MAY 1998 · VOLUME 19· NUMBER 3

The International Monetary Fund (IMF) suffered a body blow in April, as the U.S. House of Representatives voted not to authorize $18 billion in new funding for the international lending agency.

In a seeming Alice-in-Wonderland scene, the move to provide the $18 billion was initiated by the Democratic leadership in the House of Representatives, and defeated by opposition from Republicans, including Speaker of the House Newt Gingrich.

The Clinton administration has made securing funding for the IMF -- $14.5 billion for a "quota" increase (the amount countries pay to "belong" to the IMF) and $3.5 billion for a new line of credit known as the New Arrangements to Borrow -- a top legislative priority in 1998 [see "International Monetary Fund 101," Multinational Monitor, January/February 1998]. While the Senate has approved the funding, the House of Representatives has remained reluctant to support the IMF.

 Democrats stressed the urgency of infusing the IMF with new monies in the wake of the Asian financial crisis and pointed to labor and environmental language in the IMF funding bill which they said would protect those interests. Republicans complained about the IMF's role in bailing out big banks and imposing austerity measures on developing countries.

"We are in a new world," lectured House Minority Leader Richard Gephardt, D-Missouri. "And in that new world, technology has put us at a point where when one developing country has a horrible problem it begins to invade the economies of all developing countries in the world." The IMF, he insisted, was necessary to help limit the contagion.

Gephardt also took pains to respond to Gingrich's criticism of Democratic "protectionists" who supported the IMF. "I obviously reject the Speaker's categorization of some of us as protectionists," he said. "I voted for fast track when George Bush was president. I voted for the WTO [World Trade Organization]. I stand ready to vote for fast track for President Clinton if we can have proper provisions to recognize the rights and the needs of workers and the environment."

Gingrich, by contrast, slammed the IMF. "Two major U.S. banks reported yesterday that they had had record profits," he said. "None of the big banks are suffering out of Indonesia. They have made their money. They are not suffering out of South Korea. But what does the International Monetary Fund answer? Raise taxes on the poor."

Gingrich skewered the Democrats for supporting the IMF. "I hear people come to this floor who claim they represent workers, who say they are for an international bank institution that is totally secret, that is run by a bureaucrat whose major policy is to raise taxes on workers in the Third World to pay off New York banks," he said. "That does not sound like populism to me."

Gingrich's comments referred not only to Gephardt, but to many Democrats typically critical of globalization who supported the IMF. Among them was House Minority Whip David Bonior, D-Michigan. Bonior justified his support for the IMF on the grounds that the IMF funding bill included language purportedly intended to protect workers and the environment.

This language instructed the U.S. representative to the IMF (known as the U.S. Executive Director), to use her "voice and vote" to advance certain aims, such as respect for labor rights, environmental protection and defending human rights.

THE IMF GRILLED

In a hearing of the House Banking Subcommittee on General Oversight and Investigations just two days before the vote, strong evidence emerged suggesting "voice and vote" language would not match its proponents' expectations.

Karen Lissakers, the U.S. Executive Director to the IMF, testified at the House Banking subcommittee hearing, marking the first time the U.S. executive director had ever testified before Congress.

Under questioning, she acknowledged that while the IMF executive board had made approximately 2,000 decisions since 1993, it had held votes perhaps only a dozen times. Almost all IMF decisions, she explained, are reached by consensus -- one the United States apparently does not choose to upset by exercising its de facto veto at the Fund.

"For 20 years, members of Congress have been wasting their time" adopting "voice and vote" language that has no real impact because the IMF does not conduct votes, Bernie Sanders, I-Vermont, angrily told Lissakers.

Sanders focused on "voice and vote" provisions on human rights and labor rights in existing law. He read from the U.S. State Department report on human rights, which labels Indonesia a major violator of human and labor rights, and asked how the United States could support loans to Indonesia.

Treasury Assistant Secretary Timothy Geithner explained that the U.S. State Department compiles a list of human rights-abusing countries for which the United States cannot support loans. This list differs substantially from the information in the State Department's own detailed annual report on human rights. According to Geithner, only five countries are currently on the no-loan list: China, Sudan, Equatorial Guinea, Iran and Mauritania.

Sanders was not impressed. "You are funding a vicious dictator [now-deposed Indonesian President Suharto] who jails his opponents," he said. "It seems to me you very clearly disobeyed the law."

After a three-hour grilling, Lissakers' testimony ended. A slew of progressive and conservative opponents of the IMF then testified.

In written testimony, Marijke Torfs of Friends of the Earth documented the history of the IMF ignoring prior directives from the U.S. Congress [see "Reining in the IMF," Multinational Monitor, January/February 1998].

Consumer advocate Ralph Nader showed how "voice and vote" language in the proposed new legislation closely paralleled language in existing law, asking, "What reason is there to believe that this round of voice and vote language -- so similar to that of prior years -- will in any way affect Fund policy?"

"There is little evidence that the IMF takes seriously the concerns of the U.S. Congress or that the U.S. Executive Director vigorously pursues the voice-and-vote policies articulated by the Congress," Nader said. "If there were, the Congress would not again be debating instructing the U.S. Executive Director to advocate for policies that she is already required to promote."

Conservative critics agreed that instructions to the Fund are meaningless. "The problem is not a paucity of instruction, it is a lack of enforcement," said Edwin J. Feulner, Jr., head of the Heritage Foundation.

"If Congress truly wishes to address the many institutional and theoretical problems of the IMF," he testified, "it must use its constitutionally mandated power of the purse to withhold all U.S. funds -- past, present and future -- from the IMF unless its conditions of reform are met."

There was a remarkable convergence of opinion on the necessary IMF reforms: more openness and transparency; an end to the imposition of recessionary economic policies; restrictions to prevent the IMF from bailing out big banks -- bailouts which present a "moral hazard" by insuring highly risky behavior.

LINGERING SUPPORT

The left-right united opposition to the IMF, however, does not appear to extend to the Congress. All but a couple dozen Democrat members of the House of Representatives supported the IMF funding request. Many if not most Republicans are eventually likely to support funding, once they have milked the issue for all of its political worth.

Still, the massive congressional opposition to the Fund and the harsh rhetoric from the Republican leadership was unprecedented, a sign that the IMF's base of support is, at least, eroding.

-- Robert Weissman