Mr. Budhoo's Bombshell:
A people's alternative to Structural Adjustment
by Susan Meeker-Lowry
"Today I resigned from the staff of the International
Monetary Fund after over 12 years, and after 1000 days of official
fund work in the field, hawking your medicine and your bag of
tricks to governments and to peoples in Latin America and the
Caribbean and Africa. To me, resignation is a priceless liberation,
for with it I have taken the first big step to that place where
I may hope to wash my hands of what in my mind's eye is the blood
of millions of poor and starving peoples. Mr. Camdessus, the blood
is so much, you know, it runs in rivers. It dries up too; it cakes
all over me; sometimes I feel that there is not enough soap in
the whole world to cleanse me from the things that I did do in
your name and in the name of your predecessors, and under your
official seal. "
With those words, Davison Budhoo, a senior economist with the
International Monetary Fund (IMF) for more than 12 years, publicly
resigned in May, 1988. A native Grenadian, Budhoo received his
degree from the London School of Economics. He joined the staff
of the World Bank in 1966 and later shifted to the IMF, where
he was responsible for designing and implementing Structural Adjustment
Programs (SAPs) for African, Latin American and Caribbean nations.
His 100-plus page open letter to Michel Camdessus, managing director
of the IMF, titled "Enough is Enough," sent shock waves
around the world, making front page headlines in many countries
(but not in the US).
Budhoo was the first person to break the IMF's code of silence
regarding internal affairs by exposing extensive statistical fraud
carried out by the fund in Trinidad and Tobago during 1985-1987.
The IMF and World Bank are separate institutions with distinct
roles. While the bank makes loans for development projects, the
IMF lends to governments to ease deficits and make their economies
appear stable to the international market. The World Bank was
created in April 1944 as a lending institution composed of member
governments to help rebuild post-war economies. The IMF was created
to restructure and organize the market systems of member nations
by promoting international economic cooperation and trade, and
by encouraging stable currencies.
The bank introduced Structural Adjustment Programs in 1980 to
increase export production in debtor nations to provide cash for
debt-service payment. Under "structural adjustment,"
developing countries typically are required to devalue their currency;
dramatically cut spending on social services, medical care and
education; eliminate barriers to foreign multinationals and trade;
privatize national assets; deregulate business; decrease wages;
restrict credit and raise interest rates.
Due to the radical reorganization of national economies, people
in "SAPed" countries often pay for their governments'
loans with extreme poverty, hunger and disease. Using figures
provided by UNICEF and UNDP, the editors of the IMF-World Bank
Watchdog estimated that more than six million children under the
age of five have died each year since 1982 in Africa, Asia and
Latin America as a result of IMF / World Bank policies.
SAPs often carry heavy ecological costs as well. The forced privatization
of nationalized industries and public or communal lands often
opens Third World countries to opportunistic multinational corporations
resulting in degraded (or destroyed) and polluted environments.
Placing the emphasis on exports rather than local needs in a time
of falling world commodity prices results in exploitation and
depletion of oil, minerals, forests and other natural resources.
Even though debtor countries paid more than $1.3 trillion to the
IMF between 1982 and 1990, they were still 61 percent more in
the hole in the 1990s than they were in 1982. According to the
1988 UNICEF annual report, debt and interest payments by Southern
countries totaled more than three times the amount of aid received
from the World Bank and IMF.
" Under structural adjustment, the IMF and the World Bank
do not merely supervise individual sectors of the economy as in
the past... they now manage each country entirely," said
an official of the Institute for African Alternatives. "They
have to approve annual national budgets. . . monetary, trade and
fiscal policies . . . before countries can negotiate with other
foreign lending agencies." During his years at the World
Bank and IMF, Budhoo learned that core staff members are "successors
of colonial civil servants." Pointedly observing that South
Africa is administered by the European Department, not the African
department, Budhoo concludes that "our staff is the logical
consequence... of the prevailing 1944 international ethos of 'superior
man' and 'inferior man,' and the white man and his system to be
saved and nurtured, and the black / brown colonized man to be
overlooked and cast aside...."
