International Organizations Content
Support of military dictatorships
The role of the Bretton Woods institutions has been controversial since the late Cold War period, due to claims that the IMF policy makers supported anti-communist military dictatorships friendly to American and European corporations. Critics also claim that the IMF is generally apathetic or hostile to their views of human rights, and labor rights. The controversy has helped spark the Anti-globalization movement. Arguments in favor of the IMF say that economic stability is a precursor to democracy; however, critics highlight various examples in which democratized countries fell after receiving IMF loans.
In the 1960s, the IMF and the World Bank supported the government of Brazil’s military dictator Castello Branco with tens of millions of dollars of loans and credit that were denied to previous democratically elected governments.
Countries that were or are under a military dictatorship whilst being members of the IMF/World Bank (support from various sources in $Billion):
|Support of military dictatorships|
|Country indebted to IMF/World Bank||Dictator||In power||Debt %[clarification needed] at start of dictatorship||Debt % at end of dictatorship||Country debts in 1996||Dictator debts generated $ billion||Dictator generated debt % of total debt|
|Argentina||Military dictatorship||1976 – 1983||9.3||48.9||93.8||39.6||42%|
|Bolivia||Military dictatorship||1962 – 1980||0||2.7||5.2||2.7||52%|
|Brazil||Military dictatorship||1964 – 1985||5.1||105.1||179||100||56%|
|Chile||Augusto Pinochet||1973 – 1989||5.2||18||27.4||12.8||47%|
|El Salvador||Military dictatorship||1979 – 1994||0.9||2.2||2.2||1.3||59%|
|Ethiopia||Mengistu Haile Mariam||1977 – 1991||0.5||4.2||10||3.7||37%|
|Haiti||Jean-Claude Duvalier||1971 – 1986||0||0.7||0.9||0.7||78%|
|Indonesia||Suharto||1967 – 1998||3||129||129||126||98%|
|Kenya||Moi||1979 – 2002||2.7||6.9||6.9||4.2||61%|
|Liberia||Doe||1979 – 1990||0.6||1.9||2.1||1.3||62%|
|Malawi||Banda||1964 – 1994||0.1||2||2.3||1.9||83%|
|Nigeria||Buhari/Babangida/Abacha||1984 – 1998||17.8||31.4||31.4||13.6||43%|
|Pakistan||Zia-ul Haq||1977 – 1988||7.6||17|
|Pakistan||Pervez Musharraf||1999 – 2008|
|Paraguay||Stroessner||1954 – 1989||0.1||2.4||2.1||2.3||96%|
|Philippines||Marcos||1965 – 1986||1.5||28.3||41.2||26.8||65%|
|Somalia||Siad Barre||1969 – 1991||0||2.4||2.6||2.4||92%|
|Sudan||Nimeiry/al-Mahdi||1969 – present||0.3||17||17||16.7||98%|
|Thailand||Military dictatorship||1950 – 1983||0||13.9||90.8||13.9||15%|
|Zaire/Democratic Republic of the Congo||Mobutu||1965 – 1997||0.3||12.8||12.8||12.5||98%|
Notes: Debt at takeover by dictatorship; earliest data published by the World Bank is for 1970. Debt at end of dictatorship (or 1996, most recent date for World Bank data).
Two criticisms from economists have been that financial aid is always bound to so-called “Conditionalities”, including Structural Adjustment Programs (SAP). It is claimed that conditionalities (economic performance targets established as a precondition for IMF loans) retard social stability and hence inhibit the stated goals of the IMF, while Structural Adjustment Programs lead to an increase in poverty in recipient countries.
The IMF sometimes advocates “austerity programmes,” increasing taxes even when the economy is weak, in order to generate government revenue and bring budgets closer to a balance, thus reducing budget deficits. Countries are often advised to lower their corporate tax rate. These policies were criticized by Joseph E. Stiglitz, former chief economist and Senior Vice President at the World Bank, in his book Globalization and Its Discontents. He argued that by converting to a more Monetarist approach, the fund no longer had a valid purpose, as it was designed to provide funds for countries to carry out Keynesian reflations, and that the IMF “was not participating in a conspiracy, but it was reflecting the interests and ideology of the Western financial community”.
