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It’s stripped millions of people of their livelihoods, but the global economic crisis has brought one institution back from the dead: the International Monetary Fund.
Two years ago, the IMF looked to be on its last legs. It had got to the stage where nobody wanted to borrow its money. Many developing countries started accumulating reserves to avoid ever having to go to the IMF loan shark. Developed countries in trouble would go just about anywhere – China, Russia, Saudi Arabia – to avoid the IMF.
Then came the meltdown. The IMF failed to see it coming – pretty damning for a body supposed to oversee global financial stability – but bankrupt countries suddenly had no choice but to come begging.
In April last year, the G20 pumped the organisation with £330 billion of new funds. The radical Uruguayan writer Eduardo Galeano called the decision ‘black humour’, saying it would ‘rub salt in the wound’ of countries hit by a crisis they did not create.
The IMF claims to have been reborn. It says it has mended its ways (without apologising for them) and will do things differently this time around.
Certainly there are discussions about changing its voting system, which currently assigns Belgium and the Netherlands more votes than China. And in the present economic crisis, the IMF has, in some cases, actually encouraged countries to spend. It now also expresses ‘concern’ about protecting the very poorest.
But in depression-hit eastern Europe the IMF is rapidly becoming as hated as it once was in Africa.
In the 1980s, at the height of the third world debt crisis, the IMF lent huge amounts of money to developing countries, allowing them to pay off their loans to banks who had lent recklessly in the 1970s. The banks got bailed out, while the poor paid the price. Exactly the same thing is now happening in eastern Europe.
Latvia is experiencing Europe’s worst recession. On the IMF’s assessment, by the end of this year Latvia will have gone through a worse crash than the US during the Great Depression. Unemployment stands at 23 per cent.
The fund has led a rescue package of 7.5 billion euros (£6.7 billion) – but the price is eye-watering austerity measures. Schools and hospitals are expected to close and the government has pledged to reduce maternity benefits and raise taxes. Wages have been slashed by up to 40 per cent.
In Hungary, the right-wing Fidesz party looks set to sweep to power in April thanks to disenchantment with the government, which took an IMF loan in return for higher taxes and spending cuts. In Romania, the IMF is demanding spending cuts and labour reforms that could lead to 100,000 job losses.
In Ukraine, a full-blown political battle is being waged. Angry at prime minister Yulia Tymoshenko’s toeing of the IMF line, voters favoured her rival Viktor Yanukovych in February’s presidential election. However, Tymoshenko has refused to concede defeat, alleging electoral fraud.
Late last year, Ukraine’s parliament voted to raise the minimum wage. The IMF protested by suspending its funding. Today, parliament’s refusal to pass a budget for 2010 with sufficient spending cuts means the IMF funding is again on hold.
Clearly the IMF is as much about power as economics. This is nowhere seen more clearly than in Iceland. Icelandic politicians have fumed that the IMF has blocked aid, saying it is doing so in order to pressure Iceland into paying back the British and Dutch bailouts of imprudent investors – on the terms demanded by the creditors.
The IMF is repeating history. But so too are the people, with street protests in Riga, the Latvian capital, becoming increasingly militant and a small-scale renewal of anti-IMF activism in the west. It looks like the seeds of the next wave of resistance are already in place.
Nick Dearden is the director of the Jubilee Debt Campaign, www.jubileedebtcampaign.org.uk
For further critical information on the IMF visit www.brettonwoodsproject.org