Transcript Diapositive 1

Danielle Sabai
Committee for the Abolition of Third Word Debt
What are the missions of the
Word Bank, the International
Monetary Fund and other IFIs ?
Reading their documents, one could think that the
International Financial Institutions are committed to
eradicate poverty.
 World Bank
“for more than 60 years, … has partnered with
governments worldwide, reducing poverty by providing
financial and technical help”.
Missions of the IFIs : Eradicate Poverty ?
 ADB
”ADB’s corporate vision under Strategy 2020 will continue to
be “an Asia and Pacific Free of Poverty”.
“The percentage of people living on less than 1$ a day could fall
to 2% by 2020”.
 IMF
“The IMF is an organization working to foster global
monetary cooperation, secure financial stability, facilitate
international trade, promote high employment and
sustainable economic growth, and reduce poverty around
the world”.
Missions of the IFIs : Eradicate Poverty ?
Results are far from satisfactory.
According to the latest ADB report (April
2013):
 “More than 600 million people in the Asia and the
Pacific region live in absolute poverty (less than 1,25$ a
day)”
 “One of every two individuals in the region (1.7 billion
people) remain poor (less than 2$ a day)”.
Missions of the IFIs : Eradicate Poverty ?
 “Child malnutrition is high: almost half of the children
in Afghanistan, Bangladesh, India and Nepal are
undernourished”.
 “1.9 billion people in the Asia and the Pacific region do
not have access to basic sanitation”.
Missions of the IFIs : Eradicate Poverty ?
Rapid economic growth has favoured rising
income with a resulting decline in absolute
poverty but :
 “This growth is not reaching all groups of the population”.
 “Economic inequality has increased in the past 10 years”.
 “The income and expenditures of the richest have grown
considerably faster than those of the poor”. (ADB)
Missions of the IFIs : Eradicate Poverty ?
Two observations are manifest :
 It is hard to find a trickle-down effect. The rich are
getting richer and the poor are increasingly
dispossessed and marginalised.
 The situation is worsening in countries that have
implemented policy prescriptions from the WB and
the IMF.
Do the IFIs really promote development?
 The mission of the IFIs is not to reduce poverty but to
promote economic growth of the South and possibly
through “development”.
 The “development” is an alibi of the IFIs to cover up
the objective of an unlimited accumulation of capital
to the benefit of a minority.
Do the IFIs really promote development?
What is at stake ?
 A unique, globalised, free market. It means :
 The liberalization of the developing countries’ markets
 Opening their markets in order to give multinational
corporations unprecedented access to cheap land,
resources and labour.
Do the IFIs really promote
development?
How do the financial Institutions proceed?
Loans to countries +
Structural Adjustment Programs
=
Money + Neoliberal policies
How do the financial Institutions proceed?
The Structural Adjustment Programs have
two components:
1)
To “stabilize” the economy of the borrowing country by:
 Devaluation of the currency and suppression of
exchange control
 Fiscal discipline
 Liberalization of prices, suppression of subsidizes.
How do the financial Institutions proceed?
2) Structural (counter) reforms which aim at liberalizing
the economy of the borrowing country:
 Free circulation of capital and merchandize,
privatization of banking, land and enterprises.
 Priority to the production for exportation,
deregulation of labor market, limitation of the power
of trade-unions.
 Fiscal reforms by the generalization of the VAT that
impacts the poorer more severely, no taxes on Capital
How do the financial Institutions proceed?
Opened up to global capital, the economic structure of
the country - sector after sector - rapidly changes.
The country remain sources of raw materials, pools of
cheap labour to serve the interests of the
industrialized countries.
What are the consequences of
Structural Adjustment Programs?
In the two regions with the longest experience in
structural adjustment: Per capita income has
stagnated (Latin America) or plummeted (Africa).
Structural adjustment has contributed to rising income
and wealth inequality in the developing world.
How SAP increase poverty?
Privatization
 Layoffs and pay cuts for workers in the privatized
enterprises
 The sell-off of government-owned enterprises to
private owners, often foreign investors.
Cuts in government spending
 Reduce the services available to the poor, including
health and education services
How SAP increase poverty?
Imposition of user fees
 Charges for the use of government-provided services like
schools, health clinics and clean drinking water. For very
poor people, even modest charges may result in the denial
of access to services.
Promotion of exports
 Countries undertake a variety of measures to promote
exports, at the expense of production for domestic needs.
In the rural sector, the export orientation is often
associated with the displacement of poor people who grow
food for their own consumption, as their land is taken over
by large plantations growing crops for foreign markets.
