> >Via NY Transfer News * All the News That Doesn't Fit > >DIRECT FROM CUBA >PRENSA LATINA WEEK-END FEATURE SERVICE > >May 13, 2000 >HAPPY MOTHERS' DAY > >A NEW IMF >by Theotonio Dos Santos >Prensa Latina > >[The author is head professor of economy of the Federal University of Rio >de Janeiro and Coordinator of the UNESCO Faculty and the UNESCO-UNIVERSITY >network of the United Nations on Global Economy and Maintained Development. >He is head of the International Affairs Advisory group of the Rio de Janeiro >state government and collaborator of Prensa Latina.] > >Rio de Janeiro.- We are on the verge of setting up a new world financial >architecture. In this new structure the International Monetary Fund (IMF) >will sustain important changes. > >Created to support national economies in financial difficulties caused by >general deficits in the balance of payments, this organization also took on >itself the role of reorienting economies in deficit, imposing programs of >financial stability to guarantee the correct use of their loans. > >It is obvious that this interventionist intention of the IMF set it apart >from the important national economies of the powerful states. > >In the decade of the 1950s, the Brazilian president, Juscelino Kubitcheck >refused to follow the orientations of the IMF and was strongly supported by >the dominating classes of the country with very positive results regarding >growth and development. > >At the same time, the IMF totally cast aside the intention of stabilizing >the central economies of the world economic system. > >The United States after World War Two, for example, moved continuously >towards a total imbalance of its foreign accounts generated by the enormous >instability of the world economy. However, the IMF never criticized its >untenable deficits, and makes no reference to the budget deficits and other >US irresponsibilities that would be greatly threatened in other countries. > >In time it was clear that the IMF played the role of administering the >colonies of the United States. In this role it was much more efficient than >the colonial officials who did not have the resources of the IMF. > >It also counted on the system of the United Nations, the World Bank, GATT, >and a group of international and national institutions with which it >interacted to impose ideas, rules of behavior, aid and sanctions, models of >action, etc. > >The IMF carried out an economic doctrine during these years that was firmly >neoclassic with a strong monetary orientation. This often led to an open >conflict with the Keynesian sectors tending to control public policies in >the majority of the countries. > >During the 1980s with the crisis of Keynesian policy and the rise of >neoliberalism, of strong financial influence, the IMF gained enormous >strength placing itself at the center of the economic doctrine of the >period. > >During the last six years, this leadership has been challenged as a result >of a group of errors of analysis and spectacular economic lack of foresight. >The crisis of Mexico during the final months of 1994 threatened the most >loved and favored son of the international financial community: President >Carlos Salinas de Gortari. > >No self criticism followed this incompetence, which was added to the >structural crisis of Africa, the most disciplined student of the IMF and the >World Bank. Consequently, the rising national economies were made >impracticable and generated hunger and desperation in millions of political, >military and, above all, economic refugees. > >Through its structural policy adjustments on neoliberal bases, the IMF >advised these countries to maintain their colonial character producing >agricultural articles and raw materials that could be more easily sold in >the world market. > >The policies eliminated the new national states and favored a local >bourgeoisie that >lived off their intermediary functions in international funding, in >corruption and the assault of state properties. > >Consequently, these measures destroyed subsisting economies and forced them >to move into the market, where they would undoubtedly lose. This attitude >led to the influx of a mass of millions to the cities, living precariously >with an infrastructure totally unprepared to receive them. As a result >general concentration areas were formed mostly due to inter-tribal wars, >exacerbated by the miserable and disastrous social conditions. > >But the errors of the IMF became even more serious when it pushed South East >Asia in 1992 to accept an opening of international loans to avoid devaluing >their currency as a result of losing the US market and the absurd valuation >of the yen, forced by the US government. Even more serious, on the eve of >the Asian crisis of 1996, the IMF published a very favorable report on the >political economies of those countries. > >More serious still is the Russian policy of the IMF. It hands over close to >nine billion dollars to the new Russian plutocracy that simply deposits it in >its personal accounts, without any reactions from that organization. It was >an attempt to support former president Boris Yeltsin in his neoliberal >policies, disregarding the plebiscite to maintain the Soviet Union, >his bombing of the Duma (Parliamentary Lower House) which rebelled, claiming >their constitutional rights, and many other monstrous demonstrations of >autocracy in contradiction of the law, the poor use of public funds and >other disastrous and corrupt processes of privatization. > >The IMF even went further in its irresponsibility in the Brazilian case. By >the end of 1997, pressured by the Asian crisis, the IMF was forced to call >on the Brazilian government to devalue the real (the national coin). In >February of 1998, the Brazilian Minister of Economy was informed of the >immediate need to progressively devalue the country's currency to 25 percent >in a few months, thereby avoiding a graver crisis that would inevitably lead >to speculation in its currency and a liquidation of its fabulous >international reserves (obtained through internal indebtedness) carried >out to attract foreign capital with absurdly high interest rates. Funds >were immediately transformed into false reserves to create a favorable image >of the country. > >The Brazilian minister of economy informed the president of the IMF, as was >revealed publicly at the time, that a devaluation before the presidential >elections was impossible. > >With complete irresponsibility, the IMF did not bother with any technical >advice to favor the re-election of the president, Fernando Henrique Cardoso. > >Consequently, on the eve of the elections, a massive withdrawal began, >reaching over 50 billion dollars which, added to the Brazilian deficits in >its balance of payments, led the country to a total lack of liquidity and a >loss of its international reputation. As a result of this ruinous situation, >the IMF and the US government were obliged to create a fund of 41 billion >dollars to insure the functioning of the