Compiled By Richard Ebbs
July 4, 2002


An Introduction


The IMF and the World Bank were formed in 1944 largely in an attempt to
stabilise international markets and so preempt 'crashes' such as the Wall Street
crash of 1929. The IMF's profile has increased in the past 20 years however,
such that since the early 1980s, the IMF and it's sister organisation the World
Bank have imposed programmes of 'structural adjustment' on over 70 developing
nations. Some of these arrangements have been welcomed by affected populations.
Increasingly, however (in the 1990's in particular) the IMF has been party to a
series of spectacular crashes that have devastated the economies of a number of
countries. Is this mere incompetence (adversely affecting the lives of millions)
or worse? The essay aims to answer that question.

Those wishing to skip reading through the detail of the dozen or so example
countries given below should go straight to Who Sets The Agenda below. Otherwise
(if you are sitting comfortably) let's take a critical look at what goes on.

A country may be persuaded that it is a good idea to become a 'member' of the
International Monetary Fund, so that it may by that means use the IMF to
effectively seek financial assistance from the 'international community'. An IMF
team may then be delegated to look into the state of the country's economy,
drafting proposals through which the IMF would then lend the country money
conditional upon it's acceptance of a number of reforms. These 'conditional'
'structural adjustments' always tend to include what might be called
'deregulated free-market capitalist' policies such as:

Privatising and 'liberalising' the economy, including
Liberalising import controls
Liberalising capital markets
Reducing financial and legal safety nets for businesses
Introducing a payment ethic for social services of all kinds

Rescheduling existing debt

Decreasing government spending, by
Ending subsidies, and allowing the market to regulate prices
Laying off workers
Reducing education, reducing health expenditure

Increasing exports, by
Devaluing the currency
Improving the terms of foreign investment
Reducing or freeze wages
Reducing worker power

Often the IMF has insisted on all of these things. Let's look at some examples.

Argentina

'It is good to kill a country from time to time, pour encourager les autres, as
Voltaire might have said. That, at least, seems to be the message the
international community is trying to send to debt burdened countries in its
handling of the crisis in Argentina'.
(Source: Charlotte Denny The Guardian April 29, 2002).

At moment in Argentina -mid-2002- many people are unable to access their bank
accounts, having seen the value of life savings held by banks drop to a small
fraction of their original worth. Tens of thousands of people have lost their
jobs, and for those who have not, the real value of their wages has generally
fallen drastically. There are shortages of food and other essential goods, and
in many parts of the country 'local economies' have sprung up, using either a
local currency or bartering, since attempting to trade with a peso in such a
state of flux has become so difficult.

Many in Argentina blame the country's catastrophic woes on the International
Monetary Fund, claiming that the IMF insisted that among the conditions for it's
loans, (starting in 1991) Argentina should peg the value of its peso 1 to 1
against the dollar. This led to the peso being overvalued, which in turn led to
exorbitant interest rates (as investors demanded high interest rates as a
protection against the fact that the peso's value looked set to fall at any
time).

To maintain an overvalued currency, a country needs large reserves of dollars;
the government has to guarantee that everyone who wants to exchange a peso for a
dollar can get one. The IMF's role here was crucial. It arranged large loans,
including $40 billion in the year 2000, to support the peso. This was the IMF's
second fatal error. To appreciate its severity, imagine Washington borrowing
$1.4 trillion (70 percent of the federal budget, as might well be the case if
the 'rules' were applied uniformly to all countries) just to prop up an
overvalued dollar. It didn't take long for Argentina to pile up a foreign debt
that was impossible for it to pay back. The IMF now claims that it was against
the fixed exchange rate, and the large loans to support it, all along. Officials
say they went along with these policies to please the Argentine government. (And
since all IMF documents pertaining to decision-making and strategy are kept
secret, no-one outside the organisation has much chance of getting IMF officials
to take responsibility for their actions and own up to any misdeeds). In 2002
the IMF has also denied advising Malawi to sell grain reserves (that then left
the country catastrophically exposed to the risk of drought, which then
occurred). Bakili Muluzi, the President of Malawi has insisted that the IMF did
give this catastrophic advice: the IMF says 'oh no we didn't'. Bear with me dear
reader: there is a pattern here.

Prior to the current crisis, Argentina had been described as a model of
development by both the IMF and World Bank. AND YET, following their
prescriptions has led to the current situation where the Argentine economy is
currently more or less in free-fall. As the economy has collapsed, people have
died in confrontations, millions are losing jobs or facing reduced salaries and
many risk going hungry.

In mid-2001 Argentina owed US$128 billion in debt. Normal interest plus the
premium meant that the country's yearly repayments amounted to US$27 billion a
year. In 2002 Argentina arranged a US$20 billion 'bail-out' loan with the IMF.
In other words, Argentina's people didn't see one penny from the US$20 billion
in bailout loans. The debt grew, but none of the money escaped New York, where
it lingered to pay interest to US creditors holding the bonds. (Source: Gregory
Palast, Eyes-Only Memos Show Who Done It, Americas.org web site, February 7,
2002).

It is worth pointing out here that on top of all of these woes inflicted on the
economy Argentina will also suffer huge foreign exchange losses as prices for
cereals fall, as a fairly direct consequence of the huge new subsidies given to
crop producers in the US (2002). See US Hypocrisy below. The standard American
rhetoric about 'free trade' is thus rendered somewhat hollow...

Botswana

An anomaly. It is claimed (by Joseph Stiglitz, one-time chief economist at the
World Bank) that since the IMF became involved in arranging structural
'assistance' to the majority of African counties, income in those countries
dropped by an average 23%. Did any nation avoid this fate? Yes, said Stiglitz:
Botswana. Their trick? 'They told the IMF to go packing.' In the same interview
(to the Observer newspaper in the UK in April 2001) Stiglitz went on to attack
the the US for 'asset-stripping' nations in debt to global financial
institutions. (Joseph Stiglitz also won the Nobel Prize for Economics in 2001,
was chairman of Clinton's Council of Economic Advisers, and in 2002 is a
professor at Columbia University. In his new book, Globalization and Its
Discontents, Stiglitz argues that far from the current system of global free
trade and open markets being both beneficial and inevitable, it is actually
deeply damaging, with many better alternative options available). Another
similar story is how 'during the Asian financial crisis in 1997, Malaysia
rejected international assistance to shore up the economy and imposed stringent
capital controls. Branded lunacy at the time, the strategy has since proved
successful' (Source: The Guardian 26.06.02)

Brazil

By way of comparison, here are some figures showing the amount of arable land
per person (in hectares) in various countries (some of whom are close to being
self-sufficient in agricultural products): China 0.13, North Vietnam 0.10, North
Korea 0.07, Pakistan 0.40, Bangladesh 0.16, Indonesia 0.15. Yet in Brazil there
are 2.3 acres of arable land per person (and Brazil has a significant hunger
problem). Why? The main reason is that in Brazil around half of all land being
farmed is used to produce goods for export (mostly beef). Brazil entered into
loan arrangements with the IMF in the early 80s. First off, international
financiers did well out of the debt alone: -between 1985 and 1987, the
International Monetary Fund collected US$16.8 billion more in payments to Brazil
than it had actually loaned out. Most of these payments were interest on earlier
IMF-sponsored loans.

Again, part and parcel of the IMFs 'conditionality' with regard to Brazil was
the Fund's insistence that Brazil open up it's markets further to foreign
investment and speculation. So when subsequently, succumbing to a speculative
onslaught, the Sao Paulo stock exchange crumbled in 1998. The immediate results
were massive rises in interest rates, the immediate crippling of manufacturing
due to debts that appeared from nowhere, drastic cuts in general purchasing
power, loan defaults and a devaluation of the Brazilian Real such that the vast
majority of Brazilians saw their personal wealth drastically reduced.

Brazil then entered into further 'post-crisis' arrangements with the IMF whereby
Brazil agreed to accept further IMF 'conditions'. (Although the meetings where
these conditions were 'negotiated' were held at the US Federal Reserve Bank and
apparently included not only the Brazilian Finance Minister but also George
Soros from the Quantum Hedge Fund, Citigroup Vice-President William Rhodes, Jon
Corzine from Goldman Sachs and David Komansky of Merrill Lynch. Rhodes was also
representing the New York Banking Committee on behalf of some 750 creditor
institutions standing 'behind' the IMF as it were). This time the requirement
was for further budget cuts in the order of US$28 billion (including massive
lay-offs of civil servants, the dismantling of social programmes, the sale of
state assets, the freeze of transfer payments to the State governments and the
channelling of State revenues towards debt servicing). The subsequent rescue
'package' was boggling in its cheek. During a single 6 or 7 month period (July
1998 to January 1999) US$50 billion of Brazil's foreign currency reserves had
been appropriated by private financial institutions (largely transacted through
'options' and 'futures' contracts of one sort or another). This was equivalent
to 6 percent of Brazil's GDP.

US$30 billion of international funds were subsequently lent back to Brazil in
1999 in the form of 'bailout' funds (being part of a US$41 billion package). Who
lent the money? The same Wall Street financiers (and their affiliated hedge
funds) who had been involved in the speculative onslaught against the Brazilian
Real in 1998 (see above). Heads you win, tails you lose. Yet again (see
elsewhere, below) we see i) IMF involvement ii) the economic meltdown of a
country, enabling foreign capital to take over the internal market, reinforce
its stranglehold over domestic banking and enable it to pick up the most
profitable productive assets at bargain basement prices.

