Toronto Star, December 19, 1997
Richard Gwyn - Home and Away
Richard Gwyn usually writes Sunday, Wednesday and Friday. His Internet address is gwyn@inforamp.net
By Richard Gwyn
FOR ALMOST ALL practical purposes, the Washington-based International
Monetary Fund (IMF) is now the government for the 350 million people living
in South Korea, Indonesia, the Philippines and Thailand.
It's the IMF rather than the elected governments of these countries (no matter that in some instances the word "elected can only be used in its broadest sense) that is now determining all the matters that really affect the lives of people there - the level of unemployment, the level of interest rates, the value of the currency, the rules about banking and investment.
The IMF's writ is far wider than this. In another 71 countries, from Albania to Zimbabwe, with a combined population of over one billion or about one-fifth of all the people in the world, where the IMF is operating what it calls "programs," this international institution has similarly largely displaced and replaced the authority of the nation-state governments.
Never in history has an international agency exercised such authority.
It's time long over-due for a hard look at this nascent global government..
The first thing to be said about the IMF is that it isn't very competent. In its 1997 annual report published early last summer, the IMF had this to say about South Korea, a country now in deep financial and economic recession:
"Directors welcome Korea's continued impressive macro-economic performance (and) praised the authorities for their enviable fiscal record."
About Thailand, which has suffered a 50 per cent drop in the value of its baht and which now faces unemployment soaring to 2 million, the IMF report declared:
"Directors strongly praised Thailand's remarkable economic performance and the authorities' consistent record of sound macro-economic policies."
Even Hubert Hoover, on the eve of the Great Depression, wasn't so far off the mark.
Americans in the 1930s, though, had a democratic option, which they took: They replaced Hoover with Franklin D. Roosevelt.
About the IMF, no one can do anything. It's unelected, unaccountable and as secretive about its decisions and actions as the regimes in countries like Thailand and Malaysia which brought disaster upon themselves by keeping the state of their finances, most especially the extent of their foreign borrowings, from their publics and from the international financial system, and indeed from the regimes themselves, save for a few insiders.
The second thing to be said about the IMF is that it gives to those who have and takes from those who already have little or nothing.
The great beneficiaries of the $100 billion (U.S.) the IMF has committed itself to pour into Southeast Asia will be the investors (especially the foreign ones) and the bankers and the bureaucrats and the politicians of the regimes that created the disaster in the first place.
Those who will carry the cost of implementing the IMF's policies - slashes in government spending; high interest rates (25 per cent in the instance of South Korea) - will be the ordinary workers and farmers (because of high oil prices) and small businessmen.
The third thing to be said is that even if the IMF may have got it glaringly wrong in the first place, and may now be punishing the wrong people, it, as matters a good deal more, may well be doing all of this in the wrong way.
Austerity was the remedy North American and European nations first tried to cure the Depression.
The consequence was a vicious downward spiral as ever more factories closed because people lacked the money to buy their goods - until enough leaders turned to the pump-priming remedies of John Maynard Keynes.
Southeast Asia's root problem, though, is political rather than economic. All the economies there remain essentially sound, with hard-working and well-educated labour forces and pretty efficient infrastructure.
The real cause of the disaster is "crony capitalism," or the secretive and unaccountable - the same words used above to describe the IMF is deliberate - systems encompassing politicians, bureaucrats, bankers and favoured industrialists (favoured because they fund the regimes', so-called, elections).
In essence, one form of cronyism is being replaced by another and overlaid by "socialism for the rich" or the use of public money (all of which come from industrialized countries, that's to say from us) to save political and economic elites from the consequences of their actions.
The IMF's defence is that it's a financial institution, not a political one. It' job is to keep the system going and prevent panics.
But money is politics. Most of the rest of politics is rhetoric and symbols.
So what it's really time long overdue to do is to de-cronyize the IMF. That means politics, no differently for a world government than for our own nation-state governments.
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