|BUSINESSWEEK ONLINE : APRIL 24, 2000 ISSUE|
Does Anybody Love the IMF or World Bank?
These days the international lending agencies are under fire from all sides
In 1994, when global financiers met in Madrid for a lavish celebration of the 50th anniversary of the founding of the International Monetary Fund (IMF) and the World Bank, environmental protesters managed to spoil the party. Demonstrators scaled the steel beams of the conference center where the meeting was held and showered thousands of dark-suited delegates below with fake dollar bills that declared ''No dollars for ozone destruction.''
Now, as they prepare for their first ministerial meeting of the 21st century, the monetary mandarins of the IMF and World Bank are under attack again. Thousands of demonstrators are descending on Washington to disrupt the Apr. 16-17 meetings of the two lending agencies. But this time, the criticism is more widespread and will be harder for the IMF and World Bank to fend off. In the long run, both bodies may be forced to radically restructure the way they do business in developing nations.
Some of the same groups that kicked up a fuss in Madrid will be taking to the streets in Washington. Environmentalists will be there. So will antipoverty groups. But the real energy for the demonstrations is coming from a new cadre. They have been galvanized into action by the success of December's protests in Seattle against the World Trade Organization (WTO) and by the IMF's failure to stop the spread of the Asian financial crisis that began in 1997. It may not be a rerun of Seattle, with tear gas and mass arrests, since the Washington police are more prepared. Still, a broad cross-section of America will hit the streets.
It's a curious bunch. There are trade-union members who fear that the globalized economy championed by the IMF and World Bank will cost them their jobs and lower U.S. living standards. There are intellectuals who believe the IMF bungled the Asian crisis. And there's an amorphous amalgam of Gen Y college students and aging baby boomers united by their abhorrence of big business. Organizers are using the Internet and the promise of plenty of street theater, music, and giant allegorical puppets to entice the young to turn out. ''There's a lot of different messages out there,'' admits Veena Siddharth, an analyst with antipoverty group Oxfam International. ''But there's also a widespread sense that what these organizations do and how they're structured is not suited to the world today.''
If the suits who run the IMF and World Bank had to worry only about protesters in the streets, they might rest easier. But critics also now include the Clinton Administration and the U.S. Congress, both of which advocate a major overhaul of the two lending agencies in the wake of the Asian crisis. Treasury Secretary Lawrence H. Summers wants the IMF to focus on financial rescues rather than on long-term financing and thinks the World Bank should do more to attack Third World poverty. A Congressionally chartered commission headed by Carnegie Mellon University Professor Alan H. Meltzer would go even further. It would rename the Bank the World Development Agency, have it hand out grants rather than make loans, and concentrate its help on Africa.
Battered from the left and right, Fund and Bank officials are sounding defensive. World Bank President James D. Wolfensohn gave a pep talk to staffers on Apr. 10, saying, ''We should be proud of the work we do in fighting poverty.'' Acting IMF Managing Director Stanley Fischer also defended his agency at an Apr. 4 conference. ''There is a revolution under way [at the IMF], but it is a gradual revolution,'' he said.
Both organizations--especially the World Bank--have come a long way since Madrid. They're more open, more environmentally conscious, and more attuned to the impact of their policies on the poor. Activists say the biggest obstacle to a plan to forgive tens of billions of dollars in Third World debt is not the IMF or World Bank, but Congress, which hasn't allocated enough money to cover the U.S. share.
In Seattle, Wolfensohn and former IMF chief Michel Camdessus urged rich nations in the WTO to do away with their quotas and duties on imports from developing countries. Bank bureaucrats had hoped to put that item on the agenda for the spring meetings. But they had to back off after U.S. trade officials balked, worried that it would divert attention from efforts to get Congress to approve less far-reaching trade concessions for African and Caribbean nations.
For the radicals, though, the changes being made by the IMF and World Bank are window dressing. As far as these business-bashers are concerned, the two agencies are pawns of multinationals and should be done away with. ''You don't polish the chains of slavery,'' says Kevin Danaher, director of public education at Global Exchange, a human rights group in San Francisco. ''You break them.''
Danaher, a longtime activist, is leading an international drive to boycott World Bank bonds. He wants unions, universities, and municipalities to stop using pension-fund money to buy the bonds that provide a critical source of finance for the Bank's activities. While a disinvestment strategy worked against South Africa's apartheid regime, it's less likely to succeed against the faceless multilateral agency.
CAJOLING. The IMF isn't escaping the protesters' wrath either. Back in Madrid, it got a pass for the most part, less visible as a secretive financial adviser telling developing nations how to run their economies under its loan programs. But no longer. The Asia crisis threw a spotlight on the Fund's inner workings. Led by former World Bank Chief Economist Joseph E. Stiglitz, critics charge that the IMF aggravated the currency crisis by cajoling Asian nations into tightening their budgets and jacking up interest rates to prop up their currencies and pay off creditors.
That only served to make Asia's woes worse, critics allege. ''[The IMF] bungled the crisis,'' says Stiglitz. ''Their policies benefited the creditors rather than the people in Thailand.'' IMF officials admit they overdid it in calling for budget cuts but say they reversed course when they saw the crisis was worsening. They also defend the high interest rates as necessary to prevent a free fall in Asian currencies.
The fallout from the crisis--a flood of imports into the U.S. from reeling Asian nations--has helped to draw the unions into the fray. The IMF's policy is bad for U.S. workers because it forces crisis-hit countries to shrink their domestic economies and rely for growth on exports to the U.S., says David A. Smith, the AFL-CIO's director of public policy. ''We do need an IMF, but we don't need this one,'' he says.
Faced with mounting attacks from all sides, the IMF and World Bank are scrambling to assuage critics. On Apr. 10, the IMF set up an independent review board to evaluate its policies. The World Bank is pushing an initiative to combat the global scourge of AIDS. And both are working on a new strategy for fighting global poverty. But in the end, more radical reforms may be needed to get the demonstrators off the streets and the politicians off the two agencies' backs.
By Rich Miller in Washington
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