After its heyday in the wake of the global liquidity crunch in the later seventies and eighties, the International Monetary Fund appears to be adrift. Unlike its interventionist role during the Asian financial crisis of 1997, the even larger one in the western economies during 2007-2008 basically saw it once again facilitating recovery, rather than imposing controls.
The IMF, along with its “twin sister”, the World Bank, was created in the waning days of WWII as the US elbowed out Britain as the pre-eminent economic power. Whatever might have been their stated mission, their operations in the seven decades since have merely worked to facilitate the perpetuation of the exploitative relationships inherent with those imperial relations. Poor countries are basically underpaid for their work and goods by the powerful nations in control of the twin sisters, and when they run into trouble, they have to borrow from the very people that underpaid them in the first place.
The IMF works as the collections agency for the private banks of developed countries. Take the case of Guyana in the seventies. After the 1973 nationalisation of oil by the OPEC countries, the windfall had to be recycled through western banks. These encouraged even Third World decrepit dictatorships like Guyana to borrow beyond their means. When these countries could not repay, they were forced to accept loans from the IMF – the bank of last resort – to tide them over. And the famous IMF “conditionalities” kicked in. The stringency of these depended on the country’s posture to the West. Jamaica under Manley, for instance, got the cold shoulder, while his successor, Seaga, was granted much more favourable terms. By the 1980s, the IMF’s portfolio of prescriptions for troubled economies was dubbed the “Washington Consensus”, expressing its point of origin. Its remedies were grouped under three headings that should resonate with Guyanese for the simple reason that we went into an IMF programme in 1989: stabilisation, privatisation and liberalisation. Stabilisation meant, for instance, reining in inflation by cutting spending, even if it meant jettisoning desperately needed services like health and education. As with the recent Barbadian IMF loan, where 3000 lost their jobs, the public sector is also a favoured area for cutbacks. The PPP government has never been given enough credit for resisting IMF pressures to reduce our public sector. Hoyte had gone along with the IMF conditionalities in 1989 and cut thousands from the public payroll. Dr Jagan balked, just as he did with demands to privatise GuySuCo. But it would appear that the PNC-led coalition intended to out-IMF the IMF on sugar when it unilaterally closed three estates and threw 7700 sugar workers into the streets.
But in 1997 the IMF overplayed its hands. Several of the emerging economies in the Far East ran into liquidity problems (brought on not so incidentally by the IMF’s insistence on liberalisation of capital markets) and fell back on the IMF for relief. The conditions crafted by Geitner, who later became US Treasury Secretary, were so draconian that several of those economies nearly went belly up. Those economies (along with China that watched the debacle with close interest) then resolved to build up their own foreign reserves, so that they never had to return to the IMF. Apart from precipitating the present international imbalance in reserves and debt, the IMF was made almost irrelevant by its own wilful partiality.
It was given a life raft by US administrations after the 2007-08 financial meltdown when asked to intermediate the recovery-in-progress. The institution, still headed “by tradition” by a European, even after promised reforms to increase the role of China, worked hard to prevent a default by Greece in the wider EU crisis. The treatment was totally opposite to those still imposed on the Third World countries. The project of China to create a new world reserve currency, the rise of BRICS and their development bank, and the uncertainties in the recent US policies suggest maybe it is time for the IMF to be disbanded.