Bulgaria

'In Bulgaria in 1996, the IMF praised the government for its continuing reforms,
and signed a new agreement with the Bulgarian government for a one-year loan.
The program forecast a zero growth rate in 1996 and 2.5 percent for 1997. The
IMF recognized that there was a budding banking crisis but neither the IMF nor
the Bulgarian government really knew how to handle it. In a ham-handed way, the
IMF and the government decided to take "tough" action, including the
announcement of sudden bank closures. Depositors panicked; the rest of the banks
collapsed, and the flight from the currency produced a hyperinflation. Defying
IMF predictions, in 1996 GDP collapsed by 10.9 percent (in fact, this represents
a staggering fall of around 20 percent in the second half of 1996). Of course,
the IMF blamed the entire mishap on the government'. (Source: The IMF and The
Asian Flu, Jeffrey David Sachs, The American Prospect Magazine).

Historically there appears to have been a pattern of the IMF taking credit for
the successful policies of national governments: examples include Bolivia 1985,
Poland 1989 and Estonia 1992, where in each case government measures introduced
against strong IMF resistance were later heralded as IMF successes. At the same
time, the IMF has at times refused to accept responsibility when failures are
obvious, blaming anything and everybody else instead. This has been the case
with most of the countries listed here.

Egypt

To illustrate the extent to which both the trade and political agendas of 'the
West' can be seen to come together in IMF policy here is a quote from the 'CIA
World Factbook' (2002): 'A series of IMF arrangements -along with massive
external debt relief resulting from Egypt's participation in the Gulf war
coalition- helped Egypt improve its macroeconomic performance during the 1990s'.

Indonesia


Eisuke Sakakibara, Japan's vice minister of finance for international affairs,
questioned the stringent IMF conditions placed on Indonesia in 1997 (when Asian
economies in general were experiencing serious problems). Fifty items of
structural reform were required of Indonesia and he doubted whether 'all of
these reforms were absolutely necessary to resolve their crisis'. 'The reform
measures were too ambitious, as evidenced by the closure of 16 banks in
Indonesia in a matter of a few days without adequate protection for depositors,'
he said. 'I (also) do not understand why there was such harsh criticism by the
IMF of the Indonesian authorities in January, 1998, when they announced a
balanced budget'. He said the criticism had a severe adverse impact on market
confidence.

Mr Dillon, Minister for Poverty Reduction in the Indonesian Cabinet, has said
that in 1960 the number of those living below the poverty line in Indonesia was
50%. By 1997 the number had fallen to 11%. By 1998 it had doubled to 28%. By
1999 it had rocketed to 80%. Something like 160 million Indonesians, 70% in
rural areas, live below the official poverty line. The World Bank estimates that
between 1997 and 1998 the real wages of agricultural workers fell by 40%, and
those in urban areas fell by 34%. Since 1997, it is said, 39 million Indonesians
have lost their jobs. (Source: Ann Pettifor of the Jubilee Plus organisation in
a letter to Gordon Brown, the UK Chancellor).

The sudden IMF-inspired removal of subsidies on fuels like Kerosene was
extremely regressive in its impact on the poor of Indonesia in 1998. This led to
rioting in Jakarta.

The IMF has insisted that Indonesia lowers her tariffs on imported sugar to 25%,
while in another example of the double standards at work the tariffs imposed by
some IMF shareholders remain at 80%.

In the 2002 renegotiation of the IMF Accord with Indonesia, one of the most
notable features is the virtual abandonment of Indonesia's attempts at strategic
industrial policy: to whit a 'national car project' (the suggestion of which had
apparently had upset carmakers in Detroit and Tokyo) and the plan to manufacture
indigenously designed passenger jets (that had apparently worried Boeing). Thus
if it is the case that the sceptical analysis turns out to be true (the
sceptical analysis being that these conditions were imposed by the IMF as an
instrument of protectionist US trade politics) then clearly the 'free trade'
rhetoric is, shall we say, meaningless. Currently (spring 2002) Indonesia and
South Korea are set to receive US$100 billion between them in what the IMF calls
'bailout funding'. This is how one expert commentator on international finance
characterised this new set of IMF South Asian loans:
'"You'd think most of the loot would go to help ease some of the crushing
dollar-denominated debt of these hard-hammered Asian economies -at least, that's
what Rubin and Larry Summers [the US Treasury Secretary and Assistant Treasury
Secretary] claim" commented Fred Ackerman, a veteran Wall Street trader in
international debentures... Nothing like it, warned this veteran money manager.
"In reality, the IMF's bailout is being used mainly as loan insurance to enable
Indonesia and Korea's tapped-out state agencies and corporations to borrow even
more in the global markets". Goldman Sachs, chosen as the lead underwriter and
syndicator of new bond issues for some of the largest Southeast Asian borrowers,
is already collecting millions -and is expected to collect tens of millions- of
dollars in fees and royalties for helping to pile more debt on the stumbling
Indonesian and Korean economies. "It's like one of Mike Milken's daisy chains,
isn't it?" asked Ackerman sarcastically, referring to the fraudulent syndicates
set up in the '80's by convicted swindler Michael "Junk King" Milken to rig the
bond markets. In much the same fashion, there is just a thinly veiled linkup
between the official acts of Treasury Chief Rubin -known to insiders as the most
powerful man in Washington as well as the main back-channel promoter of the IMF
-and the huge profits skimmed by his once-and-future firm, Goldman Sachs, from
such international bailouts, Wall Street sources say'... (Source: The Spotlight,
by Martin Mann, May 11, 1998 republished on the Dirty Gold In Goldman Sachs
website April 2002).

Jamaica


Former Prime Minister Michael Manley was elected on a non-IMF platform in 1976.
He was forced to sign Jamaica's first loan agreement with the IMF in 1977 'due
to lack of viable alternatives'. (But of course sometimes when people -like Mrs
Thatcher, and here the IMF- say 'there is no alternative' they may not actually
be telling the truth: they may well be trying to cajole you into accepting 'your
pain, their gain', a classic ruse of the Machievell). Subsequently the IMF (on
behalf of US interests) persuaded Jamaica to set up the 'Free Trade Zones' that
we now see around Kingston, where foreign clothing companies run high-security,
low-rent factories. Over 10,000 Jamaican women currently work for foreign
companies under sub-standard work conditions (most being on the Jamaican minimum
wage of US$30 per week). The companies are encouraged to bring in shiploads of
material tax-free, which is then sewn up, assembled and transported out to
foreign markets in a minimum turn-around time.

In the 70s and 80s, women who spoke out and attempted to organize to improve
their wages and working conditions, were fired with their names placed on a
blacklist in an attempt to ensure that they never worked again. The US
government supported these Free Trade Zones through the US Agency for
International Development which used over $34 million US tax dollars to target,
persuade and provide incentives to American companies to relocate offshore in
Jamaica in this period. (Although now many of the same industries are relocating
to Mexico, Costa Rica and the Dominican Republic since production costs have
fallen further in those countries). Michael Manley was later deposed in a
CIA-orchestrated coup.

Mexico


The IMF and various private institutions made large loans to Mexico in the 1980s
and 90s. It has been said that the dream of a liberal order, which became the
Washington Consensus dogma of the 1990s, collapsed with the Mexican crisis of
1994. Wage levels in Mexico declined by 40 percent in 1994-95, having already
declined by 60 percent between 1980 and 1990. When the Mexican economy suddenly
went pearshaped after agreeing to IMF 'structural adjustments' the US treasury
helped bail out the Mexican economy with a contribution of US$20 billion. There
are those who say that this was little more than a publicly-financed insurance
policy for Goldman Sachs and other large investment houses and banks that were
'exposed' in this 'Mexican peso crisis'. Needless to say perhaps, by this means
the institutions generally made a great deal of money out of the 'crisis'.
Interestingly Robert Rubin, then US Treasury Secretary, who did much to
facilitate the movement of bailout funds from the US to Mexico (that then went
back from Mexico to US private finance institutions) at that time still had an
interest in Goldman Sachs (one of the main beneficiaries of the bailout).

In Mexico in 1994, as in East Asia in 1997, foreign creditors turned abruptly
from euphoria to flight. The outflow of funds started moderately in April 1994;
it became a stampede in December 1994, following the devaluation of the Mexican
peso. Like Asia, Mexico was basically a solvent, creditworthy country hit by a
panicked withdrawal of foreign funds. And like today's crisis countries in Asia,
Mexico had so much short-term debt that the sudden withdrawal of confidence
threatened to push Mexico into default. 'The United States and the IMF led a
bailout operation in early 1995. The IMF was assigned the task of designing the
"macroeconomic framework" the set of monetary, interest rate, exchange rate, and
fiscal policy targets to accompany the bailout loan to Mexico. The IMF didn't
really understand the Mexican crisis, and treated it incorrectly as a typical
case of a profligate government rather than crisis in the private capital
markets. The IMF called for a lot of monetary and fiscal stringency that
unnecessarily added to the contractionary effects of the creditor panic. In
setting up the program, the IMF forecast a Mexican growth rate of 1.5 percent in
1995. The actual outcome was -6.1 percent. This whopping prediction error of 7.6
percentage points within the year was never explained, and apparently did not
lead the IMF to reconsider its strategy in Mexico or in similar countries' ...
'When an internal IMF review criticized the IMF's role in Mexico in 1993 and
1994, it was quickly hushed up and never made public'. (Source: The IMF and The
Asian Flu, Jeffrey David Sachs, The American Prospect Magazine).

