IMF ON TRIAL (a courtroom drama) The story you are about to read is fictional, but it deals with an all-too-real institution. Names and faces have been changed to protect the innocent, but all statistics and arguments are drawn from the world around us. The scene: a courtroom. JUDGE (banging gavel): We are here today to hear a very important case: the World Bank and the International Monetary Fund vs. the People of the Global South. The WB and IMF stand accused of causing poverty, environmental destruction, inequality and undemocratic leadership in less developed countries. We will now hear opening statements from the attorneys for the prosecution and defense. (The prosecution takes the stand)  PROSECUTION: Thank you, your honor. Ladies and gentlemen, many of us have seen TV images of starving children, slum residents, and devastated rainforests in poor countries. We see these problems as tragic but outside our own control, like acts of God. It never occurs to us that the starvation we're watching is a direct result of programs that were deliberately imposed on poor countries - funded by our tax dollars. But the American government is one of the key funders of the World Bank and IMF, which trap poor countries in cycles of debt and then impose harsh conditions on them in return for more loans. These conditions lead to hunger, disease, and inequality.
(The defense takes the stand) DEFENSE: Ladies and gentlemen, these allegations are made by well-meaning but uninformed critics. The IMF and WB are run by expert economists who understand the complexities of global development. Their programs may be tough in the short run, but they are necessary to get poor countries out of debt and build strong economies.
(The first witness, BOB JONES, is sworn in.) DEFENSE: Please state your nationality and occupation. JONES: I'm American, and I'm an economist with the World Bank. DEFENSE: What do the World Bank and the IMF do? JONES: Both are organizations made up of many national governments, like the United Nations. Both were founded in 1944 - the IMF to regulate currency exchange rates, and the WB to give out loans for development projects in war-damaged Europe and in poor countries. They're financed by member governments. Throughout the '60s and '70s, the WB loaned money to poor countries for specific projects, like dams and power plants. By the late '70s, many countries were heavily in debt to us and to private banks. When the worldwide recession of the early '80s hit, these countries couldn't make their scheduled payments. So the IMF and WB started giving out loans for structural adjustment. The IMF still deals with currency rates, and the WB still gives out loans for development projects. But the two institutions have been moving closer together in the past 20 years, since both now give out structural adjustment loans – the IMF primarily in Latin America, and the World Bank primarily in Africa. DEFENSE: What is structural adjustment (SA)? JONES: It's a broad program that reorients a country's whole economy to help it meet debt payments. The country must agree to certain conditions designed to bring in foreign currency and cut government spending. To save money, the government must drastically reduce spending. To generate revenue, it has to sell off publicly owned enterprises. To bring foreign money into the country, it must encourage production of export crops and products, instead of goods for local consumption. And to make the country attractive to foreign investors, it must eliminate restrictions on imports, protections for local industries, tariffs, and regulations. We require countries to agree to SA packages in order to qualify for emergency loans and bailouts when they can't pay their debts. DEFENSE: Does structural adjustment work? JONES: Oh yes. These reforms are necessary to promote economic growth and competition. The Chilean government implemented sweeping market reforms in the '80s, and as a result Chile's economy is very strong: steady growth, increases in exports, rising foreign investment, and low inflation. DEFENSE: Thank you. (Next witness, PILAR MENENDEZ, is sworn in.) PROSECUTION: Please state your nationality and occupation. MENENDEZ: I'm a journalist in Santiago, Chile. PROSECUTION: What's your experience with the IMF and WB? MENENDEZ: My country adopted an IMF structural adjustment program in 1982. PROSECUTION: How did structural adjustment affect Chile? MENENDEZ: Well, we did see some economic growth. But the benefits of that growth went almost entirely to a few rich people. Conditions for ordinary workers got much worse during the '80s, after SA was imposed. Real wages for workers declined 40% during the '80s. This was part of a deliberate strategy to generate revenue. The IMF wanted us to export more goods and import fewer. So it made "wage restraint" a condition of its 1985 loan to us. This meant that the Chilean people couldn't afford to buy as many goods, and more were left over to export. Also, education and health care were increasingly privatized under SA, so poor people can no longer afford to send their children to school or to the doctor. SA has also damaged our environment. The government has sold off huge tracts of forest to investors to help meet our debt payments. This has caused soil erosion, damaged ecosystems, and driven indigenous people off their native lands. PROSECUTION: But did SA succeed in reducing Chile's foreign debt? MENENDEZ: No. Between 1976 and 1990, despite all these measures, our external debt grew from $4.8 billion to $19 billion. We are trapped in a cycle of debt: we keep taking out new loans to pay the interest on our old loans, so we get deeper and deeper in debt. PROSECUTION: But you took out these loans and agreed to SA voluntarily. Shouldn't you have to follow through? MENENDEZ: Chile was ruled by a brutal military dictatorship at the time that many loans were taken out and SA was adopted. We can't be held responsible for the Pinochet government - it didn't represent us. If someone steals your credit card and goes on a shopping spree, you aren't expected to pay the bill. But the IMF still makes us pay for the irresponsibility of the people who stole our government from us. PROSECUTION: Is SA working better in other countries? MENENDEZ: No. All around the world, people are experiencing poverty and hardship because of IMF/WB-imposed spending cuts. In Africa, health spending in countries under SA programs declined 50% during the '80s. Education spending declined 25%. The United Nations estimates that six million children under five die each year because of IMF and WB programs. Poor people go hungry because food subsidies are eliminated and wages reduced. And all around the world, small local farmers and craftspeople are unable to earn a living because mass-produced Western imports have flooded national economies. Emerging local industries never get off the ground because governments no longer offer them protection or subsidies. This means that former colonies are trapped in their old economic role - selling