IMF, WB have caused misery to poor nations
Oct 29, 2008
When the World Bank (WB) and the International Monetary Fund (IMF) required the government of Mali to privatise its cotton sector, President Amadou Toumani Toure travelled to Washington in 2005 to plead for the reversal of the policy to no avail.
By Peter Mulira
When the World Bank (WB) and the International Monetary Fund (IMF) required the government of Mali to privatise its cotton sector, President Amadou Toumani Toure travelled to Washington in 2005 to plead for the reversal of the policy to no avail.
Cotton was the country’s main foreign exchange earner but the condition had to be fulfilled if mali expected to get loans and credits. Later the President was to lament about his experience that “people who have never seen cotton come to give us lessons on cotton. No one can respect the conditionalities of donors.
They are so complicated that they themselves have difficulty getting us to understand them. This is not partnership. This is a master relating to a student.â€
The liberalisation of the country’s cotton industry wreaked havoc as cotton revenues fell by 20 percent in just one year following the industry’s exposure to the vagaries of the world cotton markets where prices are depressed by subsidies given to farmers in the United States and the European Union and this led farmers to abandon the sector.
Mali’s example can be replicated in all African countries which have succumbed to the conditionalities of the WB and the IMF over the last 25 years.
These conditionalities led to aggravated poverty for the people of those countries a subject explored in depth in a new book aptly entitled From poverty to power†by Duncan Green. in this book, the author offers alternative options and argues that leaders, organisations and individuals need to come together in the fight against the poverty scourge instead of being dictated to.
A staffer with Oxfam Green provides a tour de force of the poverty situation in Africa and how to fight it from the vantage point with a vast experience in the field. In his foreward to the book, Amartya Sen, an adviser to Oxfam, gives three important reasons why the book must be widely read.
First the book brings out the role of powerlessness in generating poverty and the effectiveness of empowerment in overcoming deprivation.
Secondly, its analysis of the issues provide correctives to the tendency to think of poverty removal in terms of economic growth. Lastly and most importantly, by recounting areas of achievements the book helps to remove the cynicism and pessimisms which have become pervasive in the fight against poverty.
Although Green covers a wide spectrum of the subject, it is his analysis of the international financial system that one finds most disturbing. After 25 years of experimentation with dosages of economic prescriptions ordered by the two international institutions, Africa has nothing to show for them except retrogression.
By contrast, countries like Vietnam and China which rejected the WB and IMF’s policies saw incomes increase by 135 per cent and 75 per cent in the same period compared to Africa’s annual per capita between 1990 to 2005 which was only 0.5 per cent.
Similarly, in Latin America where the same policies were introduced the 1980s are seen as a lost decade for the region’s development. Green notes that both the WB and IMF’s staffs are hardworking and smart and genuinely committed to promoting growth and poverty reduction. However, he blames the institutions’ failure to deliver to three powerful forces that have held back efforts to learn from the failures of adjustment policies and to change the way the two institutions work.
First on the block is the power of the shareholders. The book claims that the US and other rich countries exert inordinate influence on the boards and use their positions to promote their national interests giving the example of liberalisation which provides access for rich countries investors and exporters in developing markets.
Secondly, it is noted that orthodox economic approach to sluggish growth and inflation has excluded many other possible options and thirdly Green points out that staff concern for career and salary leads to conformity and conservatism leading to financial crises.
He writes: “The impact of these arcane manoeuvres on poor people can be devastating. In the 1998-99 financial crisis, Indonesia’s economy was cut almost in half, a loss of 45 per cent of GDP.
In Argentina poverty doubled in a single year during the crisis of 200 1-02. Since rich people are usually better at protecting their assets for example by spiriting their wealth out of the country. Financial crises almost always increase inequality.â€
The book has interesting recommendations to make both the WB and the IMF relevant in the fight against poverty. For example, we are told that the WB should strengthen its support for technological advances in health and agriculture sectors where national governments and individuals may not have the incentive to invest and the IMF on its part should concentrate on monitoring economies that threaten global financial stability while recommending that donor countries should stop making their aid conditional on a country having a WB or IMF programme.
Green is against market liberalisation arguing that it is downright damaging because sudden inflows can lead to currency depreciation making the country’s exports less competitive.
Secondly, he points out that investors in liberalised markets are prone to ‘herding’ that is jointly rushing into and out of an economy in such huge numbers that they distabalise it.
But he is quick to point out that reform must be preceded by corrective measures to the effects of the stabalisation policies of the last 25 years. It is interesting to note that countries which have maintained financial controls such as China, Chile and India have been spared the kind of financial crises we have experienced in Africa and Latin America.
Perhaps we should heed the advice of John Maynard Keynes one of the best economists of the last century who said way back in 1941: “ Loose funds may sweep around the world, disorganising all steady business.
Nothing is more certain than that movement of capital funds must be regulated.†From Poverty to power is a book which must be read by whoever is interested in finding solutions to our continent’s inequality and deprivations.