Papua New Guinea

When you look at the detail of conditions imposed by the IMF on countries, it's
clear that these conditions may well be political and not in the interests of
ordinary people in the countries concerned. As an example we need look no
further than the Land Mobilisation Programme Papua imposed on the New Guinea
government by the International Monetary Fund, the Australian government and the
Japan Export-Import Bank as a condition of their $235 million 'rescue package'.
The IMF has been leaning on the Papua New Guinea government to overturn the
system of 'customary land tenure' in Papua New Guinea, which covers 97% of all
land and supports more than 85% of the total population. Customary land rights
are obtained by virtue of being a member of, or being affiliated to, a
land-owning group. 'Customary land tenure system serves the needs and
requirements of the people,' says University of PNG lecturer and land tenure
specialist Andrew Lakau. 'It has preserved a way of life which the people know
best,' he adds. 'Because of it, people have remained on or returned to the land,
rather than drift to remain in a stagnant urban sector. It has also prevented
the rise of a tenant-landlord class of people.' Meanwhile, foreign consultants
from the World Bank, have called for changes to the customary land tenure
system, saying that the present set-up is an impediment to productivity and
economic development. Whose 'economic development' would that be exactly, one
asks... Many Papua New Guineans have seen the IMF and World Bank's position on
this issue as evidence of a conspiracy by foreign capital to buy their lands.
This author agrees with them.

Russia

The last years of 'perestroika' prior the collapse of the Soviet Union were
times of great uncertainty and economic problems for the country. In 1992 for
instance Russia experienced 2500% inflation. But when the wall finally did come
tumbling down, in 1995, even greater political chaos ensued, along with even
more serious economic problems.

'The biggest sell-off of all' is how Joseph Stiglitz, ex-chief economist of the
World Bank described the collapse of the former Soviet Union in 1995. (Stiglitz
was fired from the World Bank, for asking, quite diplomatically, whether the
policies of the World Bank were in everyone's best interests. -Pour encourager
les autres?)

The scramble for Russian assets at that time, by both foreign investors and a
new (often corrupt) Russian elite was an unedifying spectacle, perhaps somewhat
akin to the 'scramble for Africa' in the 18th century. Again, following
perestroika billions of dollars worth of reserves migrated from Russia to the
US. Many Western advisers from the Bush (senior) administration, the IMF, the
World Bank, the International Finance Corporation, the European Bank for
Reconstruction and Development and the Harvard Institute of International
Development in particular were involved in ostensibly helping to steer the
former communist nation into a successful free-market economy.

There are those who say that Yeltsin was primarily responsible for giving this
new Russian elite the freedoms and mechanisms to plunder their own country in
tandem with a resurgent and more economically competent criminal class. (Perhaps
the most impressive example of 'outclassing' in this respect was when US$5
billion provided by the World Bank for restructuring the Russian coal industry
simply disappeared). However, clearly the IMF and other such institutions have a
lot to answer for, as the Russian people are well aware. In 1995 the IMF made a
US$6.7 billion loan to Russia, lending a further US$10.2 billion in 1996. More
than US$20 billion of international funds were used as 'bailout' funds for
Russia in 1998, after the ruble was devalued. Besides lending from the IMF and
the World Bank, Russia arranged loans directly from the US government- for
instance OPIC (the Overseas Private Investment Corporation, a US government
entity) provided Russia with nearly US$2 billion worth of 'guarantees' in the
early 1990s: 'guarantees' that are still 'unresolved'. Russia experienced a
major economic 'crash' in mid-1998, when it was forced to devalue the ruble.
(Speculators please note: the experience of Russia and Brazil suggests that
fostering a period of apparent stability before the crash can do wonders for
profits). Since then, it has been locked in a debt trap, borrowing more and more
from financial institutions, with the whole system being in danger of careering
out of control: for instance annual rates of interest in the Russian bond market
since perestroika have at times have exceeded 100%. This is how one Russian
economist has characterised this period: 'IMF theorists insisted that
privatization would lead automatically to better management of industries and
lower government spending. [Claims that subsequently were shown to be quite
false.] They also stressed the need to spend less on education, social welfare,
healthcare etc. Not only did the IMF encourage the Russian leaders in the
illusion that squashing inflation would automatically lead to growth, but IMF
spokespeople also fed the misconception that if things went wrong, there'd be
plenty of money in the world financial system to bail the Russians out'.
(Source: Russian economist Boris Kagarlitsky in testimony to the US congress
1998).

Again we see the same IMF-inspired formula (that did nothing to improve the
quality of life of ordinary Russians, in fact quite the reverse) where prices
rose, wages fell, and government spending and public investment fell. And again
we find the same rapacious trickery: 'How can you talk about due safeguards when
it is a notorious fact that capital flight from Russia has far exceeded the sums
provided as credits by international financial institutions and world financial
markets? To a large extent this is the same money which immediately leaves the
country through private banks working with government agencies. It is impossible
to imagine that IMF experts are not aware of these facts, which every shopkeeper
in Moscow knows about. On the contrary western experts always insisted on open
markets and liberal regulations of international financial transactions. In
Russian conditions, open markets and liberal regulations on international
financial transactions mean not only a green light for capital flight, but also
excellent prospects for the mafia. But none of this has stopped the IMF and
similar institutions from insisting that controls be kept loose. Foreign credits
did not save Russia. They did not prevent the current crisis. On the contrary
they provoked it. It is quite possible that the chief concern of the IMF
decision-makers was not the success of Russia but the prosperity of the Western
financial community which made a lot of money out of our crisis'. (Source: Boris
Kagarlitsky 1998).

South Korea

The IMF loaned about US$20 billion to South Korea in 1997. At the centre of
South Korea's agreement with the IMF we find Seoul agreeing to the IMF demand
that foreign investors be allowed to own up to 55% of the equity of Korean
firms. This agreement paved the way for giving Western interests the opportunity
to pick up one of the world's major car manufacturing firms at a knockdown
price. Here's how financial-market-journalist Martin Mann described these
carryings-on: 'The second kickback from the IMF bailout [after using bailout
finance as loan insurance to enable agencies within Indonesia and Korea's to
borrow even more in the global markets] goes to what even the Wall Street
Journal calls "vulture capitalists" -that is, international financiers who
pounce on distressed corporations, buy them out at knockdown prices, and then
use "special connections" to make a killing on the deal. This is what happened
in Mexico in 1994-95, and it's happening now in Southeast Asia, Wall Street
sources say... For an example, they cite the case of Daewoo, a major Korean car
manufacturer, crushed by a back-breaking US$3 billion debt it could no longer
service after international speculators ... raided Korea's currency and devalued
it by more that a third last year ... An international syndicate headed by
General Motors and advised by Goldman Sachs is now negotiating to buy a
controlling interest in Daewoo at a time when they can acquire the huge bankrupt
manufacturing complex at a steep discount, something like "15 cents on the
dollar," these sources averred... "That's a real sweet deal for the vulture
investors grabbing Daewoo, but will they also get stuck with its US$3 billion in
outstanding debt," asked Dr. Gottfried Sieberth, the dean of European financial
writers based in the US... Not if the IMF cash is divided up the way it was in
Mexico, where it was used to buy up the defaulted loans of the biggest banks and
corporations, explained this knowledgeable observer.' (Source: The Spotlight, by
Martin Mann, May 11, 1998 republished on the Dirty Gold In Goldman Sachs website
April 2002).

In its agreement with the IMF, South Korea also promised to privatize the South
Korea Tobacco Ginseng Corp. and five other government-owned companies, by 2002.
Again, this opens the way for Philip Morris, British American Tobacco PLC, RJR
Nabisco Holdings Corporation and others to muscle in (all three of the above
having clearly demonstrated their interest as early as 1998).

It is interesting to note that when the IMF was insisting on it's usual bundle
of conditions to East Asian countries in 1997 (while negotiating loans) and in
1998 (when many East Asian economies were suddenly in serious trouble, after
speculative raids on their currencies) the East Asian countries were running
budget surpluses. (So the IMF had to find different ways to justify their
proposals). Also, most East Asian nations had tight monetary policies, such that
generally inflation in these countries was low and falling.

Thailand

Here is an interesting statistic: 'Thailand increased its rubber exports by 31%
in the first half of 1985 compared with the same period the year before -yet its
rubber revenues fell by 8%'. (Source: ‘Poor man’s gift’, Economist, 30 November
1985). Among other things this statistic illustrates the extent to which the
word 'efficiency', banded around from time to time by rich economists in the IMF
and elsewhere, may not actually mean very much when used in the context of
international trade, where exchange rate fluctuations and the volatile movements
of investment capital may influence revenues more than any other factor.
Generally one person using their hands for a given length of time in the
developing world will produce more than a similar person in the developed
world...

After imposing rigorous reform programmes on Thailand and South Korea in return
for massive bailouts, the IMF changed course and returned to such Keynesian
methods as reflation ostensibly to try to drag the countries out of their
economic woes. (This echoes Davison Budhoo's criticisms of IMF actions with
regard to Trinidad and Tobago, where he claimed that the IMF had a habit
changing the rules to suit its policy objectives -see IMF Fraud below).

