Top Ten Reasons to Oppose the IMF
from Global Exchange
What is the IMF?
The International Monetary Fund and the World Bank were created
in 1994, shortly before the end of World War II, at a conference
in Bretton Woods, New Hampshire. Both institutions are now based
in Washington, DC. The IMF was designed to promote international
economic cooperation and provide its member countries with short
term loans in order to trade with other countries (achieve balance
of payments). During the 1980's, the IMF took on an expanded role
of lending money to "bailout" countries during financial
crisis. This gave the IMF leverage to begin designing economic
policies for over 60 countries. Countries have to follow these
policies to get the IMF's "seal of approval" to get
loans, international assistance, and even debt relief. Thus, the
IMF has enormous influence not only in structuring the global
economy, but also on real-life issues such as poverty, environmental
sustainability and development. The IMF is one of the most powerful
institutions on Earth--yet few know what it is. 1) The IMF has
created a system of modern day colonialism that SAPs the poor
to fatten the rich
The IMF, along with the WTO and the World Bank, is directing
the global economy on a path of greater inequality and environmental
destruction. The IMF's and World Bank's "structural adjustment
policies" (SAPs) ensure debt repayment by requiring countries
to cut spending on education and health; eliminate basic foods
and transportation subsidies; devalue national currencies to make
exports cheaper; privatize national assets; and freeze wages.
These policies increase poverty, reduce countries' ability to
develop strong domestic economies and allow multinational corporations
to exploit workers and pollute the environment.
2) The IMF caters to wealthy countries and Wall Street
Although industrialized countries have not borrowed from the
IMF in twenty years, rich countries dominate decision making.
Voting power is determined by the amount of money that each country
pays. The U.S. is the largest shareholder with a quota of 18%.
U.S., Germany, Japan, France and Great Britain together hold about
38% of the vote. Each of these countries appoints their own representative
to the executive board, while other groups of countries elect
a representative. The U.S. Executive Director is Karin Lissakers,
and she works closely with Lawrence Summers and the U.S. Treasury
Department to design policy for the IMF. The disproportional amount
of power held by wealthy countries translates into decisions that
benefit wealthy bankers, investors and corporations from industrialized
countries at the expense of sustainable development. Is it a surprise
that the IMF then uses its leverage over cash-strapped developing
countries to force them to open up to powerful transnational corporations?
3) The IMF is imposing a fundamentally flawed development
Unlike the path followed by most industrialized countries,
the IMF forces countries from the Global South to prioritize export
production over the development of a diversified domestic economy.
Nearly 80% of all malnourished children in the developing world
live in countries where farmers have been forced to shift from
food production for local consumption to the production of crops
for export to the industrialized countries. The IMF also requires
countries to eliminate tariffs and provide incentives for multinational
corporations - such as reduced labor and environmental protections.
Small businesses and farmers can't compete with large multinational
corporations, resulting in sweatshop conditions where workers
are paid starvation wages, live in inhumane conditions, and are
unable to provide for their families. The cycle of poverty is
perpetuated, not eliminated.
4) The IMF is a secretive institution with no accountability
The IMF is funded with taxpayer money, yet it operates from
behind a veil of secrecy. For the most part, members of affected
communities do not participate in designing loan packages. The
IMF works with a select group of central bankers and finance ministry
staff to decide polices without input from other government agencies
such as health, education and environment departments. Furthermore,
the IMF has resisted attempts to open up to public scrutiny and
independent evaluation. The IMF has made elites from the Global
South more accountable to First World elites than their own people.
5) IMF policies promote corporate welfare
To increase exports, countries are encouraged to give tax
breaks and subsidies to export industries. Assets such as forestland
and government utilities (phone, water and electricity companies)
are sold off to foreign investors at rock bottom prices. Some
examples: In Guyana, an Asian owned timber company called Barama
received a logging concession that was 1.5 times the total amount
of land all the indigenous communities were granted. Barama also
received a five-year tax holiday. The IMF forced Haiti to open
its market to imported, highly subsidized U.S. rice at the same
time it prohibited Haiti from subsidizing its own farmers. A US
corporation called Early Rice now sells nearly 50% of the rice
consumed in Haiti. Haitian farmers have been forced off their
land to seek work in sweatshops, and people are poorer than ever.
