Bailout Blunders: More Money for the IMF?
Knight-Ridder/Tribune Media Services, August 5, 1998
The Clinton Administration is facing a bitter standoff with Congress over money for an organization that most people have never heard of: the International Monetary Fund. And that's exactly their problem: they want the money-- a whopping $18.5 billion-- but they don't want anyone to know where it's really going or what it is used for.From outside the Beltway it looks like the usual gridlock: the Republicans have attached an anti-abortion provision to the bill authorizing the IMF funding. The White House has promised to veto any bill that includes the anti-abortion language. But it's really the Administration's inability to justify the IMF's destructive policies that has allowed opponents to sabotage the bill.
For 53 years the IMF has operated in the shadows, making major economic policy decisions for most of the countries in the world. These policies have often been disastrous-- witness the 50% decline in the Russian economy over the last seven years, a catastrophe worst than our own great depression. Until recently they have been able to avoid responsibility for these foul-ups, in part because their decisions and agreements are kept secret from the public.
The Asian financial crisis has cleared some of the brush away from the IMF's hideout. It is now universally recognized that they actually worsened the situation. Harvard's Jeffrey Sachs has noted that the IMF is "in a process right now of relentlessly squeezing these economies so inappropriately that clearly they're not only not restoring market confidence, they're pushing those economies deeper into crisis."Nonetheless, the Administration wants to give this institution a vote of confidence at a time when it is under attack all over the world. This is a way of telling the world that the IMF still has the full support of the United States, no matter how much pain and suffering its "mistakes" may cause for millions of people.
From the Administration's point of view, the worst possible outcome would be a public debate over the IMF's policies. This is a debate that it can only lose. Better to maintain the status quo, in which most people don't even know what the three initials stand for.
As a result, they have mainly tried to pressure members of Congress by evoking images of a "financial meltdown" if the money is not approved. This is a pretty far-fetched and hazy scenario: something about banks all over the world going under because they can't collect on their loans to Indonesia and maybe Thailand. And then the US stock market crashes, too.The argument begins to break down when one considers that the money for the IMF isn't even going to finance any part of the bailout for the Asian economies. That money, which so far has gone mainly to bail out big banks like Chase Manhattan and Citibank, has already been allocated. This new $18.5 billion is for the IMF, to reward them for their great work.The Clinton administration has been gambling that its dire warnings will remind people of last October's stock market dips. The hope is that members of Congress will fear being blamed for any stock market crash in the U.S. that could be linked to worsening economic conditions in Asia.But stocks have doubled in value over the last three years, and almost anything could set off a retreat from record highs. If fear of upsetting the stock market is going to be our guiding principle, we might as well close down the Congress-- or that part of it that isn't already owned by Wall Street.
Over the next year, the US economy is expected to lose more than a million manufacturing jobs as the fallout from the Asian financial crisis expands our trade deficit. The United States will be hit by a flood of cheap imports. At the same time our exports to the region will fall, because they will be more expensive to buyers there, and also because of the recessions in these countries.
Who's responsible for the displacement and suffering that will be caused by this further "hollowing out" of our manufacturing base? The IMF certainly deserves the lion's share of the blame. By unnecessarily forcing these countries into recessions, and leaving them no way to grow except through exports based on undervalued currencies, they have greatly worsened the impact of the crisis, both here and abroad.
These are the kinds of issues that would inevitably come to the fore in a debate over IMF funding. No wonder the Clinton Administration is pursuing an "insider" strategy to get this money.
Mark Weisbrot is co-director of the Center for Economic and Policy Research, in Washington, D.C. and president of Just Foreign Policy. He is also the author of the forthcoming book Failed: What the "Experts" Got Wrong About the Global Economy (Oxford University Press, 2015).