The International Monetary Fund (IMF) was established in 1945 subsequent to the conclusion of World War II at the Bretton Woods Conference in New Hampshire with an expectation to promote economic co-operation among states through short-term financial assistance for commercial purposes.

Since its incorporation, the bank’s uninterrupted existence has been solidified with donations by member states which in turn defines its leadership and policies. In 1998 the US held 18 per cent of the votes within the organisation and, along with Germany, Japan the United Kingdom and France, controlled 40 per cent of shares with a small percentage owned by 175 states. Hence, the agenda is primarily dictated by the Government of the United States of America.

During the mid-1970s the establishment expanded its role to address monetary aid for countries in crisis. With such leverage it gained unbridled prominence which, when translated, reinvents economic prerequisites for loans, international assistance, and debt relief and magnifies social unrest for its recipients.

Any assistance given by the IMF has accompanying conditions — intended and unintended. These conditions, referred to earlier as structural adjustment, are imposed with declared vision to improve the lot of receiving countries, but…

The following are some classic illustrations of IMF engagement by continent and decade:

The 1970s — North America

In an attempt to advance socialism and a new world order inclusive of neighbouring communist Cuba, Jamaica’s Prime Minister Michael Manley was confronted with resistance from Washington, and ultimately his demise in 1980 acquiesced to the IMF’s austerity measures. As the lender sought and won staff redundancies (10,000 – 11,000 workers) within the public sector, greater control of the State-run operations by the private sector, the dismantling of a large range of social programmes, the removal of income distribution policies, a devalued currency, and increased importation of Western products, the country’s unravelling state of affairs exposed the flight of local technocrats, the loss of foreign exchange and an escalation of violence in urban areas — an onslaught oftentimes compared to the Lebanese debacle of the early 1980s.

By the same token, Mexico succumbed to the imposition of drastic conditions in relation to restricted government spending, and real wage rates declined in excess of 40 per cent. Presently 60 per cent of the employed earn minimum wage with the purchasing capacity of 25 to 50 per cent of their essential needs.

The 1980s — Africa

As the largest beneficiary of structural adjustment assistance, Ghana between the years 1983 and 1990 suffered from severe cuts in accordance with the bank’s directives that directly affected basic social services. Education spending was reduced to half its 1975 levels, scores of jobs were lost, and overall enrolment rates rapidly declined from 1983 to 1987.

Mozambique was likewise susceptible to negative influence attributed to IMF intrusion. The mediation of a pact in 1987 advanced budgetary restraints, thus eliminating local subsidies and in its stead introduced hefty price hikes. Between the months of March and April 1988 rice prices rose from 20 cents a kilogramme to $1.32, sugar from 25 cents to $1.32, and maize from 14 to 56 cents. In essence, the acquisition of basic commodities which intensified in cost by 300 – 500 per cent within one month presented a test of sacrifice for the disenfranchised and even qualified secondary school teachers who in the year in question received two salary adjustments in increments of 50 and 15 per cent.

According to the UN Economic Commission for Africa, expenditure in education and health care to IMF-programmed countries declined by 25 and 50 per cent during the 1980s, with the latter accounting for the death of five million children under the age of five within the same time frame.

The 1990s — Asia

The IMF, in response to the 1997 East Asian fiscal crisis, instructed Thai and Indonesian authorities to reduce government programmes and tighten monetary policy. Consequently, both countries endured a massive ongoing outflow of capital estimated at $100 billion by 1998, weakened currencies (the baht by 50 per cent and the rupiah by 75 per cent against the US dollar), the exclusion from support on the international market and the collective closure of 80 commercial banks (50 in Thailand and 30 in Indonesia). In a similar fashion, a prescription for South Korea, which entailed a $58-billion loan, increased interest rates and the devaluation of the local currency culminating in a recession from bankruptcies, accelerated unemployment (8,000 workers per day), and a decrease in government spending.

The turn of the century — South America

Under duress Argentina complied with the IMF’s measures to introduce labour market flexibility that endorsed diminishing employee privileges and undermined the effective presence of labour unions. As a result, the passage of unfavourable laws resulted in general strikes and an unprecedented deprivation of jobs.

Unlike industrialised States, advised and aided to promote national spending, tax reduction and low interest rates as requisites for investments, the Third World community is confronted with a recipe for disaster. To this end, impoverished debtor nations are challenged with punitive consequences.

Herein lies a sample of the comprehensive nature of the dilemma:

Fiscal Liability:

* An overall sum of $6.5 billion in interest and $12.5 billion with principal per month (the total is on par with the Third World’s monthly contributions to education and health).

* An increase of over 127 per cent in debt since 1982.

* An external debt that has quadrupled as a percentage of GNP since 1980.

* Debt service the equivalent of over 25 per cent of exports

Human Paralysis:

* Over 100 million children between the ages of 6-12 do not attend school.

* Another 125 million withdrawn from primary schools in under four years.

* Approximately 830 million are illiterate.

* 1.2 billion people live in absolute poverty.

* 80 per cent of malnourished children reside in developing countries that have adopted export-oriented production in lieu of tradition farming.

* 1.6 billion inhabitants are without potable water.

* 2 billion people are unemployed or underemployed.

With severe disparity (eg, an income ratio of 150 to 1)) directly affecting human development, criticism soars. Davison Budhoo, an illustrious Grenadian economist and former IMF official who now spearheads the Bretton Woods Reform Movement, in response to increasingly genocidal policies confirms, “The IMF bails out investors, not the people of troubled countries. It might be time to abolish the IMF.”

In fact, a 1988 IMF internal study authenticates the failure of at least 40 programmes instituted between 1983 and 1987 to encourage economic growth, reduce fiscal and balance of payment obligations, and lower inflation and stabilise external debt. Moreover, intensified demands from the grass roots antagonists in the form of US Network for Global Economic Justice, Campaign for Labor Rights, Institute for Policy Studies, and Global Economy Project, to name a few, and an ability to incorporate only 36 of 79 states through the 1987 stringently Enhanced Structural Adjustment Facility have given rise to the introduction of the Poverty Reduction and Growth Facility. This programme requires interaction with civil society for additional loans and debt relief and a commitment to monetary alleviation for the world’s poorest countries. Yet NGOs doubt the value of consultation if standards are cosmetically altered for the IMF’s seal of approval.

Given a history which includes the organisation’s failure to aid 30 of 40 States hich meet the rigid criteria for Heavy Indebted Poor Country initiative in 2000, the body must rethink its formula and commit to a meaningful solution in support of social justice and economic prosperity worldwide. Unequivocally, in an effort to offset a climate of regression that will adversely affect industrialised economies in the near future, a restructured organisation should demonstrate accountability to and interest in the well-being of all clients. Therefore, a reversal of past procedures, coupled with major debt reductions and long-term investments, are prime components for lasting success.

Leroy A Binns, PhD, is a lecturer within the Department of Government at the University of the West Indies, Mona, (WJC). Send comments to the Observer or labenz@dr.com.