By Nicola Bullard
The International Monetary Fund’s new managing director’s intention to “drive change from within the institution rather than have it imposed from outside”(1) does not inspire confidence, given the Fund’s dismal record of reform so far.
In the past three years a lot of ink has been spilled proposing ways for the Fund to recover from its spectacular fall from grace when its policy advice during the 1997 Asian crisis simply made matters worse. (2) Most of these reform proposals have been extremely modest but even so, on the Richter scale of change, the IMF has barely tipped the needle.(3)
The Fund’s defenses stayed firmly in place so long as Michel Camdessus was still at the helm, but this is not surprising. To undertake institutional reforms in the dying days of a 13-year term would have been tantamount to admitting the errors of the past, something that Camdessus may now be doing in his new incarnation as special adviser on debt to Pope John Paul II.
IMF, ‘heal thyself’
It is only now that the first rumblings of change are being heard from the new managing director Horst K๖hler, the second choice German candidate who was selected through a highly political, non-transparent but strangely public round of horse-trading between the US and Europe. So murky was the process that even The Economist called for new selection procedures, including a suggestion that the Fund should promote “merit over nationality.”(4)
Four months into the job, K๖hler has signed an agreement with the World Bank aimed at reducing the overlap of responsibilities (US Treasury Secretary Larry Summers has been pushing this for some time), approved disclosure of the Bank’s sources of financing, hinted that developing countries need a “larger voice” and pushed for faster debt relief “to get those 20 in” (referring to those countries earmarked for inclusion in the Highly Indebted Poor Countries (HIPC) debt relief initiative).
But even though K๖hler has made great play of the Fund “withdrawing to its core competencies of fiscal, monetary and exchange rate policy,” (5) in reality the mission creep and expansion of powers continues.
First, in the realm of standard setting, codes of practice, surveillance, monitoring and information disclosure, the Fund’s scope of activity – often in the name of transparency – has expanded. This is consistent with the Fund’s view that the Asian crisis was a result of institutional failure, corruption and lack of information. In practice, this means that the Fund it is demanding more information from governments, that it is publishing more information about national economies, and that it is forecasting on the state of these economies. Given that the Fund is concerned principally with macroeconomic stability, it has, in effect, become a de facto international ratings agency.
The Fund is also now talking about expanding its role in technical assistance, which means more Ivy League-educated economists giving more advice to more Third World ministries of finance. This hardly sounds like “withdrawal” but rather a strategic advance in the project of financial globalisation.
The Fund has also picked up new agendas along the way and is now dabbling in debt relief, poverty reduction, good governance and even tries to “engage” civil society from time to time. But for all their 70 staff in the field working with NGOs, the IMF remains somewhat gauche at public relations compared to the slick and savvy World Bankers.
However, the proposals that go to the heart of the IMF power – such as democratising voting and decision-making, systematically engaging in external reviews of programmes, or questioning some basic assumptions about the benefits of financial liberalisation — have been shelved, ignored or changed beyond their original intention.
For example, the Fund’s proposal to establish an Independent Evaluation Office (EVO) is a hopelessly inadequate response to demands that the IMF be more accountable both to its shareholders and clients. The EVO, recently approved by the Board, will be an entirely in-house operation, although it is envisaged that staff could be recruited from outside the Fund.
The background paper on the evaluation unit makes interesting reading.(6) For example, it states that one of the main purposes of the Office is to “enhance the learning culture within the Fund” yet further on warns that “management will need to commit to ensuring that EVO staff who return to regular Fund staff… are in no way discriminated against because of authorship of reports that are critical of potential receiving departments.” So much for the learning culture.
Reform of the voting system seems unlikely. Although K๖hler talks about giving developing countries a stronger voice, it is clear that this will not be at the expense of the majority shareholders, which makes one wonder how it might be achieved. At present, the US carries 17.5 per cent of the votes and the combined EU members 32 per cent. (7)
Developing countries themselves seem reluctant to press for reform. Trevor Manuel, South Africa’s minister of finance and chair of the IMF World Bank Board of Governors, is concerned about voting rights for poor countries and “wants to prick the consciences of other government and persuade them that system [gives] too small a voice to the poor.” (8) The main flaw in this approach is the assumption that there are consciences to be pricked.