The IMF has subsequently 'persuaded' the Thai authorities to agree to the
removal of all limitations on foreign ownership of Thai financial firms and is
pushing the government hard to enact even more liberal foreign investment
legislation that would allow foreigners to own land, a practice that has long
been taboo in that country.

In the 1990s US$141 billion of international funds have been used as 'bailout'
funds for Asian countries. Thailand was in receipt of a US$17 billion
international rescue package in 1997, US$4 billion of which came from the IMF.

'the IMF arrived in Thailand in July filled with ostentatious declarations that
all was wrong and that fundamental and immediate surgery was needed.
(Ironically, the ink was not even dry on the IMF's 1997 annual report, which
gave Thailand and its neighbors high marks on economic management!) The IMF
deepened the sense of panic not only because of its dire public pronouncements
but also because its proposed medicine high interest rates, budget cuts, and
immediate bank closures convinced the markets that Asia indeed was about to
enter a severe contraction (as had happened earlier in Argentina, Bulgaria, and
Mexico). Instead of dousing the fire, the IMF in effect screamed fire in the
theater. The scene was repeated in Indonesia in November and Korea in December.
By then, the panic had spread to virtually all of East Asia. Even though the
original fire could well have been contained, the ensuing panic has proved
devastating'. (Source: The IMF and The Asian Flu, Jeffrey David Sachs, The
American Prospect Magazine).

Who Sets The Agenda?

Has it been the case that the US administration and Treasury and private
financial institutions, in collusion with the IMF, or a cabal within the IMF,
have effectively hijacked world finance arrangements? The examples presented
here, along with a wealth of evidence available from other sources, suggests
that this is in fact the case.

Besides the 'member' countries of the IMF a number of private financial
institutions such as Goldman Sachs, Citigroup and Chase Manhattan are also
involved in IMF lending schemes: not directly (look at the blurb put out by the
IMF for consumption by the general public and you will see no mention of the IMF
directing private finance in any way shape or form into countries with which
they deal). Dig a little deeper, however, and you find that the IMF does get
involved in cosy negotations through which would-be-lender countries are
encouraged to strike up deals with private institutions such as these. (And one
single Goldman Sachs 'shareholder' may itself be a financial organisation that
represents a number of further organisations, and so on).

Or, these private institutions may well be invited to 'underwrite' IMF-sponsored
loans to debtor counties, such that they then receive payment for 'exposure to
risk' (which may effectively then constitute a transfer of funds from developing
country to private Western bank). Thus when a country gets in debt to the IMF,
it is also effectively in debt to all organisations (not just countries) that
contributed to the original loan made to the debtor country. Not only that, but
in the US at least any one such underwriting institution then has the power to
make legal challenges to any subsequent restructuring of the debt by the IMF
(when, in this context, they may be referred to as 'rogue creditors')
effectively giving these (private) institutions the power to influence IMF
policy. For instance one creditor, Elliott Associates, a New York hedge fund,
recently held up the restructuring of Peru's debts with a court challenge.

But why, objectively, do private firms such as this actually 'need' to
underwrite IMF-sponsored loans? Besides the enormous contributions to the fund
made by richer countries, the IMF has one of the largest reserves of gold on
earth, valued at over US$30 billion in 2001. Perhaps the word 'need' above
should be replaced with 'want' here (for obvious reasons). 'Exposure to risk'?
To this author at least it seems that what we're talking about here is all too
often low cunning (or brute force) employed in persistent attempts to rip off
developing countries in any way possible. Talk of 'risk' in this context brings
to mind the image of some 6'6" martial-arts-trained rapist talking about 'risk'
in relation to his activities. (That is, the language does not seem to bear much
relation to a common-sense reality of any sort). Goldman Sachs in particular has
had close links with the IMF for many years. For instance, Jonathan Anderson who
joined Goldman Sachs' Asia Pacific economics team as executive director in 2001
previously worked for the IMF both in Beijing and Moscow in the 1990s. (And in
1993, Goldman Sachs split a profit of US$2.6 billion between 161 partners,
whereas in the same year the country of Tanzania split a gross domestic product
of US$2.2 billion between 22 million people. Furthermore in 1997 the Tanzanian
government announced that it would lay off 10,000 civil servants in accordance
with conditions tied to an earlier -1996- IMF loan of US$234 million). Goldman
Sachs also has a history of close ties with successive US administrations: for
instance Clinton Treasury Secretary Robert Rubin was a former chairman of
Goldman Sachs. Similarly, Stanley Fischer, deputy managing director at the IMF
during the Asian and Russian crises, is today vice-chairman at Citigroup (to
what extent is this 'reward' one asks).

This section on 'who sets the agenda' would not be complete without reference to
some of the 'think-tanks' in Britain and in particular the US whose avowed
intention is to influence the way ordinary people perceive things. To those
inclined to dismiss critics such as this writer as being credulous
conspiracy-theory believers, I would recommend the interested reader look
further into the activities of the American Enterprise Institute, the Cato
Institute, the Competitive Enterprise Institute, the Heritage Foundation, the
Hudson Institute, the Progress and Freedom Foundation and the Washington Legal
Foundation in the States, all of whom receive significant funding from big
business in order to push particular (generally big business, right-wing
political) agendas. It is groups such as these who may be particularly keen to
foster the use of language in certain ways- for instance the positive use of
terms such as 'free and open markets' and 'trade liberalisation' in schools and
the media, such that people in general do then come to walk around thinking that
all of the financial wheeler-dealing involved in international trade is
ultimately in everybody's best interests. The case made here (with supporting
evidence) however, is that when the terms 'free and open markets' and 'trade
liberalisation' are invoked, the real agenda behind the rhetoric is all too
often profoundly rapacious and amoral, such that real and lasting damage (and
untold human misery) is all to often inflicted on countries in the developing
world. One of the fundamentals of capitalism is that to those who have shall be
given more (and those who have not will be exploited). Much rhetoric is employed
in an effort to disguise this fact.

Free trade as defined by the IMF, the World Bank and the World Trade
Organisation after Adam Smith and Milton Freidman, in many ways means
'deregulated free-market capitalism'. However this trade is not nearly so 'free'
as the propagandists would have us believe. (Just as in the 19th century)
Europeans and Americans today are demolishing barriers to sales in Asia, Latin
American and Africa while at the same time often barricading their own markets
against the Third World's agriculture (for instance). And while the IMF may
claim that a developing nation is 'inefficient' (in order to justify massive
'structural adjustments') individual rich member nations of the IMF may well
either i) impose barriers against that developing nation's agricultural
products, precisely because they are, in one sense, more efficient (ie cheaper),
in order to protect their own production of these goods or ii) they may rush to
buy up more of that country's commodities, thanking the IMF for making them even
cheaper than they were before.

The information presented here, and the interpretation, is admittedly somewhat
'dark'. There may well be countries in the developing world who are pleased with
the arrangements thay have made with the IMF. However, when considering the
issue of spiralling 'third world debt' alone, one is inclined to question the
appropriateness of the phrase 'debt relief' that is currently given prominence
on the IMF's website (2002). More than this though, much of the material
presented here does lend credence to the view that there is actually something
even more sinister going on, whereby private finance, along with cabals within
the IMF and the US administration, have in many cases (ie those listed here and
others) royally screwed the economies of a number of countries in ways that have
significantly reduced the quality of life of people in the countries concerned.
(And made a few people very very rich in the process).

A Little History

The institutions of the IMF and the World Bank were built on top of the 'Bretton
Woods' consensus of 1942-1944, in which the ostensibly laudable aims were to
provide a global 'structure' for international finance that would be in
everybody's interests. The stated aims were originally that rich countries could
help poor countries and collectively a set of 'rules' could be agreed, in order
that global trade could be facilitated and all parties would gain from extra
financial and political security. Arguably, however, this laudable long-term
agenda has been hijacked by those wishing to make short-term profits out of
countries in the developing world at the great expense of the populations of
those countries. This being the case, the IMF has quite clearly lost its way.
Interestingly, for at least 10 years after 1942 the US Federal Reserve bank
acted as the de facto central bank for these developing international financial
structures. And arguably the undue global influence this undoubtedly conferred
on post-war US administrations remains to this day behind the scenes. (Many
consider that the Bretton Woods consensus finally ceased to exist in 1972 when
the international link between the dollar and gold was broken). Also, since the
Reagan administration in the mid-80s, US foreign policy has been even more
aggressive in pursuit of a global economic agenda than it was before.

Here's how one writer has characterised the current US position: 'for globalism
to work, America can't be afraid to act like the almighty superpower that it is
... the hidden hand of the market will never work without a hidden fist ...
McDonald's cannot flourish without McDonnell Douglas, the designer of the F-15.
And the hidden fist that keeps the world safe for Silicon Valley's technologies
is called the United States Army, Air Force, Navy and Marine Corps. (Source:
What the World Needs Now by Thomas Friedman, New York Times, March 28, 1999).

