The International Monetary Fund defied its critics yesterday, saying countries are not impoverished by globalization, as protesters contend, but because they have not embraced the world trading system.
Leaders of the IMF have been largely silent in the face of a half-week of noisy demonstrations by protesters, who blame the exploits of the IMF, the World Bank and large, multinational corporations for impoverishing about 90 countries in the Southern Hemisphere.
The IMF took the opportunity to rebut those charges for the first time with the release of its annual “World Economic Outlook” report yesterday, which contains an unusual 120-page supplement on the causes of poverty around the world and what countries might do to break the poverty cycle.
The lending agency concluded that in country after country, studies show that increasing trade has resulted in higher growth, incomes and prosperity. It notes that most developing countries that are succeeding at modernizing their economies accept the important role that trade plays.
“Rejections of globalization principles are quite rare … in emerging market countries in East Asia and elsewhere that have successfully integrated their economies into the global trading system,” the IMF said.
“Rather, the most vocal critics of globalization are often found among advocates of developing countries who come from the advanced countries,” it said in a veiled reference to the protesters.
Some countries view “globalization” as “westernization” and “choose to turn their back on the outside world,” the IMF said. But such “retreats from globalization are very costly and are especially harmful to the poor.”
The protesters couldn’t disagree more. They are adamant that the free flow of money and goods around the world is responsible for problems from poverty and hunger in the Third World to unemployment and environmental degradation in industrialized countries.
“The World Bank and IMF are forcing these countries to increase exports and reduce their domestic demand. That helps the multinational companies and hurts the people,” said Kevin Danaher of Global Exchange, one of the protesting groups.
The demonstrators’ manifesto, published by Mobilization for Global Justice, says Third World nations are forced to open their economies to exploitation by corporations to get the cash they need to repay debts to the IMF, World Bank and other lenders.
Further impoverishment is caused by the economic austerity programs the IMF and World Bank impose as a condition of giving loans, the manifesto says. Subsidies for basic necessities like food and fuel and funding for education and health care are cut to make room for debt payments under IMF programs.
Both sides agree that low levels of education and inadequate health care are major causes of poverty, though they sharply disagree on who is responsible. The IMF says Third World governments have placed a low priority on those areas as they pursued wars and enriched the local elite.
The IMF blames “misguided economic policies, weak institutions, political instability, and recurrent civil unrest and armed conflicts,” as well as “the legacy of support provided during the Cold War era to nonreformist, unaccountable and often corrupt political leaders.”
But the protesters assert poor countries lack the resources to fight AIDS, educate children and tend to other necessities because of their heavy debt loads and the IMF and World Bank austerity measures.
World Bank President James Wolfensohn sought to appease critics yesterday, saying that the bank and IMF are more focused now than ever on eradicating poverty.
“People really care about it,” he said, though he added that the institutions still need “a change in culture” to more fully address chronic poverty in sub-Saharan Africa and elsewhere.
At the same time, he said, “globalization is not an issue that I think we can either turn back or say is not there.”
Some outside experts also came to the defense of the beleaguered institutions yesterday.
“There is a risk that the enormous benefits of the World Bank and the IMF programs will be overshadowed and unjustly called into serious question because of oversimplifications or misrepresentations about the positive effects of these programs, and because the Bank and the IMF are out-organized in the battle for public opinion,” said Sherman Katz of the Center for Strategic and International Studies, a District of Columbia think tank.
“There is no question that the programs of these institutions produce winners and losers. There is also no question that the bank and the IMF need to consider how they can help their borrower client-countries do a better job of extending a safety net to those who may be hurt in the short run,” he said.