Last Updated: Friday - 09/24/2010

IMF 'neutrality' cloaks political agenda

The International Monetary Fund claims it is politically and ideologically neutral. It claims its recommendations are based on science. Let's examine whether this claim holds water.

There is great emphasis in the foreign aid community these days on the new buzzwords "result-based management." That is to say that the complex field of assistance should be left to professionals, while amateurs - the local people and their government - should submit to orders from foreign experts.

For an analysis of this theory it is necessary to look at the concrete reality in which people in the "developing" world live. We should check how they barely survive or no longer are able to live at all.

Jamaica was governed from 1972 to 1980 by the social democrat Michael Manley who was elected on a program of political and social reform. His political base was the large sector of the population which lived in extreme poverty.

He tried to persuade the private sector to cooperate with him, but the business people and landowners feared his radical rhetoric about social justice. Investments stopped and capital flight resulted.

Manley had two choices: confront the business elite or capitulate and make a deal with the IMF which in fact favours the upper class.

The result was that Manley not only lost the 1980 election, but the IMF program failed miserably. Despite sacrifices by most of the people the economic crisis was not solved.

Manley's conservative successor, Edward Seaga, received a preferential deal from the IMF with the usual "scientific" conditions. Bauxite production went down, the currency was devaluated, wages were lowered by 10 per cent and unemployment rose by 40 per cent.

The neutrality of the IMF expresses itself in practice as a negative response when it deals with progressive governments. No funds were made available to Chile between 1970 and 1973 to the popularly elected Allende government. Instead Chile was choked by political strangulation from the U.S. which tried to sabotage democratic reform.

Despite a flight of capital and a 30 per cent drop in private investment, the gross domestic product rose 8.5 per cent in 1971. On Sept. 11, 1973, Allende was assassinated by Pinochet and the CIA.

The figures speak for themselves. From 1968 to 1970 (under the Christian Democrats) Chile received $373 million. This was cut to $74 million from 1970-1973 (under Allende) but boosted to $737 million in 1974-76 after Pinochet took power.

Ideologically Pinochet's rule of terror fit with the IMF philosophy. Yet despite detaining and eliminating thousands of his opponents, Pinochet admitted in 1981 that his economic policy had failed.

He fraudulently held on to power and Western nations, including Canada, regarded the dictatorship to provide a favourable climate for investment and in the '90s Chile was promoted as the possible "fourth amigo" to join NAFTA.

In 1979 Nicaragua was embroiled in a civil war to oust the dictator Somoza. The IMF came to his aid with $60 million, in spite of repeated warnings by Church groups and NGOs that the money would disappear in his pocket.

"It is difficult to be scientifically objective," said an IMF official, "when you play golf with General Somoza." Somoza was soon ousted and the Sandinistas were left with a staggering debt.

After 1979, Nicaragua was the only country in the region which did not receive IMF assistance. But the U.S. congress voted hundreds of millions of dollars to support the contras in a protracted war which cost the country 60 per cent of its budget for defence.

Investors were determined that planned social reforms in favour of the poor would fail. In 1990 the Miami clique took over again and IMF assistance was restored. By 1995 Nicaragua had the highest foreign debt per capita in the world, totalling US $11 billion.

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