How SAP increase poverty?
Higher interest rates
 Exert a recessionary effect on national economies,
leading to higher rates of joblessness. Small
businesses, often operated by women, find it more
difficult to gain access to affordable credit, and often
are unable to survive.
Trade Liberalization
 The elimination of tariff protections for industries in
developing countries which often leads to mass layoffs.
How SAP increase poverty?
 The vast majority hardly benefit from the loans.
 In countries of the South, most loans were contracted
by dictators, strategic allies of the great powers of the
North.
 A sizeable proportion of the sums borrowed were
embezzled by corrupt regimes.
The destruction of the environment
The development of exports leads to :
 The overexploitation of natural resources
 Large scale production which totally destroys the
natural ecosystems, threatening the traditional way of
life of peoples, farmers and reducing their source of
income.
The destruction of the environment
 Huge energy or infrastructure projects are very often
inappropriate and built with total disregard for the
impact on the environment.
 Big projects often destroy the places where ethnic
minorities are living in a sustainable way with nature.
These communities are force to migrate to cities,
 They increase the number of poor dwellers living off
the informal economy or supplying cheap labour to
national or multinational capitalist enterprises.
The destruction of the environment
 Pillage of genetic material
 Excessive exploitation of natural resources
 Colossal attacks against the environment
=
Disastrous effects on the countries of the periphery.
The mechanisms of debt cycle
 Subject the developing country that borrow to the IFIs
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to their demands.
Most of the economic policy of the borrowing
countries is decided outside.
Debt repayment sucks up part of the social surplus
produced by the workers of the South and directs this
flow of wealth toward the holders of capital in the
North.
The ruling classes of the South take their commission.
The national economies they head stagnate or regress
and the populations of the South grow poorer.
The IMF and the Asian
financial crisis
The Asian meltdown in 1997 was caused in large part by
South Korea, Thailand, the Philippines, Malaysia and
Indonesia's heavy reliance on short-term foreign loans
and openness to hot money.
This reliance came from advice proffered by the U.S.
Treasury Department, the IMF and other international
sources of "expertise".
The IMF and the Asian financial
crisis
In 1997,private enterprises in Asian nations seemed not
able to meet their payment obligations
 International currency markets panicked
 Currency traders sought to convert their Asian money
into dollars
 The Asian currencies plummeted
 That made it harder for the Asian countries to pay
their loans
 Imports became suddenly very expensive
The IMF and the Asian financial
crisis
The IMF treated the Asian financial crisis like situations
where countries could not meet their balance of
payment obligations.
But the Asian crisis differed from the normal situation of
countries with difficulties paying off foreign loans.
The Asian governments were generally not running
budget deficits. Inflation was low.
The IMF and the Asian financial
crisis
 Yet, the Fund instructed them to cut spending - a
recessionary policy that deepened the economic slowdown
 The Fund failed to manage an orderly roll over of short-
term loans to long-term loans, which was most needed
 The Fund forced governments, including in South Korea
and Indonesia, to guarantee private debts owed to foreign
creditors.
The IMF and the Asian financial
crisis
 Malaysia refused IMF assistance and advice.
 Malaysia imposed capital controls in an effort to
eliminate speculative trading in its currency.
 Malaysia generally suffered less severe economic
problems than the other countries embroiled in the
Asian financial crisis.
The IMF and the Asian financial
crisis
The result of the Fund's incompetence has been intensified
and needless human suffering :
 In South Korea, unemployment skyrocketed from
approximately 3 percent to 10 percent. "IMF suicides"
became common among workers who lost their jobs and
dignity.
 In Indonesia, the worst hit country, poverty rates rose from
an official level of 11 percent before the crisis to 40 to 60
percent in varying estimates. GDP declined by 15 percent in
one year.
The IMF and the European Crisis
 The epicenter of the crisis that began in the United
States in 2007 shifted to Europe in 2010.
 By 2010, the crisis of the private banking sector had
turned into a crisis of the sovereign debt.
 Greece, Ireland and Portugal are the first three
countries in the Euro Zone to agree to ‘bailout’
austerity plans with the so-called Troika -The
European Commission (EC), the European Central
Bank (ECB) and the IMF
 Austerity policies = Structural Adjustment Programs
Where does the Greek Debt Come
From ?
Private sector debt
 First surge with the integration of Greece into the Euro
Zone in 2001
 Second debt explosion in 2007 : Financial rescue
granted to banks by the US Federal Reserve, European
governments and the European Central Bank recycled
by bankers to Greece and other countries like Spain
and Portugal
Where does the Greek Debt
Come From ?