IMF staff receive six-figure salaries along with generous perks,
including subsidies for travel and foreign work, and housing and
education for family members. A staffer on assignment in the South
often receives more basic pay than a head of-state. Newly recruited
staff are often wined and dined, offered fat consultancy fees
and lucrative, tax-free salaries to lure them into compliance
with the IMF against what may be their better judgment. The promise
of becoming a member of the "new nobility of Earth"
can be overpowering.
IMF Statistical Fraud
In his 1994 book, Dark Victory, Walden Bello reveals how the Reagan
and Thatcher administrations in the 1980s launched a global offensive
to "subordinate" developing nations by "rolling
back the gains that had been made by the South from the 1950s
through the 1970s... decades marked by high economic growth, successful
struggles of national liberation and the coming together of Southern
states to demand a 'New International Economic Order' that would
entail a more equitable distribution of global economic power."
Budhoo recalled how, at one IMF board of directors meeting, then-President
Ronald Reagan declared that the sole duty of the IMF was to convert
all countries to free wheeling Western market economies. Reagan's
declaration signaled that the IMF no longer had to operate under
the guise of "development," or alleviating poverty or
any other humanist philosophy.
A key IMF economic indicator used to evaluate a nation's economy
is the index of Relative Unit of Labor Cost (RULC), which compares
the competitiveness of a developing country's manufacturing-labor
costs to those of industrialized nations. A rising RULC means
that the costs of a country's manufactured exports are increasing.
The IMF prescription for a high RULC is currency devaluation to
lower the expense of exports. The RULC formula was particularly
important in the IMF's appraisal of Trinidad and Tobago when,
in 1986, the bottom fell out of the oil market, the sector accounting
for the majority of the country's export earnings.
A healthy RULC would have indicated that Trinidad and Tobago could
successfully diversify its export base and service its foreign
debt. However, IMF reports for Trinidad and Tobago for 1985-1987
indicated extraordinary RULC increases. This became the pretext
for massive currency devaluation, cuts in government expenditures
and a freeze on public sector wages. But these figures were false.
In his letter, Budhoo wrote, "What we had done over these
years was to 'manufacture' statistical indices-the RULC and several
others-that would allow us to prove our point and push a particular
policy line, irrespective of economic realities and circumstances
of the country."
The IMF more than doubled Trinidad and Tobago's RULC figures,
even though data were available to enable the staff to calculate
the RULC accurately. Even after Budhoo made the staff aware of
its "miscalculations" and senior officials acknowledged
the accuracy of his figures, the IMF refused to admit any error.
Instead, it deleted all references to the index from its report.
This "statistical trickery a resulted in what Budhoo described
as "the sudden and dramatic freezing up of virtually all
foreign funding... [T]he choice that we have given the government
is either to accept our 'deadliest medicine' or to go it alone
as an international outcast. Either way, the consequences are
accelerating economic chaos and ultimate social disintegration."
Budhoo noted that Trinidad and Tobago was "only one country
from the host of Third World nations where we are perpetrating
the same economic nonsense, with the same catastrophic consequences."
A People's Program for Change
The World Bank's current focus on "democratization"
is a sham, Budhoo charges, designed to convince NGOs that the
World Bank is capable of reforming itself. He believes that reform
suggestions, such as demands for "more participation"
and "more accountability," are mostly cosmetic and too
Many experts on multilateral lending institutions (including the
Peoples' Tribunal on IMF-World Bank Crimes Against Humanity and
Sweden's official aid agency, SIDA) have called for the abolition
of the IMF and World Bank. While Budhoo feels that this is "fully
justified," he has concluded that "it will never happen."
So in 1991, Budhoo founded the Bretton Woods Reform Organization
International (BWROI) to launch a campaign to make the World Bank
and IMF more accountable to Southern countries.
BWROI's brand of "reform" supports the kind of change
that will only come about in response to pressure from those most
affected by IMF/World Bank policies.
In October 1993, in history's largest public demonstration, 500,000
Indians protested IMF/World Bank agricultural policies and GATT.
Budhoo predicts more "massive participation and massive demonstrations"
in India and the Philippines in the months to come.
BWROI's objectives include: · alternatives to IMF/World
Bank SAPs, · seeking IMF accountability for statistical
fraud in Trinidad and Tobago, · creating a Third World
Watchdog Committee to assist in negotiations and interactions
with the IMF/World Bank and, · democratizing macroeconomic
decision-making in the South.
