[A-List] A conspiracy of the rich

[Bill Totten <shimogamo@xxxxxxxxxxxxx>]

There's lots of ruin in a country, it is said.  But only the IMF could
turn one of Africa's wealthiest nations into one of its poorest in just
20 years.

by Barbara Gunnell

New Statesman (May 24 2004)

On 4 May, Rodrigo Rato, a former finance minister of Spain, was elected
to lead the International Monetary Fund for the coming five years.  His
appointment as managing director followed the resignation in March of
Horst Kohler, a German, which had provoked a flurry of speculation over
whether Gordon Brown, the British Chancellor, would take the top
international finance job.  Another Brit, an Italian and a Frenchman
were also mooted as successors.  Spanish, British, French, Italian - the
one certainty was that the post would be filled by a European, in
accordance with the unwritten understanding between Europe and the IMF's
biggest shareholder, the United States.  The decision - taken by "a
confidential straw poll", as a spokesman described it - was duly
welcomed by the US, put to the IMF board of directors as a done deal,
and ratified.

It is a strange modus operandi for an organisation that polices the
global economy, inflicts good governance and democratic accountability
on sovereign states and boasts at length on its website of its supposed
transparency.

Behind the high-handedness lie certain assumptions: give aid without
conditions and corrupt leaders will squander it; forgive debts and poor
countries will simply borrow with no thought to the future.  Above all,
the rich west knows best.

The short-term pain that the IMF visits on countries that need a loan is
frequently lamented.  It has been less easy to prove that the long-term
impact of the IMF's bitter medicine is retrogressive, and that for most
borrowing countries there is no shining future which can justify the
terrible hardship inflicted on the poor.  But a report on the IMF's dire
impact on Zambia, published this month by the World Development Movement,
sets out in detail the damage IMF policies have inflicted over the past
20 years.

Zambia, with its copper wealth, was once one of the richest countries in
Africa.  Now it is one of the poorest.  Its long association with the
IMF began in the 1970s when, like many other developing countries, the
double whammy of rapidly rising oil imports and equally rapidly falling
commodity export prices required it to seek international help.  By the
early 1980s, Zambia's debt had spiralled and it was unable to continue
repayments.

Enter, in 1985, the "structural adjustment loan", intended in the case
of Zambia to revive its agricultural sector and "reorientate" industry.
The price for this loan was high.  Zambia was obliged to cut government
spending (including food and fertiliser subsidies); sacrifice control of
foreign-exchange policy and interest rates; open its markets to cheap
imports to compete with its own nascent industries; and abolish price
controls.

The political fallout was disastrous, with student and industrial
uprisings and food riots in the copper belt (where wages had been frozen).
Zambia reluctantly abandoned IMF support and tried its own new economic
recovery programme.  The Zambian government reactivated import controls,
limited debt-service payments to ten per cent of foreign-exchange
earnings, reintroduced price controls and reintroduced fixed interest
and foreign-exchange rates.  The economy grew, first by 3.1 per cent in
1987 and the following year by 5.6 per cent.

Regrettably, there is no happy ending to this attempt to win freedom.
The rich aid donors of the Paris Club decided to back the IMF,
threatening to withdraw all bilateral aid unless Zambia returned to an
IMF-backed adjustment programme.  Normal IMF conditions were reimposed:
privatisations, further trade liberalisation and withdrawal of subsidies
for agriculture.

The Zambian privatisations of the 1990s were hailed by the World Bank as
the most successful in sub-Saharan Africa - by which it meant merely
that there were a lot of them.  During that decade, poverty and child
mortality increased and the uptake of primary education fell.  In the UN
league table of development, the country fell from 130th in 1990 to
163rd in 2001.

This has not deterred the IMF from its mission.  From privatisation of
industries such as brewing, the programme moved on to public services
such as transport and electricity, and most recently and controversially,
Zambia National Commercial Bank - a privatisation that met with such
public resistance that the government withdrew its agreement to it.  The
IMF responded with the threat to withdraw US$1 billion in debt relief.

The copper mining industry, on which Zambia's wealth was once based, was
a state concern that used to operate clinics for its workers.  The mines
generated sufficient wealth to ensure that the townships where workers
lived enjoyed amenities such as water and electricity, sewerage, garbage
collection and street lighting.  Little of that remains.  As a result of
privatisation, Luanshya mine, sold to the London-based Metal
Distributors Ltd in 1997, went into receivership after little more than
two years.

"Go tell the IMF that privatisation is a big disaster in Zambia", Joyce
Nonde, president of Zambia's trade union federation, told the authors of
WDM's report.  "I challenge them to point at a success story - it is
being forced down our throats and is highly undemocratic".

Nonde is right: the IMF's insistence on just one mode of running the
economy rides roughshod over the very idea of the democracy that it
purports to encourage.

Compare Zambia's attempt to run its own economy with Britain's recent
skirmish with the IMF.  In 2003, Zambia was hoping to agree a budget
with a planned deficit of three per cent.  The IMF said no.  In the same
period, the UK planned to increase its deficit to 3.4 per cent.  When
the IMF publicly criticised Gordon Brown's economic strategy, the
Treasury accused the IMF of having an "ideological opposition" to public
spending.  "We are not going to accept a stability pact from the IMF,
the European Commission or anybody else", said a spokesman.  Zambia
might have agreed.

Equally undemocratic have been the attempts of the unelected European
and American power-brokers running the IMF to impose trade
liberalisation on countries such as Zambia.

The World Trade Organisation was created as the forum for countries to
determine trade relations with each other.  As a former UK development
secretary was fond of telling us, this body is structured democratically,
giving weak countries such as Zambia a vote theoretically equal to that
of the UK or the US.  But the power to vote at the WTO means nothing if
the IMF can determine policy back home.

Although the IMF's richest countries find it politically difficult to
establish a timetable for removing subsidies to farmers, they have
imposed agricultural liberalisation on Zambia.  The consequences have
been to weaken the agricultural sector and increase the proportion of
the population classed as undernourished.

Such double standards reveal an urgent need for the member nations of
the IMF to consider the nature of the democratic principles by which
they claim to act.  They must start by introducing some basic democracy
into the Fund itself.  The UK has a major responsibility and some power
in this respect: the Chancellor chairs the IMF's finance committee.
With the Prime Minister, he is also dedicated to turning around the
economies of Africa.

Both men will have approved, in December 2000, the globalisation white
paper, which specifically condemned the sort of behind-the-scenes
dealing at the IMF that preceded Rodrigo Rato's election: "The UK
favours open and competitive processes for the selection of top
management - in which competence would be put above consideration of
nationality".

However, wider issues of responsibility for past errors must also be
addressed.  The World Development Movement's authors lay the blame for
Zambia's plummeting fortunes squarely on the IMF and recommend immediate
cancellation of Zambia's debts.

The IMF should also ask itself a simple question.  Why did twenty years
of aggressive intervention fail to improve the lives of some of the
poorest people in the world?

On 21 May, on BBC1's Ten O'Clock News, David Loyn reports from Zambia.
WDM's report Condemned to Debt by Lishala C Situmbeko and Jack Jones
Zulu is available through http://www.wdm.org.uk/ campaign/colludo/zambia


http://www.newstatesman.com/site.php3?newTemplate=NSArticle_NS&newDisplayURN=200405240018

Copyright New Statesman 1913 - 2004

Please also see:

"Unhappy Birthday, World Bank!" by Mark Engler, ZNet Commentary (May 21 2004)
http://www.zmag.org/sustainers/content/2004-05/15engler.cfm

Bill Totten     http://www.ashisuto.co.jp/english/