Argentina, which had been considered by the IMF to be a model country in its compliance to policy proposals by the Bretton Woods institutions, experienced a catastrophic economic crisis in 2001, which some believe to have been caused by IMF-induced budget restrictions — which undercut the government’s ability to sustain national infrastructure even in crucial areas such as health, education, and security — and privatization of strategically vital national Others attribute the crisis to Argentina’s misdesigned fiscal federalism, which caused subnational spending to increase rapidly. The crisis added to widespread hatred of this institution in Argentina and other South American countries, with many blaming the IMF for the region’s economic problems. The current — as of early 2006 — trend towards moderate left-wing governments in the region and a growing concern with the development of a regional economic policy largely independent of big business pressures has been ascribed to this crisis.
Another example of where IMF Structural Adjustment Programmes aggravated the problem was in Kenya. Before the IMF got involved in the country, the Kenyan central bank oversaw all currency movements in and out of the country. The IMF mandated that the Kenyan central bank had to allow easier currency movement. However, the adjustment resulted in very little foreign investment, but allowed Kamlesh Manusuklal Damji Pattni, with the help of corrupt government officials, to siphon off billions of Kenyan shillings in what came to be known as the Goldenberg scandal, leaving the country worse off than it was before the IMF reforms were implemented. In an interview, the former Romanian Prime Minister Tăriceanu stated that “Since 2005, IMF is constantly making mistakes when it appreciates the country’s economic performances”.
Overall, the IMF success record is perceived as limited. While it was created to help stabilize the global economy, since 1980 critics claim over 100 countries (or reputedly most of the Fund’s membership) have experienced a banking collapse that they claim have reduced GDP by four percent or more, far more than at any time in Post-Depression history. The considerable delay in the IMF’s response to any crisis, and the fact that it tends to only respond to them (or even create them) rather than prevent them, has led many economists to argue for reform. In 2006, an IMF reform agenda called the Medium Term Strategy was widely endorsed by the institution’s member countries. The agenda includes changes in IMF governance to enhance the role of developing countries in the institution’s decision-making process and steps to deepen the effectiveness of its core mandate, which is known as economic surveillance or helping member countries adopt macroeconomic policies that will sustain global growth and reduce poverty. On June 15, 2007, the Executive Board of the IMF adopted the 2007 Decision on Bilateral Surveillance, a landmark measure that replaced a 30-year-old decision of the Fund’s member countries on how the IMF should analyse economic outcomes at the country level.
Impact on access to food
A number of civil society organizations have criticized the IMF’s policies for their impact on people’s access to food, particularly in developing countries. In October 2008, former US President Bill Clinton joined this chorus in a speech to the United Nations World Food Day, which criticized the World Bank and IMF for their policies on food and agriculture:
We need the World Bank, the IMF, all the big foundations, and all the governments to admit that, for 30 years, we all blew it, including me when I was President. We were wrong to believe that food was like some other product in international trade, and we all have to go back to a more responsible and sustainable form of agriculture.
—Former US President Bill Clinton, Speech at United Nations World Food Day, October 16, 2008.
Impact on public health
In 2008, a study by analysts from Cambridge and Yale universities published on the open-access Public Library of Science concluded that strict conditions on the international loans by the IMF resulted in thousands of deaths in Eastern Europe by tuberculosis as public health care had to be weakened. In the 21 countries to which the IMF had given loans, tuberculosis deaths rose by 16.6%.
In 2009, a book by Rick Rowden titled, The Deadly Ideas of Neoliberalism: How the IMF has Undermined Public Health and the Fight Against Aids, claimed that the IMF’s monetarist approach towards prioritizing price stability (low inflation) and fiscal restraint (low budget deficits) was unnecessarily restrictive and has prevented developing countries from being able to scale up long-term public investment as a percent of GDP in the underlying public health infrastructure. The book claimed the consequences have been chronically underfunded public health systems, leading to dilapidated health infrastructure, inadequate numbers of health personnel, and demoralizing working conditions that have fueled the “push factors” driving the brain drain of nurses migrating from poor countries to rich ones, all of which has undermined public health systems and the fight against HIV/AIDS in developing countries.
Impact on environment
IMF policies have been repeatedly criticized for making it difficult for indebted countries to avoid ecosystem-damaging projects that generate cash flow, in particular oil, coal and forest-destroying lumber and agriculture projects. Ecuador for example had to defy IMF advice repeatedly in order to pursue the protection of its rain forests, though paradoxically this need was cited in IMF argument to support that country. The IMF acknowledged this paradox in a March 2010 staff position report which proposed the IMF Green Fund, a mechanism to issue Special Drawing Rights directly to pay for climate harm prevention and potentially other ecological protection as pursued generally by other environmental finance.
