The IMF Corporate Welfare Machine
excerpts from the book
by Russel Mokhiber and Robert Weissman
Common Courage Press, 1999
In a Congress eager to do the bidding of Big Business, an
item atop the Chamber of Commerce's corporate welfare agenda is
in serious jeopardy.
The Establishment leadership of the House of Representatives
has delayed consideration of a gigantic funding request for the
International Monetary Fund (IMF), fearful that it cannot muster
the votes for passage. The insatiable IMF- a multilateral institution
that lends money to countries when they are unable to pay foreign
creditors-is asking for $18 billion from the United States, part
of a $90 billion proposed expansion.
Now Big Business is growing increasingly worried that IMF
funding, which it once considered a lock, may not be approved.
In an effort to solidify support for IMF corporate welfare, the
National Association of Manufacturers, the U.S. Chamber of Commerce
and the Business Roundtable are all stepping up their lobbying
In a letter to members of Congress, the Chamber even alleged
that "continued U.S. economic prosperity may hinge on Congressional
backing of the IMF."
That is quite an astounding claim. The basis of the Chamber's
argument is that the IMF helps foreign economies, which in turn
buy from the United States. But the IMF has an abysmal record
in promoting growth in countries whose economies it has supervised.
In order to receive loans from the IMF, countries have to agree
to the Fund's conditions, including sharp budget cuts, increased
interest rates, regressive tax increases, currency devaluation
and other measures which typically throw poor countries into recession.
No, Corporate America is not backing the IMF for the good
of the U.S economy. When the IMF forces Third World countries
to become low-wage exporters of manufactured goods, that does
not help the U.S. economy. IMF policies help shift
manufacturing jobs out of the United States and put downward
pressure on the wages of jobs that remain in the United States.
Big Business has made IMF expansion a priority because, for
them, the IMF is a multi-pronged welfare machine.
First, the IMF bails out big banks and foreign investors when
they make bad loans in developing countries-investments that are
understood to be risky at the time they were made, and earn more
as a result.
In 1995, the IMF contributed almost $18 billion to a Clinton
administration bailout of the Wall Street interests who stood
to lose billions with the peso devaluation in Mexico. Last year
and early this year, the Fund orchestrated a massive bailout of
the big banks that made bad loans to Asian countries. About the
only pain felt by the banks was the need to reschedule short-term
loans. Now the IMF has done it again, bailing out foreign investors
in Russia with an $11 billion package that will go straight into
the pockets of foreign lenders.
Second, the IMF forces poor countries to discard economic
policies and regulations that limit the power of domestic and
especially foreign corporations. That makes it easier for U.S.
and other multinational companies to benefit from low wages and
other perks-like weak environmental regulations-of operating in
much of the developing world.
And finally, the IMF is intent on expanding its powers, so
that member countries remove all restrictions on the inflow and
outflow of money-what the IMF calls "capital account liberalization."
This will help banks and financial corporations make super-profits
in troubled economies like Russia's. Such assistance would be
especially perverse given the fact that, in the event of a troubled
economy's collapse, the IMF provides those investors with free,
de facto insurance.
Increasingly, members of Congress are coming to see the flaws
in the IMF. Many Republicans in the House of Representatives have
seen the flaws in the IMF bailouts-they understand that each bailout
enables more imprudent behavior by Wall Street-and are opposing
IMF expansion. Now, a growing number of Democrats are coming around
to the view that an institution with such a horrid record does
not merit a $90 billion expansion, with the United States footing
the bill for $18 billion.
The challenge now is for the bipartisan group of IMF opponents
to maintain their strength in the face of the Big Business lobbying
blitz to come.
[As the legislative session wound to a close in 1998, the
Clinton White House and congressional Republicans entered into
negotiations over an "omnibus" appropriations bill to
fund a wide array of government activities. Those factions of
the Republican Party that opposed IMF funding yielded, and the
deal cut between then-Speaker of the House Newt Gingrich, Senate
Majority Leader Trent Lott and the Clinton administration included
$18 billion for the IMF.]