CRITICISM
OF THE INTERNATIONAL and REGIONAL FINANCIAL INSTITUTIONS
Thousands
of protestors at the recent Asian Development Bank’s 45th
General Meeting in Manilla held posters calling the ADB “Asia’s
Destructive Bank – Promoting Poverty in Asia and the Pacific”.
At the same time the Asian Pacific Research Network (APRN) – a very credible organisation – issued a statement challenging the Asian Development Bank...
At the same time the Asian Pacific Research Network (APRN) – a very credible organisation – issued a statement challenging the Asian Development Bank...
“to promote rights and not just growth, genuine development and not just destruction”. The statement went on: "Development must enable the poor to claim their political, economic, social and cultural rights. ... History shows that ADB projects have beenin the interest of business and have resulted in spiralling poverty,marginalisation and worsening environmental degradation.”
Many
people all over the world are facing growing poverty and inequality.
They are crying out for greater social justice. It is apparent that
the economic system of neo-liberalism at the basis of globalisation
has not delivered social justice. It is this economic system which
has driven the policies of the International Financial Institutions
(IFIs) such as the World Bank and the International Monetary Fund
(IMF) and the Asian Development Bank – especially through the
structural adjustment policies they imposed on developing countries
which were unable to repay their debts. These policies (such as
reducing the size of government, cutting social expenditure on health
and education, tax “reforms” and labour “reforms” as well as
the opening up of markets and privatising public services) were
supposed to help these countries out of poverty and assist their
development. Instead they succeeded in deepening the debts and
creating a greater dependence on the wealthy nations of the world.
Over
the years many developing countries (including Fiji) have been
following (or advised/forced to follow) the policy directives of the
World Bank, the IMF, and the ADB despite the fact that these policies
have created greater poverty and inequality in other countries. The
findings of the Melzer Commission of the US Congress (2000) are worth
repeating and remembering:
“ Neither
the World Bank nor the regional banks are pursuing the set of
activities
that could best help the world move rapidly toward a
world
without poverty or even the lesser, but more fully achievable goal
of
raising living standards and the quality of life, particularly in the
poorest
nations of the world.”
Arundati
Roy in her book The Ordinary Person’s Guide
to Empire has this to say:
“For
all the empty chatter about democracy, today the world is run by three
of the most secretive institutions in the world: the International Monetary
Fund, the World Bank and the World Trade Organisation, all three
of which, in turn are dominated by the United States. Their decisions
are made in secret. The people who head them are appointed behind
closed doors. Nobody really knows anything about them, their politics,
their beliefs, their intentions. Nobody elected them. Nobody said
they could make decisions on our behalf. A world run by a handful
of
greedy bankers and CEOs who nobody elected can’t possibly last.”
Kalvajit
Singh (2005) agrees and says that while these institutions preach
democracy and good governance to others they do not practice them.
Some
have noted that the recent scandal surrounding Straus Khan former
head of the IMF was very symbolic. He was accused of attempting to
rape a Hotel maid. It seems that the charge was withdrawn. However
many would say that the IMF has been instrumental in raping many poor
countries for a very long time and that charge has not been
withdrawn.
At
last year’s Fiji Update in Lautoka a former World Bank employee
praised Fiji for following a WB/IMF suggestion/directive to devalue
its currency by 20% saying how it had helped to improve foreign
reserves. One lecturer from USP challenged this saying that the
devaluation had caused great hardship to the ordinary and poorer
people of the country because it had the purchasing power of their
wages and had increased the price of food by over 30%. The former WB
gentleman said with some distain that it had been a good
macro-economic policy and improved the economic situation of Fiji and
it didn’t matter how it affected the people in the short term. The
policy was not concerned with its effects on the people but its
effects on the economy. Everyone in the room was aghast! It seemed
clear that in the thinking of this economist, economic principles and
theories must take precedence over their consequences for the people.
The
economic jargon used by the IFIs often implies that the economy is
some impersonal force out there that has to be obeyed or some sort of
monster that must be fed or else …. We hear of “requirements”
and “demands” and we want to ask “whose requirements?” and
“whose demands?” We hear of “distortions” and we want to ask
“distorted by whose standards?” The language is so passive and
impersonal that one gets the impression that economists need to hide
behind this formal jargon because they would be embarrassed to say
clearly and simply what the consequences of their policies are on
real live people. The jargon evades honesty. It does not talk about
people and says nothing about who profits and who suffers. It veils
individual and corporate greed and self interest.
In
the current rhetoric about the economy little is said about the needs
of people. Economic growth is the priority and people don’t rate a
mention. Little is said about how economic growth will translate
into human development. The old “trickle down” theory is now
recognised as nothing but a myth. The economy of every country is
meant to be at the service of the people and their basic needs.
However neo-liberal economic theory based on economic rationalism
seeks to serve the interests mainly of the rich and their demands for
greater profits.