The public debt
 Debt inherited from the dictatorship of the colonels
 Borrowing since the 1990s to fill the void created in
public finances by lower taxation on companies and
high incomes
 Purchase of military equipment, mainly from France,
Germany and the United States
 Organization of the Olympic Games in 2004
 Spiraling of public debt fuelled by bribes from major
trans-nationals to obtain contracts.
why the IMF loans money to
European countries?
 Big capital interests has driven the new wave of European
integration
 The advent of the euro associated with :
 The establishment of rigid fiscal norms (a budget deficit of
no more than 3% of the Gross Domestic Product(GDP) ,
60% for outstanding debt) and
 The ECB chart: formal independence from the State, a
single objective ( inflation control) and a ban on the
financing of public deficits.
 One currency = No possibility for European countries to
control the exchange rate
 Wages become the only variable of adjustment
why the IMF loans money to
European countries?
 To bail out private banks, the United States and
Europe used public funds.
 This was followed by the creation of an enormous
“sovereign debt crisis”
 The ECB is not allowed to finance directly the Member
States
 The IMF fund part of the sovereign debt of these
States
Some figures with the example of
Greece
 Long term loans on the financial market : Interest rates are
between 12% and 17%
 ECB lends money to private banks at 1% from May 2009 to
April 2011, 1.5% today
 Private banks provide sovereign bonds to indebted
countries :
 Interest rates range from 3.75 to 5% (issue for less than a
year)
 If they are bonds maturing after 3, 5 or 10 years banks
receive even more.
 The spread is of approximately 4% for the private banks
Some figures with the example of
Greece
 Countries such as Germany, France and Austria also
enriched themselves on the burden and suffering of
the people of countries like Greece.
 They borrow at 2% on the markets and then lend at 5%
or 5.5% to Greece and 6% to Ireland.
 The same can be said of the IMF, which borrows at a
low interest from its members and makes loans at
much higher rates to Greece, Ireland and Portugal.
The brutal austerity policies applied in
Greece, Portugal, Spain and Ireland
considerably worsened the crisis in 2012
Greece
 Since the start of the crisis, the drop of Greek GNP has
reached 20%.
 The purchasing power of the great majority of the
population has been reduced by 30% to 50%
 Unemployment and poverty have literally exploded.
 Greece has seen in two years some 2000 suicides.
Worsening of the Crisis
Ireland
 Bank rescue package has sucked 40% of GNP from the
economy (close to 70 billion Euros out of 156 billion
Euros in 2011)
 The economy has shrunk by 20%
 One in three young workers has lost his jobs
 Lay off 37,500 public sector servants by 2015.
Worsening of the Crisis
Spain
 Youth unemployment is up to 50%.
 350,000 families have been expelled from their homes,
and yet must keep on paying their home mortgage
until the end!
 The number of families in which everyone is
unemployed is 1.7million (10% of all Spanish families).
Worsening of the Crisis
Portugal
 Austerity measures have been of such
violence, and the economic situation so
degraded
 One million people rallied spontaneously on
15 September 2012. This was the biggest
demonstration since the first of May 1974,
which celebrated the victory of the
Carnation Revolution.
The deconstruction of the social
model
 The ECB board, the European Commission, the
governments of the strongest EU economies, the
boardrooms of the banks and other big companies are
doing a war against the people of Europe
 They don’t want a quick return to growth, nor the
reduction of inequalities in the euro zone and the EU,
in order to create a more coherent structure that would
favor the return of prosperity.
The deconstruction of the social
model
Two of their principal objectives are:
 Avoiding banking and financial crash that could be worse
than that of 2008
 To carry out the greatest aggression of Capital against
Workers, on a European scale since the Second World War.
By repeated onslaught to stable employment, and the
capacity of workers to organise, they want to dramatically
push down direct and indirect wages while at the same
time maintaining enormous disparities, within the EU, so
as to sharpen the blade of labor competition.
Conclusion
 The IMF and the other IFIs should be dismantled and
replaced by a new, truly democratic institution, with
monetary stability and the respect of fundamental
human rights as its primary objectives.
 European mobilisation against illegitimate debt,
austerity plans and the Fiscal Compact are on the
increase, in solidarity with the Greek people along
with all other peoples under attack.
 This would be a suitable response, likely to bring about
real social transformation breaking away from neoliberalism.
Sources
 CADTM
http://cadtm.org/English
The Debt Crisis : From Europe to Where ?
 Essential action (on the Asian Financial Crisis)
http://www.essentialaction.org/imf/index.html