Of course, it’s early days and K๖hler’s reformist enthusiasm may capture the hearts and minds of Fund staff. However, he will be battling against a deeply entrenched, isolated and defensive institutional culture.
Former World Bank chief economist Joseph Stiglitz, writing about the IMF’s role in the East Asian crisis, said:
“Bad economics was only a symptom of the real problem: secrecy. Smart people are more likely to do stupid things when they close themselves off from outside criticism and advice… But, with the IMF insisting its policies were beyond reproach–and with no institutional structure to make it pay attention—our criticisms were of little use. More frightening, even internal critics, particularly those with direct democratic accountability, were kept in the dark.” (9)
The IMF is like an armadillo, burrowing deep into it’s own reality and blinking when it steps into the daylight of public debate, but it also has a tough and impenetrable shell. There is no evidence that the “culture of reform” has taken root in the Fund, and it will take a lot more than K๖hler’s zeal to introduce some humility to the institution and dislodge the vested interests of its major shareholders.
The World Bank, on the other hand, is a chameleon, a master at assuming the colours of its environment.
The World Bank public relations machinery is effective and efficient, regularly churning out op-ed pieces for their president which appear in the International Herald Tribune, co-authored by luminaries such as Nobel Prize Laureate Amytra Sen and former South Korean dissident (now president) Kim Dae Jung. Obviously it is important for a multi-millionaire former Wall Street banker and patron of the elite New York art scene to establish some “street-cred” in development circles by associating himself with the likes of Sen and Kim. Wolfensohn has also surrounded himself with a sophisticated army of vice-presidents who act as diplomatic emissaries, deployed to “engage” with the NGOs and schmooze with government officials and financiers (many of whom are their former colleagues).
While the Fund can be accused of mission creep, the Bank, in contrast, has pursued a strategy of hostile takeovers or, as one UN staffer described it “cherry picking.” In the past years, everything from the Internet to AIDS has been consolidated under the Bank’s expanding empire. A G24 discussion paper, writing about the international financial institutions’ new mandate on “good governance” described it thus:
“The new mission [good governance]… arrived at a moment when growing doubts regarding the purpose and effectiveness of the IFIs seemed to threaten their funding, and even their continued existence. Suddenly the IFIs have jumped in to the front lines of multiple wars being fought by humanity: against AIDS, human rights violations, gender discrimination, environmental degradation, drug trafficking, authoritarian governments, etc. To drive the point home, the World Bank has recently started to draw attention to those objectives, and to its own role, in CNN advertising.” (10)
The Bank’s latest additions to its self-determined terms of reference are signaled in this year’s World Development report, Attacking Poverty. (11) The report argues that “poverty is more than inadequate income or human development” and that opportunity, empowerment and security are key. True enough, but while taking up the mantle of institutional reform, social security, political democracy and participation in the fight against poverty, the Bank is pushing its own value-laden normative view of social relations and assuming ever-higher moral ground. All the while, deftly skirting the central issues of redistribution, economic democracy, and the unequal relationship between people and capital. So long as the central economic paradigm remains unquestioned, the World Bank will be peddling – with good or bad intentions — a hopelessly reformist programme which fails to move it any closer to its dream of “a world free of poverty.” (12)
The limits of dissent
However, in spite of their obsession with poverty, good governance and “partnership with members of civil society” (13) the Bank has a heart of stone. The limits of its tolerance have been tested and they have proved to be very short.
For example, during the UNCTAD tenth ministerial meetings held in Bangkok in February of this year, farmers and fisherfolk effected by the World Bank financed Pak Mun Dam protested outside the Queen Sirikit Convention Centre. They also requested a meeting with President Wolfensohn or a representative from the Bank in order to present their demands in a letter. Their request was refused. Later, fresh from his speech to the plenary in which he had equated the proliferation of NGOs with the blossoming of democracy, Wolfensohn responded to a journalist’s question about the protestors saying “We are very familiar with the local groups and the international groups who support them. There is nothing to be gained by going outside and being part of an incident.”