Brazilian economy in order to avoid >an international financial crisis of incalculable scope. > >It was very clear that this crisis would have been avoided if the government >of Cardoso did not have the political support of the IMF and if his >reelection were not considered a priority by that organization. To support >this aid, the US congress had to vote 20 billion dollars in cash resources >for Brazil. > >It should be realized that not even the election of the president of the >United States has such a high cost for the people of that country. This is >explained if we consider that the loan was made with no public guarantee. >Unofficially it has been claimed that the Brazilian government has used >Petrobras and the Banco do Brazil as security for the loan. It is not >necessary to mention the legality of such an agreement if it exists. > >In brief, it is a high risk loan, more so if we consider that the >devaluation of the real has not yet led to a commercial surplus that could >be used in the future for resources to pay the loan that is only a part of >an international debt of at least 280 billion dollars. Therefore, the policy >of the IMF and related agencies reveals the increasing danger and >disastrously unacceptable policy for the voters of the United States. > >In the United States there are two strong political forces that are becoming >more radically opposed to the present character of the international >financial system. > >On the one side, the American right, sincere and radically liberal, that >does not accept the theory that the United States should support corrupt and >incompetent governments of the Third World to avoid an international >financial crisis. For established neoliberal theory, the taxpayers' money of >the United States cannot be used for such absurd state interventions. At >the same time, they want to defend US producers from what they consider a >disloyal competition of the Third World. This is what is called social >dumping: the offer of low cost products due to low salaries and the negative >social conditions in which the companies of the Third World maintain their >workers. > >On the other hand, the US worker and union movement, in the midst of an >extremely positive process of renovation, agrees basically with the position >of the right but from a different point of view. For them it is unacceptable >that financial speculation would lead to the outflow of thousands of >millions of dollars in resources from the United States to support local >oligarchies, financial and company groups that operate in the Third World. >For this reason they also oppose loans such as those granted to Brazil >to elect a president who was allied with the Brazilian right. > >At the same time the workers of the United States, grouped in the American >Federation of Labor and Confederation of Industrial Organizations (AFL-CIO), >consider that the methods of slave and child labor as well as low salaries >are a violation of minimum social rights in the Third World which also cause >a massive exodus of US capital abroad, provoking unemployment at home. > >They call this the exportation of jobs and believe this drastically >jeopardizes North American workers. For this reason they voted against >NAFTA and the fast track and proposed and won in the US congress, with >growing support of the conservatives, the demands of social conditions for >the loans of international agencies, primarily the IMF. > >In the protests in Seattle, where the AFL-CIO demonstrated an enormous >capacity for mobilization concerning subjects of world trade, the workers of >the United States raised their demands of an equivalence of social policy >throughout the world. > >Such a progressive proposal exacerbated the realization of the most >submitted and globalized governments of the South about the concept of >national sovereignty that they had shed a long time ago. > >Under the influence of such significant social and political forces, the US >congress prepared a report on the international financial system. > >This document, recently published and summarized by the international news >agencies, arrives at very important conclusions: In the first place they >diagnosed the total failure of the IMF and its clear incompetence for >analysis and foresight on the economic circumstances. > >If they had read our articles, they would have known this a long time ago. >They would also realize that it has to do with a general crisis of dominant >economic theory. They also understood the incapacity of these organizations >to develop these regions, eliminate poverty and the growing social >disenfranchisement. > >Consequently, they propose incisive political changes. The IMF should not >grant long term loans that would go against their function of supporting the >crises of localized liquidity. In the second place, they should not charge >low and subsidized interest so as not to favor the irresponsibility of local >governments. > >Lastly, they want to restrict the functions of the World Bank which they >believe should evolve into an organization of economic research and >investigation that should offer projects to be carried out basically with >the local resources of the affected countries. > >It is evidently a conservative agency but, also, a moralizing factor within >the context of an exacerbation of the role of international organizations in >the orientation of economic policies of the peripheral countries. > >This discussion is, therefore, about a new context where the misery of the >Third World and the fierce exploitation of its workers becomes a crucial >limit for the development of the economy and civilization. > >In this context, proposals on the Tobin taxes can begin to sound interesting >by placing financial capital on the source of necessary resources to a >feasible social program in the Third World. > >This could be a life saving screen to avoid a disastrous fall of >international bureaucracy, so hated by the right and the workers of the >United States. One has to agree that the arrogance and affectation of these >international technicians finally found barriers within the very internal >financial and economic world system. > >It remains to be seen up to what point the European social, democratic and >socialist countries will agree to these proposals. They are concerned, above >all, with strengthening solutions that favor the regionalization of world >financial power, in order to remove from the United States the control of >international decisions. > >These questions are in the background of the difficulty in finding a >candidate for the IMF presidency where a German banker was finally imposed, >a banker who is uncomfortable in face of the demands of the North Americans. >We must expect, therefore, a growing tension of the world financial system. >Is it not time to strengthen regional solutions without depending on the >scarce resources available in the central countries? > >(c) 2000 Prensa Latina, S.A. (PL). 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