6) The IMF hurts workers
Many SAPs require changes in labor laws, such as eliminating
collective bargaining laws and lowering wages in order to provide
conditions favorable to attracting foreign investors. The IMF's
mantra of "labor flexibility" permits corporations to
fire at whim and move where wages are cheapest. According to the
1995 UN Trade and Development Report, employers are using this
extra "flexibility" in labor laws to shed workers, rather
than create jobs. In Haiti, the government was told to eliminate
a statute in their labor code that mandated increases in the minimum
wage when inflation exceeded 10%. By the end of 1997, Haiti's
minimum wage was only $2.40 a day, just one-fifth of the minimum
wage in 1971 in real terms. Workers in the U.S. are also hurt
by IMF policies by having to compete with cheap, exploited labor.
Two years ago, the IMF's mismanagement of the Asian financial
crisis plunged South Korea, Indonesia, Thailand and other countries
into deep depression that led to the creation of 200 million "newly
poor." The IMF advised countries to "export their way
out of the crisis." Consequently, the dumping of Asian steel
in U.S. markets resulted in the layoffs of over 12,000 steelworkers.
7) The IMF's policies hurt women the most
SAPs make it much more difficult for women to meet their families'
basic needs. When education costs rise due to user fees, girls
are the first to be withdrawn from schools. User fees in public
health facilities make it unaffordable to those who need it most.
The shift to export agriculture also makes feeding one's family
increasingly difficult. Women have also become more exploited
in the private sector workforce as regulations are rolled back
and sweatshops abound. The general lack of economic opportunity
has meant an increase in prostitution and other black market jobs
and indentured servitude.
8) IMF Policies hurt the environment
IMF loans and bailout packages are paving the way for natural
resource exploitation on a staggering scale. The IMF does not
consider environmental impacts of lending policies; and environmental
ministries and groups are not included in policy making. The focus
on export growth to earn hard currency to pay back loans means
unsustainable liquidation of natural resources. Government cutbacks
inevitably target the environmental ministry as one of the first
agencies to come under the budget axe. This happened with the
bailouts of Brazil, Indonesia, and Russia--countries that are
renowned for their great biodiversity.
9) The IMF bails out rich bankers, creating a moral hazard
and greater instability in the global economy
The IMF pushes countries to dismantle trade and investment
rules, as well as raise interest rates in order to lower inflation.
The removal of regulations that might limit speculation has greatly
increased capital investment in developing country financial markets.
More than $1.5 trillion crosses borders every day. This capital
is short-term, unstable, and puts countries at the whim of financial
speculators. The Mexican 1995 peso crisis was partly a result
of these IMF policies. When the bubble popped, the IMF and US
government stepped in to prop up interest and exchange rates,
using taxpayer money to bailout Wall Street bankers for their
high-risk investment. This encourages investors to continue making
risky, speculative bets, increasing the instability of national
economies. Furthermore, during the bailout of Asian countries,
the IMF restored rich people's profits while implementing policies
that threw people out of work and increased poverty. Asian governments
were required to assume the bad debts of private banks, thus making
the public pay the costs and draining yet more resources away
from social programs and real development.
10) IMF bailouts deepen, rather then solve, economic crisis
During financial crises, such as with Mexico in 1995 and South
Korea, Indonesia, Thailand, Brazil, and Russia in 1997, the IMF
stepped in as the lender of last resort to "bail out"
countries with huge loan packages. Yet the IMF bailouts in the
Asian financial crisis did not stop the financial panic--instead,
the crisis deepened and spread to more countries. The policies
imposed as conditions of these loans were bad medicine, causing
layoffs in the short run and undermining development in the long
run. In South Korea, the IMF sparked a recession by raising interest
rates and lowering the currency, resulting in more bankruptcies,
increased unemployment, and government spending cuts. Under the
IMF-imposed economic reforms after the peso bailout in 1995, the
number of Mexicans living in extreme poverty increased more than
50% and the national average minimum wage fell 20%.
IMF, World Bank, Structural