World Development Movement Report: Resistance to IMF policies in poor countries [introduction]

By Jessica Woodroffe and Mark Ellis-Jones, Global Exchange, 28 September 2000

Introduction

Since Seattle last year, the media has heralded the dawn of a new movement in Europe and America, epitomised by protests aimed at the WTO, IMF and the World Bank.

However, this ‘new movement’, portrayed by the media as students and anarchists from the rich and prosperous global north, is just the tip of the iceberg. In the global south, a far deeper and wide-ranging movement has been developing for years, largely ignored by the media.

What follows is a summary of protests and demonstrations organised by the southern poor. They are aimed at policies that hurt their livelihoods and, in some cases, undermine the democratic foundations of their countries. This ‘hidden’ movement has a global reach and signals a deep unease at economic policies that keep the poor in poverty.

Southern Protest

All of the developing countries detailed in this report have experienced civil unrest in the past year.

Teachers, civil servants, priests, farmers, students, doctors, trade-union activists, indigenous peoples and women’s groups have called on their governments to halt the introduction of economic reforms which have by-passed their national democratic institutions, and have been foisted on them by the IMF and World Bank. These are poor people, in a desperate situation, who are striving for respect, dignity and a sense of pride in their lives and countries. Their voices deserve to be heard.

But they’re not. Developing countries are still locked into a dependant relationship with the international financial institutions and donor governments. Despite the rhetoric of poverty reduction, debt relief and economic stabilisation, these countries must still implement liberalisation policies which hurt the poor. This report shows how deeply the poor oppose them.

The Gatekeeper

The IMF has unprecedented power over these vulnerable countries and is often referred to as the ‘Gatekeeper’ because it determines whether to open or shut the ‘gate’ between a borrowing government and its creditors. Unless the IMF gives its ‘seal of approval’, signifying that a government’s policies are ‘adequate’, the government may be unable to access credit and attract foreign investment. The only way these countries have been able to gain the IMF’s ‘seal of approval’ is by introducing a package of reforms called a Structural Adjustment Programme (SAP). These reforms often involve the following common elements:

Reducing government expenditure, by making public-sector redundancies, freezing salaries, and making cuts in health, education and social welfare services;

The privatisation of state-run industries, leading to massive lay-offs with no social security provision and the loss of inefficient services to remote or poor areas;

Currency devaluation and export promotion, leading to the soaring cost of imports, land use changed for cash crops, and reliance on international commodity markets;

Raising interest rates to tackle inflation, putting small companies out of business;

Removal of price controls, leading to rapid price rises for basic goods and services.

In 1999, these notorious SAPs underwent a transformation following criticism of their content and undemocratic nature. At last year’s Annual Meetings, the Enhanced Structural Adjustment Facility (ESAF), responsible for providing loans to up to 80 countries, was renamed the Poverty Reduction and Growth Facility (PRGF). In addition, Poverty Reduction Strategy Papers (PRSPs), which must be drawn up in consultation with civil society, were introduced to meet fears that governments lacked ‘ownership’ of SAPs. But early evidence suggests that PRGF conditions are almost identical to the old ESAF conditions, and that PRSPs will closely resemble SAPs. The names may have changed but the economics has stayed the same.

For countries outside the remit of the PRGF, the IMF remains as inflexible as ever. Loans from the IMF are always conditional on the implementation of structural reforms, and countries seeking the IMF’s international ‘seal of approval’ are always ‘encouraged’ to continue with SAP-style policies.

All these policies hurt the poor. Developing countries have few choices -- either implement policies ill-suited to their country or risk economic isolation. Most governments, seeking to retain power and be accepted internationally, choose the IMF over their own people.

Demolishing Democracy

One of the objectives of IMF and World Bank conditions is to leave economies well governed and increase stability. Instead, SAPs have undermined the ability of democratic governments to set their own priorities and policy objectives; instead, they often rush through economic reforms without adequate legislative or democratic processes. While governments are held responsible for the social and economic upheaval which results, the IMF and World Bank escape largely unscathed.

These institutions have little accountability to any electorate, and remain forever at arm’s length. At best, they offer advice to the governments ‘to continue building the necessary political support for reforms’, and at worst distance themselves completely from failed programmes, blaming inadequate political will or corruption.

SAPs, which cut back the role of the state, ignore the basic function of governments - to provide social services to their citizens. If governments are unable to provide these services because of budget cuts or debt servicing, governments lose their legitimacy in the eyes of their citizens.

It would be wrong to suggest that developing countries have no responsibility. Some have embraced the proposals willingly, others have been guilty of corruption. But our point is that civil society’s attempt to democratise their own governments is made substantially more difficult, if not impossible, by the imposition of IMF conditions. There is no room for flexibility in negotiations with the IMF.

This is compounded by the current revamp which seeks to dress SAPs up in the rhetoric of PRSPs, which could make matters much worse. The policies will stay the same, but instead of being explicitly prescribed by the IMF, they will be covertly pushed on government officials by ‘IMF advisors’. In the long run, PRSPs will only help the IMF pass the buck when things go wrong.

When democracy is undermined and governments are unable to act in the interests of their electorate, one of the only channels left is for citizens to demonstrate. Civil unrest, demonstrations and strikes should indicate to governments, law-makers and the international community that policies are not working.