Editorial

Restraints for the World Bank and IMF

Janya Petrovic is blunt: “The World Bank,” she says, “is clear on what needs to be done [in Central and Eastern Europe]: deregulate workers’ rights, annul or considerably reduce severance pay, facilitate dismissals, introduce fixed-term contracts as a rule, extend the probationary period for new employees, shorten annual vacations, strengthen employers, weaken trade unions, legalize ‘equality’ of small and large trade unions, bust collective bargaining at the national level.”

The model of development that the World Bank and the International Monetary Fund are promoting, says Petrovic, who is editor-in-chief of the International Confederation of Free Trade Unions’ Central and Eastern European Network Bulletin, “is anti-worker and anti-unionist.”

In the interview in this issue, Petrovic offers a detailed account of the labor law and policy changes pushed by the World Bank and IMF in country after country.

Instead of treating the high level of worker organization in Central and Eastern European nations as one of the few strengths of these economies as they transition to market systems, the Bank and Fund have facilitated the dismemberment of unions.

These are institutions out of control.

For further evidence, consider the institutions’ feeble and fatally flawed debt relief program. Under their Highly Indebted Poor Country (HIPC) initiative, the world’s poorest countries can receive reduction of approximately one third of their current payments to overseas creditors — if they endure six years of closely monitored, extremely intrusive “structural adjustment.” Structural adjustment is the policy package that includes such measures as indiscriminate privatization, labor market deregulation, government spending cuts, trade and financial liberalization, economic deregulation, an emphasis on exports and charges (“user fees”) for people to attend clinics for basic healthcare.

HIPC is the institutions’ most important fig-leaf, a program designed to obscure the view of the harm they are doing to poor countries. The World Bank and IMF regularly tout HIPC as a sign of their responsiveness to the poor.

But now the HIPC initiative is beginning to collapse, even on its own terms. In April, the IMF and Bank announced that several of the countries that have qualified for debt relief by suffering through the first period of mandated structural adjustment have had relief suspended. The charge: they have failed to continue to implement structural adjustment conditions with sufficient vigor.

Apparently, the Bank and Fund cannot control themselves. They want to exact more blood from the world’s poorest countries, even when they must know it will sabotage their public relations campaign.

There is, however, now an opportunity to rein in the Bank and Fund.

This year, the Bank is seeking new monies for its International Development Association (IDA), the arm of the Bank that lends to the poorest countries.

Getting the U.S. contribution to IDA will require a vote by the U.S. Congress.

A broad coalition of U.S. environmental, development, religious, labor and global justice organizations has formed to demand that if the United States decides to contribute to IDA — a near certainty — that it also work for policies that will reduce the IMF and Bank’s power. (Essential Action, a project of Essential Information, the publisher of Multinational Monitor, is part of this coalition.)

The coalition is drawing on a successful initiative two years ago, when the Congress enacted a law requiring the U.S. representatives to the World Bank and IMF to vote against projects, loans or strategies that included user fees for primary education or healthcare.

The Treasury Department, which manages U.S. policy at the Bank and Fund, invented a duplicitous reading of the legislative language to avoid carrying out Congressional intent, especially on healthcare user fees.

But the passage of the law helped force a reconsideration of education user fees. Now the World Bank, which for 15 years has encouraged school fees, is actively working to help countries remove such charges. In Tanzania, the recent elimination of school fees enabled 1.5 million children who otherwise would have been locked out to go to school.

The coalition is now urging the United States to oppose loans or projects that include a range of harmful provisions, including restrictions on labor rights; increased water charges for the poor; environmentally hazardous practices such as aggressive pesticide use; privatization without safeguards for workers and protections against corruption; and privatization of tobacco enterprises.

The coalition is also proposing the IDA appropriation be accompanied by new U.S. support for debt cancellation for the poorest countries, social and environmental assessments of structural adjustment, and requirements that the World Bank measure the effectiveness of its project loans.

Some set of these proposals will appear in an IDA authorization bill, which Congress will consider over the summer, as well as in the foreign operations appropriations bill, which is sure to pass by the end of the Congressional term.

It is sad and pathetic that these reforms, limiting the ability of the World Bank and IMF to do harm, must come from the U.S. Congress. Sad, because institutions that claim to be devoted to eradicating poverty should not need such external discipline. Pathetic, because it is not people in affected countries who have the ability to influence the institutions’ policies, but uniquely the citizens of the United States.

With that power and influence comes obligation. The Treasury Department will oppose the coalition’s proposals, if for no other reason than it does not like Congress trying to direct policy toward the Bank and IMF. It will take an expression of citizen concern to overcome the Treasury Department’s obstruction.