IMF: Advance Guard of the WTO
In 1997, Bangkok's Rafabhat Institute Suan Dusit took a poll of 1,648 Thai children under the age of 15. The survey asked the children to identify the IMF, the International Monetary Fund. A quarter knew what the IMF was. About 30% believed that the IMF was an Unidentified Flying Object, a UFO.
All those who think this is funny may want to look outside the windows or else into the mirror. The body snatchers have commenced their invasion. The Eagle has landed. A host of acronyms (IMF, FDI, GATT, MAI, WTO), a brood of anonymous bureaucrats, technocrats. A childhood friend becomes the expert of a country in Central Asia -- he failed geography in school. But he is good, all things remaining equal, at economics. The Chicago Boys, the Sachs effect, the Wharton graduates. The index of reason is the double entry account book.
Those Thai children are perhaps not so unreasonable after all. Thailand, by 1997, was at the tail end, to put it mildly, of an unsustainable financial boom: 90% of Thailand's wealth resides in Bangkok alone, whilst farmers comprise 60% of the working population and hold only 11% of the wealth. During the 'boom,' the automobile industry grew astronomically in Thailand, as the country became the third largest consumer of Mercedes Benzes in the world. As Thailand's merchandise exports began to plummet (from 22.4% in 1994 to 0.1% in 1996), its economy entered a crisis. Enter the IMF with a draconian set of rules. The austerity program put into place led to massive protests, including the erection of a 'village' outside Parliament House in early 1997.
In South Korea, during the trauma of 1997, the IMF entered the lexicon not as a UFO, but in Kavaljit Singh's words, 'as a synonym for gloom, doom and despair.' The 'IMF Era' refers to a 'period of national humiliation.' The 'IMF Sale' is a bargain for few buyers, 'IMF Fashion' is used clothing, and 'IMF Syndrome' is fear of future unemployment.
The IMF over the past few years has worked as the advance guard of the WTO. In December 1997, the IMF's bailout program for South Korea included the following, very revealing, statement: 'Timetables will be set, in compliance with WTO commitments, at the time of the first review, to eliminate the import subsidies; eliminate restrictive import licensing; eliminate the import diversification programme; and streamline and improve the transparency of the import certification procedures.' The Indonesia bailout package speaks of 'liberalization of foreign trade and investment' as a condition for the IMF secured monies.
The push to insert conditions such as 'freer' markets and trade indicates an interest by the IMF to open access for transnational corporations to financial markets. But it also indicates that the IMF is operating outside its previous structural adjustment framework in order, perhaps, to do the advance work for the WTO. James Tobin, at Yale, for instance, notes that 'it is hard to escape the conclusion that the countries' currency distress is serving as an opportunity for an unrelated agenda -- such as the obtaining of trade concessions for US corporations and expansion of foreign investment possibilities.'
Why are private sector firms interested in investing in what the UN calls the Least Developed Countries (LDCs)? Are they interested in the development of these countries, in the well being of the people of these regions? Or do they require these regions to turn a profit on their financial holdings? For several years, interest rates in the advanced industrial countries have been rather low when compared to the rates of return in the LDCs. Institutionalization of savings and increase in the investor base (through mutual and pension funds) creates a larger fund of money that needs to turn a profit. As the LDCs, under pressure from the IMF and many of their corrupt governments, liberalize their financial markets, these become a haven for the speculator.
Such speculation began in the mid-1970s, when LDCs began to dismantle capital controls to draw in commercial cash in order to offset increased oil prices. But in the 1990s, we have seen a real expansion in private investment in the LDCs. In 1996, net inflow of private capital into LDCs was six times greater than in 1990. Of total foreign direct investment, 40% goes to LDCs (it used to be 15% in 1990), with the LDCs taking receipt of 30% of the global portfolio equity (2% in 1990). This is no redistribution of global wealth (10 countries received over 90% of the inflows) nor is it a productive use of capital (since it mainly traffics in speculation, so-called 'hot money');. The turmoil of SouthEast Asia is sufficient illustration of these trends.
The WTO was to meet 'peacefully' and 'quietly' in Seattle to further the cause of 'free trade' and some form of agreement on investment (despite the public pressure against the Multilateral Agreement on Investments). The United Nation's Conference on Trade and Development (UNCTAD) Report from 1998 notes that the LDCs would lose $600 million per year if the WTO agreement comes into effect. Consider that 48 of the LDCs hold 10 percent of the world's population, but only 1 percent of the world's wealth. The average income in these LDCs is less than it was in 1980. In 43 of them, the average income is less than it was in 1970. The debt has also increased to $215 billion today, from $55 billion in 1980. Things look pretty grim, with the WTO even grimmer.
Perhaps it is time to blow off the dust from your volume of Capital I. Remember where it quotes an authority on page 926 (my edition is the Penguin Classic) to the effect that 'with adequate profit, capital is very bold. A certain 10 percent will ensure its employment anywhere; 20 percent will produce eagerness; 50 percent positive audacity; 100 percent will make it ready to trample on all human laws; and 300 percent and there is not a crime at which it will scruple, nor a risk it will not run, even to the chance of its owner being hanged.'
And the world watches as a host of human beings take the piss out of the WTO in Seattle, home of Microsoft and other predatory firms. All sorts of groups gathered to do damage to the 'Emerald City'; reports in the world media hearken back to those pictures of Bull Connor's dogs tearing into brave protestors for Civil Rights in Birmingham, Alabama. As the WTO gets a bit of egg in its face, let us not forget its advance guard, the IMF. Under Michel Camdessus' watch the IMF entirely capitulated to transnational corporate interests. His resignation has drawn the US into pitched battle to get one as keen as he was to foster the power of Big Money. From Seattle to Washington, DC -- from the WTO to the IMF: Basta to Finance Capital!
3 December 1999.