The BWROI's most ambitious effort is the Alternative Structural
Adjustment Program (ASAP), which Budhoo calls "a people's
economic program with equity." Until now, SAPed countries
had no concrete alternatives to IMF policies. As an economist
and an insider, however, Budhoo knows that technical expertise
is the IMF/World Bank's Achilles heel. "The technical work
at the IMF/ World Bank is really pathetic," he claims. "They
cannot justify, in economic terms, the costs of their projects
and they can't' stand up to technical scrutiny."
The Third World Watchdog Committee (TWWC), BWROI's technical arm,
has begun to confront the IMF/World Bank on a professional and
technical level. "We are trying to destroy the World Bank/IMF
as technical institutions by doing what they say they're doing-only
we need to do it better," Budhoo has said.
The TWWC has been designing ASAPs on behalf of citizen groups
and Third World governments. The expertise of committee members
like Ramesh Ramsaran (a former IMF consultant and a consultant
to the European Secretariat in charge of negotiating European
aid structure to the Caribbean) and Morris Miller (former executive
director of the World Bank for Canada and the English-Speaking
Caribbean, and former executive director of the Caribbean Development
Bank) ensure that the ASAPs will be able to withstand IMF scrutiny.
According to BWROI's project director (and Davison's brother)
Patrick Budhoo, creating an ASAP "involves democratically
designing a comprehensive, highly visible and quantifiable economic
policy to meet the basic needs of the entire population"
with a clear time frame for implementation. ASAPs are flexible-able
to accommodate the dynamics of change, ranging from natural disasters
to economic or political upheavals-and responsive to the needs
of ordinary people.
BWROI develops rural agriculture to create greater food security;
linkages with rural non-agricultural production; a broad economic
base with priority given to small scale, labor-intensive, high
value-added enterprises; improvement of appropriate rural infrastructure
including roads, communications, affordable energy and technology;
and friendly credit, using "Grameen-type" banks that
make small loans for income-producing activities to typically
disenfranchised people (particularly women), at no- or low-interest
rates, using a peer-group-lending process.
BWROI does not support exporting primary resources and commodities
like minerals and grains. Export of non-traditional fruits, vegetables
and exotic flowers is acceptable provided that their cultivation
is not at the expense of traditional crops needed by residents.
In 1993, Guyana, Trinidad and Tobago, India and the Philippines
started initiating ASAPs. Project descriptions for Mexico, Costa
Rica, Kenya and Uganda are under way, and the TWWC has been invited
to prepare project descriptions for Bangladesh, Sri Lanka, Indonesia,
Nigeria, Zimbabwe, Tanzania, Jamaica, the Dominican Republic,
Brazil, Peru and Nicaragua.
Guyana Leads the Way
In August l993, the citizens and government of Guyana joined forces
with BWROI to create the world's first ASAP. Guyana is the most
heavily indebted country in the world. It has a foreign debt equal
to 650 percent of its total gross domestic product and is the
poorest country in the Western hemisphere, surpassing even Haiti.
Guyana was once considered one of the more prosperous countries
in the Caribbean region. However, following independence from
Britain in 1966, a corrupt civilian dictatorship (led by Forbes
Bumham until 1985 and propped up by the US, the IMF and the World
Bank) succeeded in placing 80 percent of all economic activity
under state control.
Mismanagement and "cronyism" resulted in the country's
inability to meet its export quotas for North American and European
markets in the 1970s. An agreement negotiated with the IMF in
1978 reduced Guyana's budget, but caused a drastic decline in
all sectors of the economy and a corresponding 40 percent rise
From a ratio of 1:4 (US : Guyana) in 1980, the Guyanese dollar
is now valued at 1:130, making it virtually worthless. Since 1988,
80 percent of revenues and 60 percent of Guyana's foreign earnings
have gone into servicing and repaying its foreign debt. In the
late 1980s, under World Bank supervision, Burnham implemented
an economic recovery program that removed the last barriers to
foreign control over key sectors of the economy. This mainly benefited
foreign investors and multinationals.
The political tide turned in 1992 when, in Guyana's first free
elections in 30 years, voters elected Cheddi Jagan of the People's
Progressive Party (PPP). (President Jagan, a Marxist, had been
Guyana's first native born Prime Minister in 1953, but British
Prime Minister Winston Churchill ordered his government dissolved.
