Bretton Woods debate 15/12/2011

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The Bill before us is relatively straightforward. Its purpose is to ratify changes to the IMF articles of agreement. However, we must first step back and examine the role of the IMF. It is clear that the IMF is not a neutral international economic advisory committee. The allocation of quotas and voting rights in the IMF, far from being about democracy, are structured in a manner to preserve a totally unjust economic system and to prevent any attempt by the majority of the world’s population to share in the wealth they create and to end poverty and hunger.

I was astounded by the remarks of one of the Fine Gael Deputies, I believe it was Deputy John Paul Phelan. He said that this legislation is about bringing fully democratic elections into the IMF. In his opinion, the role of the IMF was to secure the safe operation of the world economy and it had basically done a good job. I do not know what planet this man is living on but he clearly has no relationship with planet Earth as it is at present. The IMF is a totally undemocratic institution, designed in 1944 to enable the imperialist powers to maintain their control of the world’s resources. In the agreement there is an inbuilt domination by the US, Japan and the EU which is utterly disproportionate to their share of the world’s population.

The proposed changes do not in any way loosen the stranglehold of those main economic powers. While China and India have more than 40% of the world’s population between them, they have 6.01% of the voting rights in the IMF. Under this proposal China will take a great leap forward and go from 3.66% to 3.81% of the IMF voting rights, even though it has a population of 1,500 million people. A group of 24 sub-Saharan African countries with a population of 225 million is represented on the IMF executive board by Rwanda, which has a total of 1.39% of IMF voting rights. How any Deputy could claim that this is a democratic institution is beyond me.

The Bretton Woods institutions, the World Bank and the IMF are designed in a deliberate manner to ensure that the US retains control. A look at the figures proves that. The US effectively rules the IMF on behalf of the advanced capitalist countries. No country other than the United States has more than 15% of the voting rights. It will be 16.76% after these proposed changes. What that means is that the US has a blocking minority vote against any changes which require 85% of the votes. It can effectively block anything. This is a terrible embarrassment for the Labour Party in particular. It clearly supports the IMF and the troika and would have us believe that the IMF is an objective, technical economic advisory body. Its attitude is that if we just listen to the IMF, take the hits and make all the sacrifices, we will be on the yellow brick road to economic recovery. That is total nonsense.

The Labour Party would point to the fact that the missions of the IMF are defined in statutes. These include very lofty ideals such as: to facilitate the expansion and balanced growth of international trade and to contribute thereby to the promotion and maintenance of high levels of employment and real income; the development of the productive resources of all members as primary objectives of economic policy; members may exercise such controls as are necessary to regulate international capital movements. That is stated in the articles and statutes of the IMF. It sounds great, but what is its record in reality? The policies of the IMF contradict its statutes.

The IMF has supported neo-liberal policies, including the complete liberalisation of capital flows, which are precisely the mechanisms that fuelled the financial speculation that was one of the key reasons for the world economic crisis for which we are now paying the price. The Bretton Woods institutions have had oversight of the international financial system since 1944, during which time we have witnessed financial fraud, embezzlement and wholesale tax evasion, all of which have spiralled. Under the watch of the IMF and World Bank so-called offshore banking systems, which are really tax havens such as the Irish Financial Services Centre, IFSC, and so forth, have enabled capital flight, transfer pricing and massive tax evasion. The Tax Justice Network International report of last November estimates that total tax evasion now stands at $3,100 billion dollars, the equivalent of over 5% of the world’s GDP. This revenue and due taxes that are being withheld could transform the health, education and welfare services of the industrialised and the less developed countries. The losers are working people and their dependants in the industrialised economies and the poor in the least developed countries.