cheap crops and raw materials to Northern societies. When countries concentrate on selling one or two crops to the North - instead of producing a variety of goods to meet their own needs - they become vulnerable to fluctuating world markets. A country's whole economy may crash if world sugar or coffee prices go down. SA rarely succeeds in paying off debts. Sub-Saharan Africa's total debt has increased 400% since the early '80s - even though African countries spend four times as much on interest payments as on health care. PROSECUTION: Thank you. (next witness, HUBERT J. WORTHINGTON IV, is sworn in.) DEFENSE: Please state your nationality and occupation. WORTHINGTON: I'm a red-blooded American and CEO of Worthington Banking and Manufacturing Conglomerate. DEFENSE: What's your opinion of the IMF and WB? WORTHINGTON: I think they're doing great work. DEFENSE: How would you respond to Ms. Menendez's suggestion that they're failing? WORTHINGTON: Well, that depends on what you understand the IMF and WB's purpose to be. They're working quite well for my purposes. They make poor countries more suitable for investors like me. SA drives down wages and taxes, and gets rid of pesky labor and environmental laws, so it makes our overseas factories much cheaper to operate. It eliminates tariffs, restrictions on imports, and support for local producers - so it opens up new markets for our products. It focuses countries' economies on producing exports - which we, the American companies, can sell for generous profits to American consumers. And it deregulates investment, so we can speculate to our hearts' content. After all, our tax dollars fund the IMF and WB - so we expect them to act in our interests. DEFENSE: So the IMF and WB benefit American business? WORTHINGTON: More than you can imagine! Since the 1980s, when SA was created, there's been a massive transfer of wealth in the form of debt payments from the third world to the US and Europe - far more than we spend on aid to poor countries. Between 1982 and 1990, the Global South received $927 billion in aid, grants, trade credits, private investment, and loans. But it paid out $1.3 trillion in interest and principal – a good bit of that to American banks! Plus, the IMF and WB transfer the risk of investing from us onto the government. Normally, when we make a loan, we assume a risk - if the borrower can't pay us back, we lose the money. But when we make risky loans to unstable economies, we don't have to worry - we know that the government will give the debtors loans to pay us back. That way, it's the taxpayers who have to pay for our faulty investment! DEFENSE: Thank you. (next witness, MUHAMMAD SINAI, is sworn in.) PROSECUTION: Please state your nationality and occupation. SINAI: I work for the Grameen Bank, a community development bank in Bangladesh. PROSECUTION: What do you think about the IMF and WB? SINAI: I think they have the wrong ideas about development. I believe that poor people and countries must control their own economic progress. You can't just impose these formulas from outside. Small-scale, local projects are more likely to benefit poor people, preserve natural resources, and operate democratically. My bank gives out small loans to villagers to run their own small businesses and and local development programs, and it involves the entire community in the process. PROSECUTION: I can see that this kind of development might alleviate poverty, but how would it help poor countries pay back their debts? SINAI: It won't. But I don't believe we should have to pay them back. Most of the governments that took out the loans were undemocratic. In any case, they needed the loans mainly because their internal economies had been ruined by years of European imperialism. And whatever the justification, the loans just aren't going to get paid off - we don't have the money. We're only getting deeper in debt under the IMF and WB’s programs. There's an international movement of religious people called Jubilee 2000. Its members want to declare 2000 a jubilee year, which means that old debts are forgiven. This would allow poor people to put their scarce resources into education, health care and economic development. PROSECUTION: But wouldn't that cause problems in the global economy? SINAI: Well, private banks took a risk in loaning money to these governments in the first place. They can afford to accept the consequences. And our public debt has already been repaid many times over, because we’ve had to take out so many extra loans to pay the interest on our original ones. Mr. Worthington mentioned that the Global South paid out $3.73 billion more than it received during the ‘80s – but the South was 61% deeper in debt in 1990 than in 1982. There’s no reason to believe this trend will ever reverse, since the IMF and WB’s policies stop us from developing strong industrial economies that would put us on a more equal footing with the North. So we’re really not asking Northern taxpayers for a bailout. We just want them to stop skimming money off the world’s poorest communities. (The judge gathers his papers) JUDGE: Thank you all. I now declare a verdict of not guilty. PROSECUTION: What? Don't we get a jury of our peers? JUDGE: I'm afraid not. That's not how the IMF and WB work. Member countries get a number of votes proportional to the amount of money they contribute to the organizations. Rich industrial countries like the US and Japan are the main donors, so they make the rules. The poor countries themselves have very little say. And officials are appointed by member governments, not directly elected. So citizens - even in the US - can't directly inluence the IMF and WB's policies. I see no reason why our trial should use a different system. The US government made the largest cash contribution to me before this trial, so I've handed down the verdict it requested. PROSECUTION: You mean there's nothing we can do? Even if we prove that we're right? JUDGE: Within the structure of the system, there's not a whole lot. PROSECUTION: We just have to accept global poverty, then? I can't see any way out of it. MENENDEZ: Wait a minute! Why do we have to do what that man says? Why don't we shut down the IMF and WB ourselves? SINAI: There are billions of people in the world that are hurt by these policies, and only a few people making them. We could just refuse to obey them, refuse to let them run their organizations. PROSECUTION: Well . . . I guess we could! OMNISCIENT NARRATOR: And that's exactly what thousands of activists from all over the world are planning to do. On April 16 and 17, the IMF and WB are having their annual meeting in Washington - or so they think. Environmentalists, human rights activists, religious people, and students have other ideas. They're planning a massive nonviolent action to shut down these undemocratic institutions. Come join the resistance! Sources: 50 Years is Enough, ed. Kevin Danaher, and The Case Against the Global Economy, ed. Jerry Mander and Edward Goldsmith. Also factsheets available at www.50years.org.  |