U.S. officials had started to signal changes in their position and begun to leak to the press statements not for attribution indicating that the IMF’s reform program would not work unless Suharto were replaced. Senators like John Kerry of Massachusetts and Paul Wellstone of Minnesota echoed this demand on Capitol Hill....

Amid growing turbulence in Jakarta, President Suharto left Indonesia for a state visit to Egypt, and the country’s top military officer, General Wiranto, left the capital on May 14 and flew to eastern Java for a divisional parade. In this context, Indonesia erupted....

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It may seem that what happened in Indonesia was another successful American-choreographed replacement of a regime that had become “unacceptable” – especially since the army in which the United States had invested so much came out in an even more powerful position in the new, soon-to-be “democratic” Indonesia.... But the truth of the matter was that the IMF and the U.S. Department of Defense, having helped reverse a quarter century of economic progress, had probably made it impossible for any Indonesian government to recover from the disaster...

– Chalmers Johnson, 2000

For more, GO TO > > > BLOWBACK!; Buzzards in the Bank of Honolulu; Merrill Lynch: Beware this bull is for the birds; Sukamto Sia: The Indonesian Connection

How IMF policies block the Global Fund

Maputo, Dec (by Gorik Ooms*) - “It is very genocidal for one part of the world to have the cure for the AIDS disease while millions of people in another part are dying from the same. The developed world is challenged to make antiretroviral drugs available”, declared Uganda’s President Museveni (New Vision, 11 Dec 02).

But only weeks before this declaration, Uganda’s Ministry of Finance made it virtually impossible for the Ministry of Health to accept a grant from the Global Fund to fight AIDS, TB and Malaria, a grant that could help to make antiretroviral drugs available.

“Any new donor monies absorbed into a government sector must be accompanied by a similar reduction within the sector in order to keep the expenditure limit,” said Francis Tumuheirwe, director of budget in Uganda’s ministry of finance (The Lancet, 7 Dec 02).

In other words, if Uganda gets the $ 52 million it asked from the Global Fund, it will simply reduce its own contribution to the health budget, which will remain the same, with or without Global Fund monies. Obviously, the Global Fund will never accept this, since it can only give money for additional activities, not to replace Uganda’s contribution to a fixed health budget.

The solution proposed by Uganda’s Ministry of Finance - to cut into other parts of the health budget to “make way” for the interventions approved by the Global Fund - is clearly not acceptable.

For, this means that President Museveni can call for as much international financial support for antiretroviral therapy as he wants: as long as his own Ministry of Finance is firmly committed to a public health budget that doesn’t exceed $ 9 per person per year, “no matter how much donors are willing to provide”, the inaccessibility of antiretroviral therapy - described as a ‘genocide’ by the President himself - will continue. It makes you wonder who the real decision-maker in Uganda is; the President or the Minister of Finance? Or is it someone working for the IMF?

Like Uganda, Mozambique has a public health budget of $ 9 per person per year. Like Uganda, Mozambique wants to provide antiretroviral therapy to the people who need it. Like Uganda, Mozambique is counting very much on the Global Fund to keep its people alive. Mozambique and Uganda have poor public health budgets not only because they are poor countries, but also because they have accepted - or, at least in the case of Mozambique, was obliged - to adopt the IMF and World Bank economic and development doctrine, in the form of a Structural Adjustment Program (or SAP.)

This doctrine is quite simple: it is based on the assumption that real development and economic growth can only occur when governments limit public spending to a percentage of their gross domestic product. In very poor countries, this has resulted in ridiculously low public health and education budgets. Less than 50% of children of school age attend school in Mozambique, less than 50% of the population has access to poor public health services.

But this would be just a temporary problem, assured the IMF and the World Bank. Soon there will be economic growth, they promised. Economic growth will increase state budgets for public social services, and many people will become rich enough to buy private social services. Very conveniently, this doctrine provided an excellent excuse for reducing international aid. It was not only permitted to give less, rich countries were actually doing poor countries a favour by giving less (and thus stimulating their economic growth).

In the ‘90s, international aid levels dropped dramatically. Fifteen years later, the ‘temporary problem’ has been solved for less than 3% of Mozambicans. They can afford private schools and private clinics; 47% have access to poor public services, badly equipped and run by underpaid civil servants. The other 50% don’t send their children to school and don’t go to health centers.