Yet, just last week in Washington, Wolfensohn attacked what he called “the Berkeley mafia” saying, in reference to the controversial Chad Cameroon pipeline, that “it’s important that we have a proper balance between the Berkeley mafia and the Chadians, and I, for my part, am more interested in the Chadians.”(14) Strange, therefore, that he refused to meet Thai fisherfolk and farmers.
The Bank has even less tolerance for dissent in the ranks. The “resignations” of chief economist Joseph Stiglitz and WDR team leader Ravi Kanbur (neither of whom could be classified as anything but mainstream albeit intelligent economists) show that the Bank culture does not abide deviation, especially when it challenges the authority of “The Bank” and its shareholders.
The limits of reform
Both the International Monetary Fund and the World Bank have shown a remarkable resistance to change, in spite of the tremendous external, and even internal, pressure to reform. The IMF’s attempts to “heal itself” seem doomed from the start, given its extremely technocratic and isolationist mentality, the weight of vested interests and institutional entropy. The World Bank, on the other hand, is setting a cracking pace and at least is giving the illusion of reform. This is dangerous, especially for civil society groups who are being offered “pseudo-influence” (15) in implementing the Bank’s “reform” agenda.
But, there should be no illusions. In both institutions, there has been no shift in their two pillars of power: the neo-liberal ideology which underpins their policies and programmes and the voting power and influence of their major shareholders. And, as we all know, he who writes the rules, rules.
* Nicola Bullard is the deputy director of Focus on the Global South, a policy research and advocacy organisation based in Bangkok, Thailand.
1. ‘K๖hler demonstrates a reformist zeal,’ Stephen Fiddler, Financial Times, 14 September, 2000
2. See ‘The IMF’s Asian Legacy’ by Jacques Chai Chomtongdi in this collection. Back
3. Among the better known – with apologies for the obvious Anglo-Saxon bias — are reports from the US (the Congress’ Meltzer Committee, the Committee for Economic Development, The Council on Foreign relations, the Overseas Development Committee), the Financial Stability Forum (G20) and the G22, the UN’s Economic and Social Council, the United Nations Conference on Trade and Development, and select committees in several OECD countries including Australia, France and the UK. Countless academics have contributed to the debate, including Paul Krugman, Jagdish Baghwati, John Eatwelll, Lance Taylor, Milton Friedman and Jeffrey Sachs. Everyone in the financial sector has chipped in, from The Economist to George Soros and all sorts of civil society groups and NGOs, such as ATTAC in France, Oxfam UK, 50 Years is Enough in the US and Focus on the Global South in Thailand. There is no shortage of ideas – both good and bad.
4. ‘Picking winners,’ The Economist, 19 February 2000
5. Horst K๖hler, ‘Towards a more focused IMF,’ address at the International Monetary Conference, Paris, 30 May 2000.
6. ‘Making the IMF’s independent evaluation office (EVO) operational: A background paper,’ August 2000.
Downloaded from IMF website. The report notes that $2.5 million has been set aside for direct staffing costs, presumably for one year. With a projected staff of 11, that works out at $227,000 a head.
7. IMF member’s quotas and voting power, as at 13 September 2000. Downloaded from IMF website.
8. ‘Aiming to give poor countries a bigger voice,’ Victor Mallet, Financial Times, 13 September 2000
9. Joseph Stiglitz, ‘What I learned at the world economic crisis,’ in The New Republic, 17 April 2000
10. Devesh Kapur and Richard Webb, ‘Governance-related conditionalities of the international financial institutions.’ G-24 Discussion Paper Series, UNCTAD, August 2000. Downloaded from website.
11. World Bank, World Development Report 2000/2001: Attacking poverty, September 2000
12. This is the opening line of the World Bank’s mission statement, etched in glass in the splendid foyer of the Bank’s Washington headquarters.
13. World Bank Fact Sheet, ‘The World Bank, NGOs and civil society,’ April 2000. The Bank reports that more than fifty per cent of projects approved in 1999 involved NGOs and civil society “in some way” and that is has 64 representatives “on the ground” working with NGOs.
14. ‘World Bank chief takes a swipe at NGO groups,’ IPS, 3 September 2000
15. UNRISD, Visible hands: Taking responsibility for social development, July 2000, p.xvi.