It will change peoples’ perception that there is only one route to development—prescribed by the World Bank and International Monetary Fund.
The writer is a lawyer
When the World Bank (WB) and the International Monetary Fund (IMF) required the government of Mali to privatise its cotton sector, President Amadou Toumani Toure travelled to Washington in 2005 to plead for the reversal of the policy to no avail.
Cotton was the country’s main foreign exchange earner but the condition had to be fulfilled if mali expected to get loans and credits. Later the President was to lament about his experience that “people who have never seen cotton come to give us lessons on cotton. No one can respect the conditionalities of donors.
They are so complicated that they themselves have difficulty getting us to understand them. This is not partnership. This is a master relating to a student.â€
The liberalisation of the country’s cotton industry wreaked havoc as cotton revenues fell by 20 percent in just one year following the industry’s exposure to the vagaries of the world cotton markets where prices are depressed by subsidies given to farmers in the United States and the European Union and this led farmers to abandon the sector.
Mali’s example can be replicated in all African countries which have succumbed to the conditionalities of the WB and the IMF over the last 25 years.
These conditionalities led to aggravated poverty for the people of those countries a subject explored in depth in a new book aptly entitled From poverty to power†by Duncan Green. in this book, the author offers alternative options and argues that leaders, organisations and individuals need to come together in the fight against the poverty scourge instead of being dictated to.
A staffer with Oxfam Green provides a tour de force of the poverty situation in Africa and how to fight it from the vantage point with a vast experience in the field. In his foreward to the book, Amartya Sen, an adviser to Oxfam, gives three important reasons why the book must be widely read.
First the book brings out the role of powerlessness in generating poverty and the effectiveness of empowerment in overcoming deprivation.
Secondly, its analysis of the issues provide correctives to the tendency to think of poverty removal in terms of economic growth. Lastly and most importantly, by recounting areas of achievements the book helps to remove the cynicism and pessimisms which have become pervasive in the fight against poverty.
Although Green covers a wide spectrum of the subject, it is his analysis of the international financial system that one finds most disturbing. After 25 years of experimentation with dosages of economic prescriptions ordered by the two international institutions, Africa has nothing to show for them except retrogression.
By contrast, countries like Vietnam and China which rejected the WB and IMF’s policies saw incomes increase by 135 per cent and 75 per cent in the same period compared to Africa’s annual per capita between 1990 to 2005 which was only 0.5 per cent.
Similarly, in Latin America where the same policies were introduced the 1980s are seen as a lost decade for the region’s development. Green notes that both the WB and IMF’s staffs are hardworking and smart and genuinely committed to promoting growth and poverty reduction. However, he blames the institutions’ failure to deliver to three powerful forces that have held back efforts to learn from the failures of adjustment policies and to change the way the two institutions work.
First on the block is the power of the shareholders. The book claims that the US and other rich countries exert inordinate influence on the boards and use their positions to promote their national interests giving the example of liberalisation which provides access for rich countries investors and exporters in developing markets.
Secondly, it is noted that orthodox economic approach to sluggish growth and inflation has excluded many other possible options and thirdly Green points out that staff concern for career and salary leads to conformity and conservatism leading to financial crises.
He writes: “The impact of these arcane manoeuvres on poor people can be devastating. In the 1998-99 financial crisis, Indonesia’s economy was cut almost in half, a loss of 45 per cent of GDP.
In Argentina poverty doubled in a single year during the crisis of 200 1-02. Since rich people are usually better at protecting their assets for example by spiriting their wealth out of the country. Financial crises almost always increase inequality.â€
The book has interesting recommendations to make both the WB and the IMF relevant in the fight against poverty. For example, we are told that the WB should strengthen its support for technological advances in health and agriculture sectors where national governments and individuals may not have the incentive to invest and the IMF on its part should concentrate on monitoring economies that threaten global financial stability while recommending that donor countries should stop making their aid conditional on a country having a WB or IMF programme.
Green is against market liberalisation arguing that it is downright damaging because sudden inflows can lead to currency depreciation making the country’s exports less competitive.
Secondly, he points out that investors in liberalised markets are prone to ‘herding’ that is jointly rushing into and out of an economy in such huge numbers that they distabalise it.
But he is quick to point out that reform must be preceded by corrective measures to the effects of the stabalisation policies of the last 25 years. It is interesting to note that countries which have maintained financial controls such as China, Chile and India have been spared the kind of financial crises we have experienced in Africa and Latin America.
Perhaps we should heed the advice of John Maynard Keynes one of the best economists of the last century who said way back in 1941: “ Loose funds may sweep around the world, disorganising all steady business.
Nothing is more certain than that movement of capital funds must be regulated.†From Poverty to power is a book which must be read by whoever is interested in finding solutions to our continent’s inequality and deprivations.
It will change peoples’ perception that there is only one route to development—prescribed by the World Bank and International Monetary Fund.
The writer is a lawyer