In 1961, Jagan's overtures to President John F. Kennedy were rebuffed
and a covert CIA operation was mounted to drive Jagan from power.)
Despite good intentions, the PPP was powerless to implement necessary
social and economic reforms due to requirements imposed by the
IMF, so the Guyanese, working with BWROI, established a National
Committee (renamed BWRO/Guyana in late 1994) to oversee the creation
of an ASAP "for short-term financial stabilization and long-term
economic and social development." After receiving BWROl's
ASAP Debt Strategy Paper in May 1992, Jagan wrote to the IMF's
Camdessus to plead for debt relief. In a press conference held
in Guyana, Jagan stated, "It is ridiculous to expect real
growth in the economy if we have to continue paying these debts."
In May, 1994, President Jagan and government officials met with
Patrick Budhoo and the Guyana National Committee and issued a
resolution declaring the IMF program for Guyana to be "massively
flawed and inappropriate." The government also agreed to
cancel negotiations with the IMF pending the "conclusions
and recommendations of the people's ASAP."
The International Debt Tribunal (IDT), chaired by Jan Pronk, Minister
for Development Cooperation of the Netherlands, will propose an
equitable solution to Guyana's debt crisis, a critical step if
the country is to implement the ASAP. The IDT will pay special
attention to the origins of Guyana's foreign debt, its structure
and growth, its legal basis and legitimacy. Another crucial step
will be getting Guyana classified as a Least Developed Country
(LDC) by the UN which would entitle Guyana to substantial debt
relief and other concessions not currently available.
A Rainforest Tribunal
Money-poor Guyana is rich in natural resources-bauxite, gold and
diamonds- and has some of the most extensive remaining rain forests
in the world (9.1 million hectares or 22.4 million acres). According
to the World Rainforest Movement, approximately 80 percent of
Guyana's forests have been leased for exploitation by multinationals-many
of them, Asian-based firms responsible for deforesting rain forests
in the Philippines, Malaysia and New Guinea. Under IMF "conditionalities,"
Guyana now offers multinationals a ten-year exemption from all
taxes-income, withholding, property, import and timber. A recent
addition to the Guyana ASAP is the appointment of an International
Rainforest Tribunal (IRT) to make recommendations for the renegotiation
of the government's agreements with logging and mining multinationals.
The IRT will declassify secret contracts between the government
and multinational companies, work to reform the Forestry Commission,
Mines Commission, help to revive the Guyanese Natural Resources
Agency, and ensure that Indigenous Amerindian land titles will
"Guyana is important," Budhoo says, "because we
need to show... that we can use peoples' participation and economic
technical skills to push through the ASAP. It must only be the
first of many."
When the Guyana ASAP was presented at European Parliamentary hearings
in Brussels last June. representatives from Poland, Caribbean
nations, the Philippines and Latin America expressed support.
Budhoo expects the IMF to accept the ASAP by year end. In November,
Antigua and Trinidad and Tobago initiated ASAPs.
Adoption of ASAPs in those nations, Budhoo stated, "would
change the international equation overnight."
However, the big splash will come in late 1995 when India and
the Philippines are expected to stand up to the international
lending community to enact ASAPs.
Surprisingly few US activists are aware of BWROI and the South's
new economic initiative. It is no accident that Budhoo's resignation
and BWROl's work are practically secrets in the US, while they
are major news in Europe and the Third World.
The "powers that be" want us to believe that we have
no influence on their policies and actions. The Guyanese people
know differently and face great risks by acting on this knowledge.
How can we do less?
As Budhoo so passionately wrote in 1988, "we are not speaking
about technical problems in international finance... we're speaking
about our role in shaping the destiny of humankind... about the
legacy that we will leave to generation upon generation yet unborn...."
What You Can Do:
Read : Enough is Enough, by Davison L. Budhoo New Horizons Press
available from the Council on International and Public Affairs
For more information contact: 50 Years is Enough Campaign 1025
Vermont Ave. NW, Suite 300, Washington, DC 2005; (202) 463 2265;
or the Bretton Woods Reform Organization International Green St.
and Bain Alley St. George's, Grenada, The West Indies; fax: (809)
this article is from the Earth Island Journal, Summer 1995
Years Is Enough
World Bank, Structural Adjustment
Structural Adjustment page