We must examine the record of so-called success with regard to the economic guidance of the IMF. I will not even give a Socialist Party analysis but refer to what some people in the heart of the beast say about it. The US Congress Meltzer Commission report of 2000 states the following:

Numerous studies of the effects of IMF lending have failed to find any significant link between IMF involvement and increases in wealth or income. IMF-assisted bailouts of creditors in recent crises have had especially harmful and harsh effects on developing countries. People who have worked hard to struggle out of poverty have seen their achievements destroyed, their wealth and savings lost, and their small businesses bankrupted. Workers lost their jobs, often without any safety net to cushion the loss. Domestic and foreign owners of real assets suffered large losses, while foreign creditor banks were protected. These banks received compensation for bearing risk, in the form of high interest rates, but did not have to bear the full (and at times any) losses associated with high-risk lending. The assistance that helped foreign bankers also protected politically influential domestic debtors…
Does this sound familiar? Of course it does. This is the same type of regime and policies that have been imposed on people in Ireland. The international economic crisis that began in the summer of 2008 demolished all the neo-liberal dogmas and exposed all their lies and deceptions. It totally discredited neo-liberal regulation measures and structural adjustment programmes. In addition, the economic predictions of the IMF have been incredibly unreliable.

The IMF is not a white knight coming to the rescue of the Irish economy or any other economies. This organisation has defended and advanced the neo-liberal agenda even though it has been discredited and the toxic policies it promotes are the ones for which ordinary people are now paying the price. It is particularly galling for citizens of this State to see a Labour Party in Government stand over such measures.

The IMF and the World Bank on a global scale are largely responsible for the food crisis during 2007 and 2008 which increased the number of people suffering from hunger by 140 million. The IMF and the World Bank produced the structural adjustment programmes which recommended that governments in Africa, Asia and Latin America should stop maintaining the grain silos that had been used to feed the domestic market during periods of food shortage or steep price increases. The IMF insisted that these countries, to secure loan finance, had to abolish food subsidies and cut public credit agencies giving subsistence to farmers, thus driving them into the hands of private lenders charging penal rates of interest. IMF policies coerced tropical countries to stop producing food to eat and instead promoted cash crops such as coffee, tea, flowers, peanuts and so forth for export, to ensure payment of loans to foreign banks, while opening their borders to food imports produced with major public subsidies in the advanced capitalist countries.

That is the agenda that goes on behind the IMF.

It demands that less developed countries open up their economies to the investment products and services of multinational corporations of the advanced capitalist countries. It does that to enable multinationals to produce what they like, where they like, under whatever conditions they like and at wages they decide with practically no taxation and 100% profit repatriation. The 30 years of these neoliberal policies were examined by the UNCTAD report in 2006 and declared a total failure.

These policies have caused enormous hardship, suffering and deaths in the least developed countries. Large numbers of subsistence farmers in India have taken their own lives in the course of the past decade because of the debts they had to take on as a result of the imposition of IMF policies. Far from alleviating poverty and promoting growth in this country or any other, the IMF and World Bank policies have led to massive increases in the public debt of the least developed countries, locking them into dependency on foreign banks, dollars and euro.

The G20 countries agreed, in the face of the crisis in 2009, to quadruple IMF funding to $1 trillion. Debtor countries can borrow $1 trillion from the IMF not to develop their economies and raise living standards, but to hand the money back to parasitic banks and pay exorbitant interest rates. The IMF is really saying that the solution to the debt crisis is more debt. That is all it is offering these countries.

The Minister, Deputy Noonan, and the Tánaiste and Minister for Foreign Affairs and Trade, who believe that the IMF programme and debt payment demands are manageable while at the same time lamenting the necessary sacrifices, are not learning the lessons of modern history. Debts that cannot be paid will not be paid and foisting austerity on people will not alleviate the situation.

People can waffle on all they like about the millennium development goals and so on. They are totally irrelevant against the backdrop of hundreds of millions of people dying painful deaths from hunger. The IMF and World Bank encouraged debt. It is odious, immoral and a major obstacle to fulfilling people’s basic needs on a global scale, including the right to food.

No tinkering with IMF voting rights will benefit working people in this country or the world’s poor. These discredited institutions will have to be abolished and replaced by really democratic institutions which a truly democratic economy would use to develop the world’s resources in order to enable all people to develop their talents to their fullest potential.