Ever since Reagan, the main thrust of US foreign policy has been to aggressively
promote US trade and investment across the world, while removing all obstacles,
such as protectionism, government regulation, and subsidization of local
producers, that appeared to constitute handicaps to US-based companies. And one
of the more obvious aspects of 'globalisation' that is often overlooked is that
when a very rich country is given unfettered access to the economy of a very
poor country, ownership and control of the poor country's assets will tend to
fall into the hands of interests from the rich country (because local
entrepreneurs will always be 'outgunned': -the 'foreigners' will generally be
able to buy up local resources more easily). This is one reason why there are
currently (in 2002) several hundreds of Americans in the capital city of
Kazakhstan, Almaty. Many of them are looking for assets to buy for 'a song'.
Such a situation is NOT always desirable, however, whatever the apologists for
such 'freedom' may say. The 'freedom' exists on one side only. The tendency of
capital to concentrate in the hands of a tiny few at the expense of everyone
else is one of the fundamental flaws of the unregulated capitalist free market.

This is how Mark Twain described the United States indulging in European-style
imperialism in the Philippines in 1901: 'it is yet another Civilized Power, with
its banner of the Prince of Peace in one hand and its loot-basket and its
butcher-knife in the other'. (Source: Mark Twain, To the Person Sitting in
Darkness, 1901).
Plus ça change, plus c'est la même chose.

Running structural adjustment through finance ministries that became its virtual
appendages, the IMF substantially has transformed the economies in Latin
America, Africa and Asia in a free-market direction. And the 'advertising'
rhetoric put out by Fund supporters is that central to the Fund's operations is
the idea that 'sick economies', through the ministrations of the Fund, could be
'nursed back to health'. However, there are those who say that many IMF
programmes were, in fact, never meant to restore 'sick economies' to health at
all, and that the real agenda has been quite different: the rhetoric being
simply a means by which A Belief System Is Imposed Under Which The Unwitting
Willingly Hand Their Wealth To The Cunning...

There has often been a political dimension to this agenda too: for instance
'Turkey received the largest handout last year from the IMF of any country since
the Asian crisis. Defenders of the package would no doubt argue that the country
has stuck to the IMF's tough conditions more successfully than Argentina, at
considerable economic cost. Cynics might note that the country is an EU
accession candidate with an overwhelmingly Muslim population, and an important
ally in America's war on terror. The moral of the story seems to be, no bailouts
except for countries which are strategically or economically important. Poor old
Argentina is neither'. (Source Charlotte Denny The Guardian April 29, 2002).

Clearly the US government has also attempted to push its policy goals through
the actions of the IMF and the World Bank. (The US Treasury 'owns' 51 percent of
the World Bank, for instance).

What Is The Agenda? (A Sad, Depressing And Ugly Business)

Step into my debt trap, little one...

In 1997 the total foreign debts of all developing countries were more than US$2
trillion (million million) and still growing. (Only some of this is owed to the
IMF of course).

The result is a debt of US$400 for every man, woman and child in the developing
world where average income in the very poorest countries is less than a dollar a
day. (Source: New Internationalist Issue 312 on Debt).

Half the world's people live on less than US$2 a day.

1.2 billion people live on less than US$1 per day.

When the inescapable compound interest owed by the debtor nations is taken into
account the situation is even more absurd, ridiculous, and
life-and-death-serious: writing in 1994 (when the total foreign debt of the
developing world stood at US$1.5 trillion) this is how economist JW Smith
described the situation: 'if allowed to continue to grow the magic of compound
interest dictates it is unsustainable. One trillion dollars compounded at 10
percent per year becomes US$117 trillion in fifty years and US$13.78 quadrillion
in one hundred years, about US$3.5 million for every man, woman and child in the
Third World. Their debt is 50 percent greater than this and has been compounding
at twice that rate -over 20 percent per year- between 1973 and 1993'. (Source:
JW Smith, The World's Wasted Wealth 2, Institute for Economic Democracy, 1994, p
143).

In 1998 developing countries paid back $13 for every $1 they received in grants.

And still, in 2000 alone the total amount invested in developing countries was
US$1.7 trillion. (Source: United Nations Report Of The High-Level Panel On
Financing For Development).

Money-lending has often been one of the less savoury ways to earn a living, and,
like money-lenders in the poorer parts of the city, lenders may have no real
interest in educating, encouraging and helping people to find better ways of
doing things, such that they avoid the trap altogether. Like drug pushers, what
they really want is that you should take that first step with them into a new
landscape, where they hold your hand and do their best to make you 'trust' them.
The first step is the difficult one. After that it's all downhill. And thus it
is with the IMF. The developed world currently owes a total of more than US$2
trillion to governments and private financial institutions in the developed
world, and once in that trap, if the experience of the countries listed above is
anything to go by, they will squeeze (and squeeze, and squeeze) and it does not
matter how poor you are, or how much you are suffering...

One of the age-old tricks of the loan shark is to somehow push the debtor into a
situation where they default on a loan. This gives the shark a whole lot more
leverage, enabling them to push the debtor yet further into a debt trap,
enabling the shark to make yet more money from extortionate interest repayments,
etc. Looking at the case of Mexico in 1995, for instance, it is hard not to come
to the conclusion that this was precisely what the IMF was up to in their use of
innappropriately negative financial 'gossip' regarding Mexico's economy.

'Debt is an efficient tool. It ensures access to other peoples' raw materials
and infrastructure on the cheapest possible terms'. (Source: Susan George, A
Fate Worse Than Debt). Let's take a step back and look at the generalised
IMF/World Bank strategy of imposing conditions- the conditions tend to include
some or all of these (usually all of them):

Privatising and 'liberalising' the economy, including

Liberalising import controls
Liberalising capital markets
Reducing financial and legal safety nets for businesses
Introducing a payment ethic for social services of all kinds

Rescheduling existing debt

Decreasing government spending, by
Ending subsidies, and allowing the market to regulate prices
Laying off workers
Reducing education, reducing health expenditure

Increasing exports, by
Devaluing the currency
Improving the terms of foreign investment
Reducing or freeze wages
Reducing worker power

Regarding privatisation, Joseph Stiglitz' (ex-chief economist of the World Bank)
view is that when international financial institutions stepped into the breach
made by perestroika in the Soviet Union's defenses in 1995, for instance,
US-backed oligarchs stripped Russia's industrial assets. In the ensuing chaos
national output was cut nearly in half. When state-owned enterprises are sold
off to foreign interests in this manner Stiglitz said that 'rather than
objecting to the sell-offs of state industries, some politicians -using the
World Bank's demands to silence local critics- happily flogged their electricity
and water companies. "You could see their eyes widen at the possibility of
commissions for shaving a few billion off the sale price"'. (Source: The
Observer 29th April, 2001). Did you know that Thames Water owns and manages
Jakarta's water supply? Elsewhere Stiglitz has observed that the IMF's
objectives have changed 'from serving global economic interests to serving the
interests of global finance'.

In theory 'liberalising capital markets' allows investment capital to flow in
and out. Unfortunately, as demonstrated in Indonesia and Brazil, the money often
simply flows out. Cash may come into the country for speculation in real estate
and currency, but it may also fly out of the country at the first hint of
trouble. A nation's reserves can drain in days. And when that happens, to seduce
speculators into returning a nation's own capital funds, the IMF may then demand
that these nations raise interest rates to 30%, 50% and 80%, thus demolishing
property prices, savagely reducing industrial production and draining national
treasuries. 'Liberalising capital markets' may well also involve devaluation of
a country's currency. When the IMF/World Bank/GATT/NAFTA/WTO/ colossus somehow
forces a country to devalue its currency, and reduce consumption to increase
sales of resources to the developed countries, this lowers the costs of such
labor and commodities to outsiders, while raising the costs of manufactured
products from outside when imported in to the country. The claim is often made
that such a situation is an inevitable result of inefficiencies in the
developing country's industry and labor, but actually such a situation can
clearly benefit foreign investors and/or asset-strippers if ENGINEERED by them.
And where this is the case (as it all too often it seems to have been in recent
years) what we are seeing is effectively 21st century colonialism. By way of
example, as a result of austerity measures forced on rubber-producing countries
by the international financial institutions, the relative value of world rubber
exports dropped 300 percent between 1960 and 1975. Cotton exporters lost 60
percent of their buying power in the same time span. The price of primary
commodities that developing countries in general export have collapsed to the
same price as 20 years earlier while prices for manufactured products have
soared, forcing the developing countries to export more and more while importing
less and less. Is this 'development'? The liberalising of capital markets may
well also involve enticing the country into (further?) debt: the IMF or World
Bank persuading that country to borrow more money. This is sometimes referred to
as the 'debt trap' or 'debt dependence'. In general the scenario is this:
typically the debts are incurred by the developing country for investments to
extract resources, produce agricultural exports, and build the infrastructure to
ship commodities to developed countries. The developing country is then expected
to lower living standards and export more minerals, lumber, and food, all to pay
debts that did little for their economic development in the first place.
According to the World Bank, commodity prices overall lost 16 per cent of their
value in 1998 alone, continuing a longer-term trend. Metals and minerals prices
ended the year 33 per cent down from their peak in August 1995, while food
prices fell 21 per cent from their level in April 1996. Ironically all of the
main conditions giving rise to these falls have been as a direct result of IMF
and World Bank-sponsored structural adjustment programmes. (Source: Jubilee 200
Coalition).

Also in a typical list of IMF conditions we invariably find: item- 'reducing
education' and item- 'reducing health expenditure'. For most if not all
populations in the developed world, increasing expenditure on both education and
health is probably the number one priority. So why should we let the IMF or
World Bank insist on reforms in developing countries where these vitally
important opportunities are taken away? People with social consciences in the
developed world must act to stop the rape of developing nations by these (and
any other) means.