IMF and World Bank no longer promote SAPs, they invented a new game and called it ‘poverty reduction.’ In theory, Poverty Reduction Strategic Papers (or PRSPs) are meant to ensure that the benefits of debt cancellation are invested directly in poverty reduction. In reality, they just protect the core of the old SAPs, ensuring that public spending remains capped. While HIV infects more and more Africans, the IMF and the World Bank ensure that African countries are not able to provide enough education to their children to protect them against HIV, let alone provide lifesaving treatment.

When African leaders, gathered in Abuja in April 2001, promised to substantially increase their public health budgets, I wondered if they realized they were defying IMF and World Bank policies. I felt relieved when I read the ‘Declaration of Commitment on HIV/AIDS’ that came out of the UNGASS meeting in June 2001. The international community was actually supporting increased public spending to fight AIDS and other infectious diseases! The fulfilment of this commitment would require improved health and education services!

Then came the report of the WHO Commission on Macroeconomics and Health; an implicit but clear condemnation of IMF and World Bank policies, arguing that increased spending on health would not harm but rather stimulate economic growth. When the Global Fund announced its first approved proposals in April 2002, I was saddened that the Mozambican proposal was not included, but satisfied to see that similarly poor countries would receive substantial amounts, amounts that would obviously make their health budgets break through the ceilings foreseen in their respective PRSPs.

I should have been completely convinced when the World Bank Multi-sectoral AIDS Plan (MAP) team visited Mozambique for the third or the fourth time in October 2002, announcing that the MAP would be funded with a grant, not a loan, and that the World Bank had secured $ 1 billion for several MAPs.

Surely, if this $1 billion went to the countries that need it most, it would lift their budgets well over the PRSP ceilings. Surely, if the World Bank supports such a strategy, the IMF would not challenge it. The door was open for a rights-based approach to health care and education.

Suspicious as I am, I questioned the World Bank MAP team about this. Did their macroeconomists agree with this? Because if not, that $1 billion was useless, it would only replace national contributions or contributions from other donors, but not increase the budgets. The answers were vague and evasive. One said that PRSP budgets were targets, not ceilings. The other admitted that there might be a problem.

I guess we have the real answer now. No matter how much donors are willing to provide, no matter how much the Global Fund is willing to provide, Uganda will not increase its health budget and therefore it will not provide anti-retroviral therapy (unless President Museveni has the courage to intervene directly.)

The arguments used by Uganda’s Ministry of Finance are pure IMF doctrine arguments: increasing the health budget with the Global Fund grant would destabilize Uganda’s economy, the way to increase expenditure on health is through sustained economic growth, Uganda must reduce its dependence on donors. This is probably why the chairwoman of the parliamentary committee on social services wondered whether the ministry of finance or the IMF was the architect of the low ceiling.

Does it really matter? Does it really matter if the decision to sacrifice thousands of people living with AIDS on the altar of a development doctrine that has proven to be ineffective came from an office in Washington or from an office in Kampala? Does it really matter if the South African form of structural adjustment - GEAR - was voluntarily adopted by President Mbeki, strongly encouraged by the IMF and the World Bank or even imposed by them?

It doesn’t make any difference to South Africans, many of whom died of cholera in October 2000 because they suddenly had to pay for water and couldn’t; they don’t get antiretroviral treatment when they need it because of ‘financial discipline’ in a vain pursuit of economic growth. Does it really matter if NEPAD - the New Partnership for African Development that hardly mentions AIDS at all, let alone AIDS treatment - is the fruit of African Renaissance or the result of 20 years of indoctrination by Washington-based macroeconomists?

The result is the same: poor health care and poor education for poor people.

I believe the Global Fund has met its worst enemy in Kampala. Raising the funds needed to fight AIDS, TB and Malaria remains important, but it is not enough. It must also promote a rights-based approach to social services, one that legitimises public budgets that are in accordance with real needs, not limited to a percentage of gross domestic product. Otherwise the Global Fund will end up channelling funds to relatively well-performing countries only, while refusing agreements with the countries that really need it, because their budgets are capped and Global Fund money would only replace national contributions or contributions from other donors and would not create additional services.

Both objectives, to raise more money and to create a climate that allows spending it where it is needed most, go hand in hand. Both require a new development vision. Both require a genuine understanding that only a healthy and well-educated population can create real and sustainable economic growth. Both require a genuine understanding that access to treatment is a human right! - SUNS5260

[* The author, Gorik Ooms is a Mozambique-based health activist. This is taken with acknowledgement from the list-server, ‘Stop the IMF’]

http://www.twnside.org.sg/title/5260c.htm

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