While the response to these moves was generally positive possibly because ecological protection and energy and infrastructure transformation are more politically neutral than pressures to change social policy. Some experts voiced concern that the IMF was not representative, and that the IMF proposals to generate only 200 billion dollars/year by 2020 with the SDRs as seed funds, did not go far enough to undo the general incentive to pursue destructive projects inherent in the world commodity trading and banking systems – criticisms often levelled at the WTO and large global banking institutions.
In the context of the May 2010 European banking crisis, some observers also noted that Spain and California, two troubled economies within Europe and the US respectively, and also Germany, the primary and politically most fragile supporter of a Euro currency bailout would benefit from IMF recognition of their leadership in green technology, and directly from Green-Fund generated demand for their exports, which might also improve their credit standing with international bankers.
Criticism from free-market advocates
Typically the IMF and its supporters advocate a monetarist approach. As such, adherents of supply-side economics generally find themselves in open disagreement with the IMF. The IMF frequently advocates currency devaluation, criticized by proponents of supply-side economics as inflationary. Secondly they link higher taxes under “austerity programmes” with economic contraction.
Currency devaluation is recommended by the IMF to the governments of poor nations with struggling economies. Some economists claim these IMF policies are destructive to economic prosperity.
Complaints have also been directed toward the International Monetary Fund gold reserve being undervalued. At its inception in 1945, the IMF pegged gold at US$35 per Troy ounce of gold. In 1973, the administration of US President Richard Nixon lifted the fixed asset value of gold in favor of a world market price. This need to lift the fixed asset value of gold had largely come about because Petrodollars outside the United States were worth more than could be backed by the gold at Fort Knox under the fixed exchange rate system. Following this, the fixed exchange rates of currencies tied to gold were switched to a floating rate, also based on market price and exchange. The fixed rate system had only served to limit the nominal amount of assistance the organization could provide to debt-ridden countries.
Historically the IMF’s managing director has been European and the president of the World Bank has been from the United States. However, this standard is increasingly being questioned and competition for these two posts may soon open up to include other qualified candidates from any part of the world. Executive Directors, who confirm the managing director, are voted in by Finance Ministers from countries they represent. The First Deputy Managing Director of the IMF, the second-in-command, has traditionally been (and is today) an American.
The IMF is for the most part controlled by the major Western Powers, with voting rights on the Executive board based on a quota derived from the relative size of a country in the global economy. Critics claim that the board rarely votes and passes issues contradicting the will of the US or Europeans, which combined represent the largest bloc of shareholders in the Fund. On the other hand, Executive Directors that represent emerging and developing countries have many times strongly defended the group of nations in their constituency. Alexandre Kafka, who represented several Latin American countries for 32 years as Executive Director (including 21 as the dean of the Board, is a prime example.
Rodrigo Rato became the ninth Managing Director of the IMF on June 7, 2004 and resigned his post at the end of October 2007.
EU ministers agreed on the candidacy of Dominique Strauss-Kahn as managing director of the IMF at the Economic and Financial Affairs Council meeting in Brussels on July 10, 2007. On September 28, 2007, the International Monetary Fund’s 24 executive directors elected Mr. Strauss-Kahn as new managing director, with broad support including from the United States and the 27-nation European Union. Strauss-Kahn succeeded Spain’s Rodrigo de Rato, who retired on October 31, 2007.The only other nominee was Josef Tošovský, a late candidate proposed by Russia. Strauss-Kahn said: “I am determined to pursue without delay the reforms needed for the IMF to make financial stability serve the international community, while fostering growth and employment.”
|May 6, 1946 – May 5, 1951||Camille Gutt||Belgium|
|August 3, 1951 – October 3, 1956||Ivar Rooth||Sweden|
|November 21, 1956 – May 5, 1963||Per Jacobsson||Sweden|
|September 1, 1963 – August 31, 1973||Pierre-Paul Schweitzer||France|
|September 1, 1973 – June 16, 1978||Johannes Witteveen||Netherlands|
|June 17, 1978 – January 15, 1987||Jacques de Larosière||France|
|January 16, 1987 – February 14, 2000||Michel Camdessus||France|
|May 1, 2000 – March 4, 2004||Horst Köhler||Germany|
|June 7, 2004 – October 31, 2007||Rodrigo Rato||Spain|
|November 1, 2007 – present||Dominique Strauss-Kahn||France|
In the media
Life and Debt, a documentary film, deals with the IMF’s policies’ influence on Jamaica and its economy from a critical point of view.
The Debt of Dictators explores the lending of billions of dollars by the IMF, World Bank multinational banks and other international financial institutions to brutal dictators throughout the world. (see IMF/World Bank support of military dictatorships)