When one looks hard at the reality of what has happened in the case of those
countries listed above (for instance) it is difficult to escape the view that
behind the rhetoric that would portray world financial institutions as working
in the interests of 'everybody', there really is a deeply ugly conspiracy (with
a predominantly US/multinational company agenda) afoot. Written into the script
of this conspiracy is the idea that certain key players have actively sought to
destroy the economies of certain countries so that a very few people can get
very very rich at the expense of literally several million people who have then
been forced to suffer truly terrible consequences, including ultimately (and in
many cases) disease, hunger and even death.

Some say, for instance, that in the 1980's, the IMF effectively directed public
funds first through the institutions of indebted Southern governments and then
back to the coffers of Citigroup, Chase Manhattan, and other heavily 'exposed'
Northern banks, then squeezing the peoples of these Southern countries to repay
the Fund (and the Fund's banking backers).

According to Walden Bello, professor of sociology and public administration at
the University of the Philippines 'there is a belief going around industrial and
government circles throughout Asia that Washington and the IMF conspired with
the banks and speculators to bring about the region's financial meltdown. The
alleged reason: to derail Asia from its march to become America's strategic
economic and political rival in the 21st century. This is, of course, classic
conspiracy theory, but it is a sign of the times that it now has the status of
fact among economic and political elites that once served as Washington's
staunchest backers in Asia'.

First, get a country hooked into the system (by making it owe you money).
Promise greater wealth as a consequence of the structural reforms that you
advocate with the dual intention of i) making the whole economy and reserves of
that country vulnerable to asset-strippers ii) making it impossible for the
country to pay the debt when the promised extra wealth does not materialise (as
you knew would be the case). Then change the rules, asserting the need for yet
more stringent measures, that create greater devastation and lock the country in
to the sick system even further. It really is like pushers and addicts (except
that the national funds at stake here are life-and-death ESSENTIAL to the
countries involved). The strategy of persuading someone that they have a need of
something ('creating a market', in this case for 'financial products') is a very
old one. And when they bite a little at first, do everything you can to 'lock
them in' to your long-term strategy, such that over a period of years you can
really take them to the cleaners. The Grand Strategy appears to be to impose
unequal trades upon the world so as to lay claim to the natural wealth and the
labors of weak nations.

World trade today is characterised by corporate imperialism.

In terms of rhetoric, the IMF and the World Bank have different faces that it
seems they will try and put across to different people at different times, as
need dictates: on the one hand they seem keen to foster the impression to people
at large that they do have a social conscience and that their actions are
ultimately in everybody's interests. On the IMF web site homepage in mid-2002,
for instance, we see special prominence given to the terms 'debt relief' and
'poverty reduction', along with the following: 'the IMF is an international
organization of 183 member countries, established to promote international
monetary cooperation, exchange stability, and orderly exchange arrangements; to
foster economic growth and high levels of employment; and to provide temporary
financial assistance to countries to help ease balance of payments adjustment'.
But to interested parties such as Western investors, they will say 'the IMF has
repeatedly stated that it is not, and was never intended to be, a development
institution' and similarly 'the fundamental goal of creating markets for
industrialized countries' exports, was written into [the World Bank's] charter'.
If only these institutions had been as honest with the governments of developing
nations who have been lured into crippling debt traps (etc) then much human
suffering would have been prevented. But it seems that honesty itself is not
been given much of a priority in these 'arrangements'...

IMF Fraud

Despite the cloak of secrecy thrown over all decisions made internally within
the IMF, Davison Budhoo, senior economist with the Fund, who resigned in the
late 1980s on ethical grounds, brought some of the organisation's shockingly
dubious internal practises to the attention of the world at large with his
150-page resignation letter. (With facts and figures later verified by
independent research). Among other things, Budhoo pointed out the way in which,
when making a assessments of the state of a country's economy, IMF economists
wre keen to put a value against what they called the Relative Unit Labour Cost,
or RULC. Within the IMF this was (and possibly still is) taken to be a key
indicator, attempting to compare the unit labour costs for manufacturing
industries in a developing country against the unit labour costs for
manufacturing industries in developed countries (ie the developing country's
'major trading partners'). Budhoo was at pains to point out the dubiousness of
these statistics, however, claiming that 'what we had done, over the 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
the economic realities and circumstances of the country'. In his book 'Enough is
Enough', Davison Budhoo plots the course of IMF machinations with relation the
example of Trinidad and Tobago in some detail, showing how on the basis of
fraudulent fugures, the IMF pressured Trinidad and Tobago into (the same list,
including)

currency devaluations
public sector job losses and wage cuts
price deregulation (for which read price increases) on essential goods used by
the poor in particular
further regressive tax measures
etc

Budhoo shows, however, that not only were the figures contrived in the first
place, he also shows that even as sections of the organisation itself become
fully aware of the 'mistakes' in the figures, and internally at least admitted
to the fact that the figures on which the policies were supposed to be based
were quite wrong, the same policies nevertheless continued to be pushed, with
all reference to the originally fraudulent figures simply expunged from all
documentation, and no mention of the 'mistakes' ever being made to the
government of T and T.

It is not difficult to play around with statistics, such that they show what you
want them to show, if one has a mind to do so. For instance, when referring to
'a basket of currencies of major trading partners' (as the IMF is wont to do)
and using that as an index, immediately one has a great deal of scope: one can
choose to include only the figures for countries that help one's 'cause' on that
particular day (perhaps taking adjantage of big fluctuations in the money
markets in the process). One can simply ignore the rest (that don't help the
'cause').

In the case of Trinidad and Tobago, the IMF even used figures pulled out of thin
air, saying that it had 'unconfirmed reports ... indicating that unpaid bills
amounted to TT$1.1 billion'. This would have represented 6.5% of GDP, had it
been true. In fact the government of T and T owed virtually nothing in unpaid
bills at that time. So where did these 'unconfirmed reports' come from? The IMF
would not say.

Furthermore, according to Budhoo (producing internal IMF figures that were later
validated by independent academic research) the IMF

misrepresented T and T's 1986 fiscal deficit to make this appear to be TT$1.9
billion more than was in fact the case
misrepresented a 1986 decline in private sector bank deposits in T and T to make
this figure appear to be TT$250 million less than was in fact the case
misrepresented T and T's 1986 deficit on the current account of the balance of
payments to make this appear to be TT$500 million more than was in fact the case

misrepresented T and T's 1986 government transfers to the public enterprise
sector to make this appear to be TT$1.0 billion more than was in fact the case

A recent a recent decision within the WTO (World Trade Organisation) quotes
Article XV:2 of GATT 1994, asserting that 'the contracting parties must accept
all findings of statistical and other facts presented by the Fund [ie the IMF]
relating to foreign exchange, monetary reserves and balance of payments'. This
when the IMF is in no way transparent and when it has also often been clear that
IMF statistics are dubious.

Another relatively simple way to indulge in statistical trickery is to choose
your own 'base' from which to provide figures. For example, in pressing the
IMF's subsequent 'case' for devaluation of the Trinidad and Tobago dollar, an
IMF report in 1987 stated 'the external value of the Trinidad and Tobago dollar
was still around 10% higher in real effective terms than in 1980, while the
external terms of trade had declined by about 50% since that time'. However, in
1980 unusual fluctuations in the price of oil on world markets took place (when
oil was accounting for 80% of Trinidad and Tobago's merchandise exports) so
fluctuations in the price of oil worldwide tended then to have a big (and in
this case unusual) effect on the country's trade figures. Had 1982 been chosen
as the base year, however, the report quoted above would have read 'the external
value of the Trinidad and Tobago dollar had declined by 16% in real effective
terms since 1980, while the external terms of trade had declined by less than
10% since that time'. So the IMF, while recommending massive changes to the
economy and lifestyle of the people of Trinidad and Tobago, was basing its
recommendations on figures that many of its staff surely knew were fraudulent.
(see Davison Budhoo, Enough is Enough page 26, section entitled Statistical
Monkey-Business Once Again).

At one point in 'negotiations' with Trinidad and Tobago in the late 80s, it was
clear that the country had in fact achieved (by their own methods) the fiscal
account adjustments that the IMF had been insisting on. The IMF's response? The
response was to move the goalposts by insisting on stiffened targets (in what
therefore demonstrated a clear attempt to enforce a political agenda).

Budhoo suggested that in choosing the example of Trinidad and Tobago he was
merely demonstrating practises that were in fact the norm in relations between
the IMF and 'member' counties.

Besides the specifics of the way in which the IMF was using statistical fraud to
justify massive 'structural readjustments' in Trinidad and Tobago however, the
whole theoretical basis notions such as the Relative Unit Labour Cost, or RULC
as used by the IMF begins to unravel on close scrutiny. When looking at the
relative value of labour in different countries, the 'productivity' of
labor-time is seen less of a function of the level of wages (as classical
economic theory would suggest) and more of a function of exchange rates and the
workings of the international monetary system. For instance Mexican metal
workers are 40 percent more productive than US workers, Mexican electronics
workers 10 to 15 percent more productive, and Mexican seamstresses produce 30
percent more sewing per hour than their US counterparts. So the rhetoric about
'efficiency', or lack it, when used to justify the kind of massive structural
changes that the IMF tends to insist on, generally does not add up.

