Sachs on World Bank and IMF

["Ken Hanly" <khanly@xxxxxxxxxxxxxxx>]

I thought that Sachs was one of them! What happened?
   CHeers, Ken  Hanly




The Financial Times  26 September 2000

The charade of debt sustainability

The World Bank and IMF fail the world's poorest people by siding
with western governments.

By Jeffrey Sachs

Many of the protesters in Prague may not have mastered the
economics of globalisation, but they certainly understand the politics.
Their complaints about the International Monetary Fund and World Bank
destroy any pretence that these are global institutions with more than
180 member countries. The truth, of course, is that they are the
instruments of a few rich governments, which hold a majority of the
dollar-based votes and would rather pretend that all is well in the
world
than ask their taxpayers to address the urgent problems of the poor.
The US is the most egregious of the lot. A country that has an annual
income of $10,000bn scrapes together about $1bn of development
assistance for sub-Saharan Africa - 100th of 1 per cent of its national
income. In Nigeria last month, US President Bill Clinton had the
temerity
to trumpet the US's token support of $9.4m - 3 cents per American - for
the estimated 2.5m sufferers of HIV/Aids in Nigeria. If he had stayed at
home and spared the expense of the trip, he probably could have
doubled the amount.
The IMF and World Bank have been mouthpieces of this deceit, with
their charade of analysing the "debt sustainability" of the poorest
countries. These analyses have nothing to do with debt sustainability in
any real sense, since they ignore the needless deaths of millions of
people for want of access to basic medicines and nutrition. Money that
could be directed towards public health is instead siphoned off to pay
debts owed to western governments and to the IMF and World Bank
themselves.
When push comes to shove, the IMF and World Bank side with the
creditor interests of the rich countries, even when such policies
violate
the most basic precepts of market economics. Take the "success" of the
Korean bail-out operation. Under the IMF deal, the creditor governments
forced Korea to guarantee the repayment of bad debts owed by private
Korean banks to private US, European, and Japanese banks. The
Korean people are paying billions of dollars in taxes so that their
government can make good bad private loans.
The truth is that we need the Bretton Woods institutions - but as truly
global institutions representing all of their members, not as creditor
collection agencies designed to shield taxpayers in rich countries from
bad news about world poverty.
The IMF has a very important role to play in monitoring global
financial markets. It even performs the vital function of providing
short-
term emergency funds to maintain liquidity in international markets and
to member countries facing financial panics. It has absolutely no
business trying to run dozens of impoverished countries, mainly in
Africa,
from 19th Street in Washington.
The IMF knows very little about economic development challenges,
from disease to tropical agriculture to environmental degradation.
Advocates for the poor accept that export-led growth raises incomes of
the needy, when based on a steady shift to higher technology goods (as
in China and elsewhere in Asia). But the IMF's policy recommendations
have left Africa every bit as dependent on primary commodities as that
impoverished continent was 20 years ago.
The World Bank is equally ineffectual. To shield US taxpayers, it
pretended for 20 years that public health disasters in Africa could be
solved by "cost recovery" measures imposing higher fees on the poor. It
stood by paralysed as HIV/Aids became the greatest pandemic in history
and as malaria swept across the continent.
The Bank says poverty alleviation is its main business but directs
most of its lending to creditworthy countries not in need of
public-sector
support. It preaches good governance to the poor countries, but has
itself been unable to set meaningful priorities.
The simple truth is that we do not need a public-sector bank at all for
the problems of the poorest countries. We need a World Development
Agency that would use grant funding to help spur technological solutions
to the problems of the poor, and would provide grants to deliver
urgently
needed healthcare and education. The World Bank has about $30bn of
capital, generating about $2bn in income each year, which could be
used to support programmes in technology, disease control, and related
areas.
This money should be supplemented by substantial new grants and
capital contributions by donor governments. Increased funding is also
urgently needed by specialist agencies such as the World Health
Organisation. The bank lending operations of the Bank could be spun
off, indeed privatised.
Globalisation underpinned by global ethics is the best hope for the
poor. An IMF focused on global financial markets and a World
Development Agency devoted to the poorest peoples could yet make a
valuable contribution to the world. Neither is yet on offer in Prague.

_____________

The writer is director of the centre for international development at
Harvard university.