Journal of Commerce, March 28, 2000
Intellectualcapital.com, March 23, 2000
The Clinton administration claims to have learned something from the outpouring of protest against the World Trade Organization (WTO) last December. "Those who heard a wake-up call in Seattle got the right message," said President Clinton. Maybe so, but then they hung up the phone and went right back to sleep.
Fortunately for the world, the administration and its allies will not slumber for long. In just a couple of weeks, thousands of protesters will take to the streets of the other Washington -- the District of Columbia -- for a week of events that will probably rival Seattle in its impact on the institutions of globalization.
Religious groups will lead a rally for debt relief for poor countries on April 9. Organized labor will gather its troops and others to oppose the expansion of the WTO on April 12. And on April 16, the International Monetary Fund (IMF) and World Bank will face the first major demonstrations ever to take place on their home territory. In addition to a rally and march, many protesters will attempt to shut down the spring meetings of the Fund and the Bank with non-violent civil disobedience -- as they did with the WTO meetings in Seattle.
The Roots of Discontent
This is a movement that is not going away. In some ways it is reminiscent of the early stages of protest against the Vietnam War. Those who understand this movement know that unless there is a drastic change in our government's policy, it will continue to grow in numbers and in strength.
The analogy is appropriate along a number of dimensions: For years the American public was told that we were fighting for the freedom of Vietnam, and that victory was around the corner. As the casualties mounted and official lying was exposed, and the horror and cruelty of the war became more widely known, people began to question the prosecution of the war. Then they began to question the justification, and finally the motives of our entire foreign policy.
This time it is our foreign economic policy that is being held up to scrutiny, and for millions of Americans it has already become discredited. That this could happen at the peak of our longest-running economic expansion, with unemployment at a 30-year low, is further evidence that this movement is deeply rooted.
The Seattle protests plucked the WTO from its cozy obscurity and dragged it out into the daylight, where ordinary citizens could see the impact that it has on their lives, and the lives of other people around the world. This forced President Clinton to scuttle the WTO's Millennial round of negotiations.
The April protests will cause many people to learn about the IMF and the World Bank for first time, and others to find out more about what they do. This is almost certain to diminish support for these organizations.
The Case Against the IMF
The IMF is the most powerful financial institution in the world. It is arguably the most powerful institution of any kind, in terms of its impact on the lives of hundreds of millions -- and indirectly, billions-- of people. This is due to an informal arrangement under which borrowing countries must first reach agreement with the IMF, in order to get credit from other multilateral institutions, governments and often private sources as well. This gives the IMF the power to choose finance ministers and central bankers, and even to topple governments that do not comply with its conditions.
The U.S. Treasury Department is the overwhelmingly dominant influence in the IMF and holds this system together. So anything that weakens support for the IMF in its home base has the potential to collapse the whole arrangement. The recent report of a congressional commission that sharply criticized the IMF, and called for downsizing its mission, has contributed to this weakening. And the fight between the Clinton administration and Europe over who would head the IMF – recently resolved with the administration agreeing to support Germany's No. 2 choice, Horst Koehler -- is another sign of strain.
The IMF is commonly portrayed as a global rescue operation -- an international "lender of last resort" analogous to our own Federal Reserve at the national level. But this is not true, even in those instances in which the IMF intervenes in a crisis situation. The Federal Reserve will provide funds to a failing financial institution in the United States, in order to prevent the collapse from spreading. The IMF does something quite different: It helps to form a creditors' cartel, so that the lenders can collect as much as possible on their debt from the government that is facing a crisis. In the Asian crisis, for example, the main result of their intervention was to get governments such as those of South Korea and Indonesia to guarantee the debt of private borrowers.
Although the IMF’s most destructive policies are carried out in the poorer countries, they also hurt working people in the United States. For these reasons a growing portion of organized labor here is joining the movement to curb the power of the IMF. After all, unions opposed NAFTA because the agreement made it easier for American corporations to relocate to Mexico, drive down wages and undercut labor's bargaining power. The IMF does all of the things that NAFTA did, in dozens of countries, making it labor's most powerful adversary.
The IMF also pressures countries to produce for export rather than for domestic markets. This can cause a glut of manufactured or agricultural goods on world markets, driving down prices, encouraging "dumping" and putting more downward pressure on wages. Many of the thousands of steel workers who lost their jobs in the wake of the Asian economic crisis are casualties of IMF policies.
Time For a Wake-up Call
Although Treasury Secretary Larry Summers is now jumping on the reform bandwagon, it appears that he is simply trying to preempt demands for real change. He refuses to support cancellation of the poorest countries' debt to the IMF and the World Bank, a basic demand of the worldwide movement for debt relief. This debt is widely known to be unpayable, and it is within the means of these institutions to let go of these claims. But they refuse to do so, preferring to use these debts to maintain control over the economic policies of these countries. James Wolfenson, the head of the World Bank, and Koehler, soon to approved as the new managing director of the IMF, concur with Summers.
They're going to need a few more wake-up calls -- and next month's meetings in D.C. will provide another.