US Hypocrisy

One of the most dramatic ways in which the hypocrisy of the US manifests itself
in this context, is in relation to 'balance of payments' issues. The IMF, the
World Bank, and other financial institutions, when making their mark in the
developing world, and following a US and US-multinational-inspired agenda, will
often point to perceived balance of payments problems in a country, where the
value of that country's imports may be much greater than the value of the goods
it has imported (or vice versa). Rough parity between the value of a country's
imports and exports is seen by classical economists to be a 'good thing'. Yet
the current (2002) US trade deficit (as the difference is known) is thought to
be around US$400 billion. It has even been suggested that funds (eventually)
flowing into the US as a consequence of IMF/World Bank sponsored arrangements as
described here are one of the main ways in which the US treasury can maintain
such an imbalance. If true, this would suggest hypocrisy on a truly staggering
scale.

The US government provides US$5 billion annually in subsidies to the fossil fuel
industry (coal, oil, gas, petrol). (And, by way of an interesting 'aside', a
petition to the US government signed by over 1,000 economists stated that 'the
most efficient approach to slowing climate change is through market-based
policies').

Shortly after his election as president, George W Bush put his name to a bill
that will raise US agricultural subsidies by up to 80% a year for the next 10
years. Recently (in 2002) the tariffs imposed by the US on imported steel have
caused a good deal of 'concern' in other countries. These are two examples of
many, demonstrating the fact that while encouraging other countries to remove
subsidies and tariffs (and using the IMF/World Bank/WTO/NAFTA etc to push these
policy aims) the United States itself is manifestly unwilling to swallow this
'medicine'. So are we ever likely to see the IMF passing judgement on the US in
the way that it has persistently judged other countries (taking note of the
massive subsidies the US gives to agriculture and other industries, taking note
of the tariffs slapped on many goods to deter foreign imports, taking note of
the 'inefficiencies' that such subsidies and tariffs must surely hide, taking
note of the current US$400 billion US trade deficit)? Perhaps the US will
emasculate its own economy and tie the hands of all interested parties within
the country in the interests of 'trade liberalisation', giving speculators from
across the globe the opportunity to take them to the cleaners? When a person has
a 'one rule for you, another rule for me' kind of attitude, this is usually
perceived to be one of the hallmarks of a selfish, myopic or arrogant
individual...

The huge subsidies given to farmers in the US may in themselves have massive
effects on farmers in the developing world. For instance West African cotton
exporters already lose about US$250 million a year as a direct result of US
subsidies (a figure set to rise sharply after the imposition of new subsidies in
2002). For countries like Burkina Faso, Mali and Chad, where cotton accounts for
more than one-third of export earnings, the losses are huge. It's a similar
story re Mexican maize, and Haitian rice, where US subsidies have completely
distorted the market, forcing local producers out of business, and forcing
countries to import products where before their agriculture had been virtually
self-sufficient. 'The first law of the free market in agriculture according to
President Bush can now be clearly stated: we subsidise, you liberalise' (Source:
Kevin Watkins, senior policy adviser at Oxfam).

European Hypocrisy

Both the US and the EU are hypocritical in respect of tariffs and subsidies.
Franz Fischler, the EU Agriculture Commissioner claimed in 2001 that in the
three years since 1998 each US farmer had received US$11,000 in direct payments,
almost three times as much as EU farmers who in the same period had received the
equivalent of US$4,500. A study by the Organization for Economic Co-operation
and Development (OECD) found that for every tonne of wheat produced, Canadian
farmers get US$15 in total subsidies, American farmers US$72 and Europeans
US$116. The EU spends nearly half its collective budget on the Common
Agricultural Policy (with most of it payed out in the form of subsidies).
'subsidies which ensure that third world farmers struggle while EU farmers
survive, are not the stuff of free trade'. (Source: Free Trade Is Bananas By
Patrick Barkham Guardian Unlimited March 4th 1999).

Is There Another Side Of The Coin?

The detail here shows the IMF and other financial institutions in something of a
bad light. In the interests of clarity, it could be argued that to home in on
these few countries is effectively to use only a subset of the data. So, we may
ask 'have the actions of the IMF and the World Bank benefitted any countries of
the 70 or so that have been helped since 1980?' The standard line given out is
that the IMF helped to expand global trade through out the 1950s and 1960s. More
recently, yes, there are some countries that appear to be happy with their IMF
arrangements. It is the view of this author that the failures listed, however,
here are sufficient to justify a complete overhaul of the system, where the IMF
and other similar institutions are scrapped.

Some have argued that in the case of the Brazilian and Russian currency
devaluations, for example, the IMF supported overvalued currencies (both in
1998) with large loans and sky-high interest rates. In both cases, some say, the
currencies collapsed anyway, and both countries were better off for the
devaluation (some say) pointing out that Russia's growth in 2000 was its highest
in two decades. One commentator argueing from this angle, for example, has been
Mark Weisbrot, co-director of the Center for Economic and Policy Research.
Conversely, however, it can be argued that were it not for the deadly
combination of vicious raids by foreign speculators and IMF 'conditionality',
neither country would have been forced to their knees economically (where
devaluation became an inevitability) anyway. In 1997 president Fidel Ramos of
the Phillipines went on record as saying that he considered his country an 'IMF
success'. Since the late 80s, however, such 'successes' appear to be the
exception and not the rule.

Conclusion

'The 1930s were the last era in which the international political and financial
elite sought advantage through control of the global economy. What economists
call "hot money" raced from one nation to the next throughout that era, leaving
a trail of competitive currency devaluations in its wake. Six decades ago, as
nation after nation was humbled by and strangled with the manipulations of the
financial world’s insiders, history saw fit to serve up Adolph Hitler'. (Source:
economist and Russian expert, Anne Williamson, in testimony to the Committee on
Banking and Financial Services, US House Of Representatives, 1999). Currently
(in July 2002) peaking out from the huge relative affluence and security of
typical 'developed' nations, we see that now too there are in fact many serious
warnings now being made about the risk of another global recession from which no
countries will be immune. There are those who say that in another era, the wild
speculations of the big finance houses such as Goldman Sachs had a lot to answer
for in relation to the Wall Street Crash of 1929. The same people point to the
global recession of the 1930s that followed, suggesting that in many ways this
led to the Second World War.

The examples above illustrate a spectacular failure of the IMF 'experiment', an
experiment that has inflicted serious damage upon the economies and peoples of
too many developing-world countries.

Noted economist William Easterly has pointed out that 'The IMF and World Bank
had, during the last decade, given 36 poor countries 10 or more loans each, with
conditions attached. The growth rate of income per person of the typical member
of this group was zero'.

Joseph Stiglitz , ex-chief economist of the World Bank has pointed out that
because the plans of the IMF and World Bank are devised in secrecy and driven by
an absolutist ideology, never open for discourse or dissent, they 'undermine
democracy'. Secondly (as he put it) 'they don't work'.

How convenient it would be (for apologists of the present system) if it could be
argued that incompetence was at the root of current problems, and that
essentially we should continue attempting to apply band-aids and tourniquets (or
not) to the internal haemorrhages of economies in the developing world that are
merely caused by some kind of innappropriate application of the essentially
faultless neo-liberal free-market-capitalist dogmas of Adam Smith, Milton
Friedman et al (that should remain essentially sacrosanct).

It is worth pointing out here that Adam Smith was writing in the 18th century.
His was an early analysis of such things as the way in which markets operate.
Yet today we find people still invoking Adam Smith's name, by way of
intellectual justification or rationale for the unregulated free market. And
often those doing the invoking make more money the less the markets in which
they operate are regulated. However how much clear academic evidence is there
that Adam Smith 'got it right'? How much clear academic evidence is there that
'free' and 'open' markets of the kind espoused by the IMF are in the best
interests of all concerned? Answer: almost none. It is important to remain
extremely sceptical of such claims. Far from being self-evidently true they
remain untested (or, what evidence there is actaually points in the other
direction).

But no, there's more than incompetence going on here. Seemingly it's both
incompetence and fraud, theft and deceit. (Anne Wilkinson, who is also quoted
above, has made it clear that in her opinion 'Michel Camdessus [the then IMF
head] and his deputy, Stanley Fisher, together are quite possibly the two most
incompetent people on the planet'. But there's more than incompetence going on
here -and perhaps it has suited certain interests to have 'socialists' like Mr
Camdessus as head of organisations like the IMF. [The current head of the IMF
-in 2002- is now Horst Kohler]). It is the conclusion of this author that the
pattern manifest in the examples quoted here is a pattern whereby the interests
of private capital groups have been effectively working 'under cover' within the
institutions of global finance, using the IMF as camouflage, as a trojan horse,
such that what's really going on is that some of the richest people on the face
of the planet are taking from the poorest. It's hard to find adjectives to match
the ugliness of this situation.