It
seems that there is a fanatical fundamentalism behind the extreme
form of neo-liberal capitalism running rampant in our world today.
It seeks to produce ever more money for those with the most wealth
with no limits or regulations. Everything is subjugated to corporate
profit. The demands of individual greed and unlimited profit have
been allowed to dominate the business world and governments are often
forced to bow to the powerful lobbies of corporations and business
elites. Worldwide there is a very unequal distribution of wealth
and development. Some say that our current economic system is one of
the most unjust the world has ever seen. The Common good, social
justice, compassion and concern for the poor are not values in a
market-driven economy dominated by greed.
The
IMF policy of “Poverty reduction through ... “ and the ADB policy
of “Poverty alleviation through private sector development” sound
great. Yet in reality they show little real concern for poverty but
show great concern for private sector development. They promote the
interests of investors and advise governments to venture into
privatisation (or corporatisation) of public assets such as water,
electricity, education and even prisons or at least into
public-private partnerships (PPPs). In many ways they encourage what
some have called “crony capitalism” often described as a close
relationship between businessmen and the government in such a way
that the success of the business sector is not so much determined by
a free market and the rule of law but is dependent on the cosy
favouritism that is shown to it by the ruling government in the form
of tax breaks, grants, low wages, restrictions on worker’s unions
and other government “incentives”. It usually depends on close
relationships that exist between business people (and their lobbies)
and government ministers or officials.
These
trends are very worrying if one is concerned about social justice,
poverty, inequality, just wages and the rights of workers because
they place the interests of investor capital above those of labour
and the interests of the rich above those of the poor. They favour
those with capital and business interests and help to maintain
certain small groups in positions of wealth, power and privilege.
But they have little to offer to the poor and ordinary people in Fiji
except greater poverty, low-wage employment and very uncertain and
questionable “trickle-down” benefits. Only by broadening its
horizons to include more than the particular interests of specific
individuals or groups can a society establish socially just and
stable foundations.
In
his recent book entitled Poverty and Power
(2008) Duncan Green from Oxfam writes at
length about the IFIs:
“For much of the last 25 years the IMF and the World Bank have beenpursuing nothing less than a radical overhaul of the way that developingcountries run their economies. That role has been controversial and, inmany eyes, profoundly destructive ..... “
He
argues that overcoming the scourges of poverty, inequality and
environmental disaster requires a radical redistribution of power,
opportunities and assets and that the driving force for this radical
change must come from active citizens and effective states. In other
words the people themselves must be empowered to raise their voices
and fight for justice and hold the state and the private sector to
account. At the same time the State must be restructured in order to
make sure that development is people-centred. Leaders, organisations
and individuals must act together to bring about a secure, just and
sustainable world.
Years
ago in his book A History of Economics (1989)
the celebrated economist, Kenneth Galbraith,
attacked those economists who claimed no responsibility for the
social consequences of their theories. They justified themselves by
claiming that their principles and theories had independent
“scientific” validity and had nothing to do with moral principles
or ethical questions. He writes:
“The detachment and the justifying commitment to scientific validity as opposed to social concern are especially influential in our own time. When acting in his professional role, the economist does not contend with the justice or the benignity of classical or neo- classical economics. To proclaim economic injustice or failure is, scientifically speaking, off limits. ... The pretension of economics that it is a science is rooted in the need for an escape from blame for the inadequacies and injustices of the system.”
The
outcries of so many people in our world today are reminding us that
economic policies have moral consequences and the economic theories
on which they are based are underpinned by philosophical values which
can be evaluated by ethical standards.
The
bankruptcy of neo-liberal economics and its globalising exponents –
particularly the World Bank and the IMF – needs to be acknowledged.
We can no longer tolerate growing inequality and poverty and the
dominance of wealthy elites. As Mahbub ul Hag (1998) observed:
“We cannot leave intact the model of development that produces persistent poverty and wistfully hope that we can take care of poverty downstream through limited income transfers or discrete poverty reduction programs. ... A few technocratic programs downstream are not the real answer. The real answer lies in changing the very model of development, from traditional economic growth to human development, where human capabilities are built up and human opportunities enlarged, where people become the real agents and beneficiaries of economic growth rather than remain an abstract residual of inhumandevelopment processes.”
1 comment:
Wow, that is quite a bit of negativism. No good ever to come out of the ADB? It appears that our Finance Minister and PM was ill advised to attend the annual meeting of such an evil institution. May I remind good father that when Fiji still qualified for ADB assistance (before that little incident in 2006) we had roads that could be negotiated without a 4x4 and we had a power supply that worked without interruptions. But yes, denying support to the regime because of this minor incident in 2006 must be evil. The UN seems to be doing so much better. They do not fix our roads but they give us all these wonderful workshops which the regime hopes to use to legitimize their rule. And what about this evil grants from the EU that do not flow anymore because of the little upheaval in 2006 that regrettably violated the Cotonou agreement?
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