At its inception in 1945, the IMF was disputed by two rival tendencies. The British group, led by the brilliant economist J Maynard Keynes, envisaged an organisation which would act to regulate capital flow world-wide in order to cap national deficits, and so avoid the employment crises and economic collapses that had convulsed the world economy of the 30s. In contrast, the US delegation wanted to see the IMF as something akin to a giant central bank; as a business interest in its own right, and one which would lend large sums to flagging economies - with the proviso that such cash injections would set the stage for economic rejuvenation, and future loan repayments therein.
The difference in ideas about how the IMF was supposed to function would have profound ramifications. If the Keynesian model had prevailed the IMF would have retained a level of separation from the world economy; attempting to manage its economic components from the outside, so to say, in order to soften extreme forms of national deficit imbalance. In the event it was the American vision which triumphed. Rather than achieve distance from the various competing economic interests - by making its central focus the repayment of loans, the IMF itself became yet another local interest locked into the global economy and the cycle of profit.
As the German philosopher Hegel might have observed - the universal moment was lost in particularity. Once the IMF was particularised in this way, the economists and strategists whom it employed inevitably began to frame their analyses in terms of what was beneficial for the organisation itself, its employees and shareholders, rather than the world economy as a whole. Its specific structural position increasingly brought it into contradiction with its mission statement ‘to reduce poverty around the world.’ The IMF would offer financial aid for ‘underdeveloped’ countries who found themselves desperately in need of emergency loans, for sure. But these loans carried certain stipulations designed to open up the economy in question to foreign investment as part of any repayment programme. The consequences for the populations of these countries would nearly always prove dire.
The journalist John Pilger has described the procedure as follows – ‘Industry would be deregulated and sold off; public services, such as health care and education, would be diminished. Subsistence agriculture […] would be converted to the production of foreign exchange-earning crops.’ In many cases the conversion from traditional crops to cash crops, and the selling off of state stockpiles, meant that a key safety valve against famine was removed. In the case of Malawi in 2002, for instance, the results of famine were exacerbated because the IMF had allegedly ‘recommended’ the government sell off its grain reserves. In addition the government’s ability to respond to the crisis was hampered by the heavy debt repayments it was embroiled in. For this, hundreds of thousands starved.
The representatives, of the IMF, of course, do not articulate their role in this way. They insist that deals of ‘financial support’ between the organisation and the cliental states are the products of free negotiation on both sides. In a certain sense they are correct. Any given country has the formal right not to resort to the IMF in times of crisis just as someone living in on the breadline need not approach a loan-shark. But desperation, for any of us, will always prove a powerful incentive. Struggling economies do resort to IMF ‘support’ and, as the Nobel Prize winning economist Joseph Stiglitz points out, the respective power differences in the relationship mean the IMF is able to dictate its terms from the very beginning – ‘these are one-sided negotiations in which all the power is in the hands of the IMF, largely because many countries seeking IMF help are in desperate need of funds […] a public announcement by the IMF that negotiations had broken off would send a highly negative signal to the markets’.
Where does the power behind the IMF lie? Its largest shareholder is the US with a quota of 68 billion. As with any company, capital subscription as opposed to simple membership is what determines influence here. Consequently the US carries what effectively amounts to a veto over the organisation’s decision making process, converting it into a proxy of its own power. And so the IMF, in effect, operates as something more than simply another business interest on the global stage. By bringing the right combination of threat and finance to bear on weaker economies, the IMF is able to oversee their reconstruction according to a pro-Washington paradigm.
When the IMF closes an 'agreement', Stiglitz finds himself wondering - is this so very different from ‘the opening up of Japan with Admiral Perry’s gunboat diplomacy or the end of the Opium Wars or the surrender of the maharajas in India?’ Pilger too perceives the hidden hand of colonialism behind the activities of the IMF, only he regards the process as often more subtly subversive, for it often accomplishes ‘the surrender of sovereignty, and without a gunboat in sight.’ The allusion here is to the lack of military intervention on the part of the IMF itself. For much of the time the IMF is able to rely on the military strength of the regimes it backs, as in the case of its support for the hated apartheid state in South Africa which was prepared to pulverize its indigenous population into cooperation, and which the IMF kindly furnished with more money than it gave to the rest of the continent combined.
The great Latin American historian Eduardo Galeano reminds us that when we look at capitalism it is as if we perceive it through a looking glass which generates an upside-down effect. The IMF does not exploit and reduce to dependence once sovereign economies, you see – no, it simply seeks to ‘restructure’ them. In the process, it does not propagate the divisions of wealth and power between ‘underdeveloped’ nations and those of the first world – no, it merely helps ‘foster global monetary cooperation.’ And it certainly does not reduce vast numbers of people around the globe to destitution – rather it only hopes to encourage ‘sustainable economic growth.’
And so when the head of the IMF appears before us with dressed immaculately in a serious business suit, and wearing the grave expression of someone who is dispassionately concerned with the fate of the world economy as a whole, we must remember that she too is appearing through the looking glass. And when that same figure tells us, with consummate and oily professionalism, that the Greek population deserve to suffer, and our compassion should really rest with the impoverished children of Africa, we might take a few moments to reflect on just what kind of an influence her organisation has had on that continent.
In the parks, halls and public spaces around Kings Cross
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