Ever since the earliest days of colonialism the developed world has been trying
to screw the developing world for all that it could lay its hands on. This
remains the case today. But whereas once the means by which such colonialism was
forced upon the poor and powerless of the world was with vast armies, now the
means are the institutions of world trade such as the IMF, the World Bank, the
World Trade Organisation, NAFTA, and so on. And where once recalcitrant
countries were threatened with military blockades, now they are threatened with
economic blockades. No bank in the world will loan to a country blacklisted by
the World Bank. 'Analysis' or even 'rumours' put out by the IMF or World Bank
(who claim to make objective assessments of a country's economy) invariably have
a huge effect of the way the 'global market' relates to that country. Thus even
IMF/World Bank inspired rumour can be used as a weapon, as a means of persuading
(for which read intimidating) a country into doing what they are told. As the
text above makes clear, the IMF, for instance, has been shown to be both willing
and able to use fraudulent statistics in pursuit of its political objectives.
'to disagree publicly with the IMF is viewed in the international community as
rejecting financial rectitude itself'. (Source: The IMF and The Asian Flu,
Jeffrey David Sachs, The American Prospect Magazine).

The rules of modern world trade, while being imposed by bodies such as The IMF,
the World Bank, The World Trade organisation, NAFTA, and so on, are defined
primarily by corporations, via corporate lobbying and other forms of corporate
political influence.

Corporations from the developed world, in involving themselves in operations
where there is unreasonably cheap labor, tax breaks and no environmental
protections are effectively removing unpaid costs (that should properly be
considered industrial production costs) and banking them as profits.

Since the 1980s, when UNICEF, UNDP and others began talking about 'adjustment
with a human face', there has been high-level rhetoric about IMF medicine being
administered with "social safety nets"; however, since the Asian regional
financial crisis first erupted (in Thailand in July 1997) there has been a
relatively coordinated anti-IMF anti-global-speculative-capital movement. The
IMF and the World Bank are increasingly coming to be seen more as 'the problem'
rather than 'the solution'.

The impoverished world's main requirements are the right to control their own
land, the right to industrial capital, and the right to grow their own food.
Given those requirements, people will not generally go hungry. However, what we
see now is an increasing monopolization of land and the means of production in
the developing world by interests from the developed world, where wealth is
effectively diverted to those who are already well-off. Far from the rich
countries subsidising the poor countries, the situation is in fact very much the
other way around. The rich countries are bleeding the poorest countries on earth
dry. For many in the developing world, the result is more and yet more
suffering. As disullusioned Russian economist Boris Kagarlitsky put it 'there is
one thing we need from the West now -for it to leave us in peace'.

The issue of the international conflict and anti-Americanism brought about
directly by the catalogue of disasters listed above should be sufficient reasons
alone to force a rethink. (In Russia, Argentina, Mexico, South Korea and
elsewhere massive anger and mistrust at the rich countries of the world and
their financial organisations, where probably the majority of people blame the
IMF more than any other factor for their economic woes, seeing their recent
crises as engineered and 'malicious').

This is how another expert characterises the scam: 'Sell assistance programs on
an alleged "free market" and "humanitarian" basis by awarding government grants
to those academics who can be relied upon to supply the intellectual camouflage
politicians and journalists then repeat ad nauseum to a distracted public, move
the IMF and the World Bank to target, induce target to raise taxes, fine tune
target’s central banking operations, encourage borrowing and debt creation
through the target’s government and its national banks, allowing IMF lending to
pay yields if necessary; induce target to privatize national property while
building a flimsy, artificial "infrastructure" for an equities market good
enough to attract high risk foreign investors. Once the target nation’s
government flounders, step back and watch speculators assert discipline through
a run on the target’s currency. The subsequent devaluation delivers, in turn, a
flood of cheap imports to American manufacturers and producers. The finishing
touch on the swindle is to confiscate more money from G-7 citizens (the lion’s
share from Americans) to pay for what is said to be an "essential" IMF bailout;
thereby allowing Uncle Sam’s IMF minions to entrench themselves more deeply in
the target’s government. Taxes are raised, the population struggles beneath
indebtedness, government funding demands and the inevitable domestic inflation a
devaluation delivers. Western neo-colonialists then bully the target over its
rapidly compounding debt in order to extract yet more property. Once successful,
the world’s insiders then turn around and deliver cheap shares from
privatizations and initial public offerings into the maw of US mutual funds and
portfolio investors. US taxpayers get hit coming (foreign aid) and going
(bailouts) and innocent foreigners’ property is finagled away either from, or on
account of, inattentive and corrupt leaderships. The big winners are the world’s
increasingly corrupt and cozy governing class, international bureaucracies and
global banks. What US policy has wrought across much of the post-cold war
landscape is a moral, political and financial abomination based on fraud, theft
and deceit'. (Source economist and Russian expert, Anne Williamson, in testimony
to the Committee on Banking and Financial Services, US House Of Representatives,
1999).

Here's how another analyst has described speculative attacks on the currencies
of developing countries (and the related bail-outs by the IMF, etc): 'by now the
ploy should be known to schoolboys. The government whose currency is attacked
draws on foreign loans arranged by the IMF, and turns over the foreign currency
to buy back its own paper. The "assisted" country ends up with the foreign debt
to the amount of the "aid" while the speculators pocket the proceeds of the
loans, and move on to the next replay of the scam'. (Source: Brazil's IMF
Sponsored Economic Disaster: The Speculative Onslaught From East Asia And Russia
To Latin America by Michel Chossudovsky, Professor of Economics, University of
Ottawa, who also is author of The Globalisation Of Poverty, Impacts Of IMF And
World Bank Reforms).

One final point to bear in mind is that moving agricultural products from one
country to another tends to be extremely wasteful in terms of resources, when
looked at in absolute terms. It requires US$0.4 worth of (often imported) oil to
produce and transport US$1.0 worth of agricultural exports, and the production
and distribution of one can of sweet corn containing 270 calories consumes 2,790
calories of energy. Arrangements that deliver the greatest good to the greatest
number of people (and the environment) must surely be very different to this. It
is the view of this author that fiddling with the current system would not solve
these problems. The 'system' needs replacing root and branch: it needs replacing
with a system that truly is in the best interests of everyone.

Remedies?

historically the IMF has never been accountable to the world at large. This is
not acceptable. Currently it fails in terms of its original aims, seeming to
have been hijacked by greedy private interests.

it needs to be said, loudly and clearly, that this kind of rapacious
free-market capitalism is not in everybody's long term interests.

it needs to be said, loudly and clearly, that 'third world debt', as currently
manifest, is an obscenity.

the IMF should be scrapped. On the single issue of its original mandate to
'increase stability in international markets' it has failed spectacularly in
recent years (and it should be scrapped for a range of other reasons too).

a return to Keynesian concepts such as a world clearing union (or even going
back to a 'gold standard').

agreed reduction of the standard 50% rate for crop rents charged by propertied
oligarchs in many countries of the world.

the fostering of a culture of social responsibility in Wall Street.

the fostering of a culture of social responsibility in private financial
institutions such as Goldman Sachs, Citigroup, Chase Manhattan, etc.

the fostering of a culture of social responsibility in the US treasury.

the fostering of a culture of social responsibility in US foreign policy.

consideration given to finding ways to ensure that Goldman Sachs partners, IMF
directors, et cetera, live for a single day in somewhere like the Duravi slums,
Bombay (for instance) with no way out, no money and no possessions. (What's one
day? Millions of people spend their entire lives in such utterly, utterly
desperate circumstances). OK this is a bit tongue in cheek. For most Westerners,
real experience of such poverty, even that gained from a short visit, tends to
be a life-changing shock. Such misery is perhaps hard to imagine until it is
right in front of your eyes...

make it generally more difficult for politicians and investment bankers
worldwide to i) promote deficits ii) force taxpayers to redeem government debts.

mechanisms put in place to reduce the extent to which international financial
institutions become the instruments of foreign policy of the more powerful
'members'

make absolutely sure that no-one who works for any of the international
financial organisations such as the IMF, the World Bank, and the World trade
Organisation have any personal financial interest in anything connected with
their work (which would probably mean imposing restrictions similar to those
designed to stop 'insider dealing' on all concerned). Such restrictions must
then be properly policed.

completely close the revolving door between the IMF (and any other similar
body) the US administration and the big international finance houses.

any organisation that replaces the IMF should use its resources to help fund
health and literacy efforts in the developing world.

any organisation that replaces the IMF should be both as transparent and
democratically accountable as possible.

write to your political representatives to i) scrap the IMF ii) drop the debt
COMPLETELY iii) set up new humane international finance institutions that really
are interested in economic development and social justice for all parties.

get involved in some kind of effective action...

developing nations should collectively and simultaneously say 'sorry, none of
us intend to pay back these loans' (ever).

Copy this page! Put it on your website! Get everyone you know to read it! There
is emphatically no copyright on this information. Please distribute it.

In recent years dialogue about reforming world financial institutions and
attempts at reform have been gathering more and more momentum. Some of this
momentum has come from groups such as Unicef, from a wide range of
'anti-globalisation' organisations, and increasingly from dissenting voices
within the G24, the group of 24 developed nations at the core of the IMF itself.
These views have so far been largely ignored by both the IMF management and the
US government. In 2001, the US government did commission a report (the Meltzer
Commission Report) to look into the conduct of the IMF and World Bank in
relation to the South Asian financial crisis of 1997-98, but their anodyne
recommendations ('IMF be limited to only short term lending', 'countries should
pre-qualify for IMF assistance' and 'penalty interest rate borrowing from the
IMF') are not commensurate with the scale of the problem. The IMF should be
scrapped.

What goes around comes around.

If you are a finance minister who has not yet had dealings with the IMF, it
appears that the best thing you could do when they come to call is tell them to
take a running jump.