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Bye Bye IMF?
A New Blueprint for the Global Economy
By Ellen Frank
two years ago, the juggernaut of globalization
Suddenly, even respectable members of officialdom, like financier George Soros and World Bank vice-president Joseph Stiglitz, speak of the "chaos of global markets" and call for renewed global regulations. Canada’s parliament is considering a tax on currency trading, the so-called Tobin tax; the Vatican and the National Conference of Catholic Bishops endorsed Jubilee 2000, a plan to cancel the debts of poor developing countries. Even the G-24, an organization of 24 developing countries, called for thorough reform of the international financial system.
With criticism of deregulated global markets mounting, officials of the International Monetary Fund (IMF), a quasi-public lending institution, and representatives from the seven largest economies began laying the groundwork for a new "global financial architecture" at the IMF’s annual meeting in April. In their discussions of international banking laws and currency trading, however, the well-being of humanity and the future of the planet received scarcely a mention.
If global reform is to address such pressing issues as world poverty and climate change, the job can not be left to the architects of the current fiasco. Recognizing this, U.S. progressives have developed their own global architecture emphasizing workers rights, expanded democracy, and ecological sustainability. The details can be found in the Global Sustainable Development Resolution, which was scheduled to be filed in June by Congressman Bernie Sanders (I-Vt.) with Sherrod Brown (D-Ohio), Cynthia McKinney (D-Ga.) and Dennis Kusinich (D-Ohio) signed on as cosponsors.
Given the conservative climate in Washington, the act is more a wish list than a realistic piece of legislation — but what a wish list it is. For those seeking alternative solutions to global economic ills, the resolution presents state-of-the-art thinking about the prospects for sustainable and democratic economic reform and is evidence that reasonable alternatives to the IMF’s vision exist.
The danger with any blueprint for international finance and trade policy — and there have been dozens recently, from the left and the right — is that international institutions are easily hijacked by powerful countries and, with the complicity of authoritarian client states, transformed into instruments of corporate and imperial control. Many would be surprised to learn, for example, that the IMF, as economist John Maynard Keynes had originally conceived it in the 1940s, was to be a lender of first resort to countries needing to borrow foreign currencies to purchase goods abroad. Had the IMF developed as Keynes intended, poorer countries would have more control of the terms under which they borrow. Rich countries would have been stripped of the economic power to force poorer nations into debt.
In practice, of course, the U.S. government demanded the lion’s share of the votes, and the IMF was itself stripped of power and transformed into an enforcement agent for international corporate interests. The IMF, like other international economic institutions, is intensely secretive and top-heavy with U.S. and European representatives whose allegiance to corporate interests is generally unquestioned (see "Dr. Dollar," this issue). No plan for economic reform, no matter how pleasing or sensible on paper, can promote democratic development when the institutions of the global economy are themselves profoundly undemocratic and fully controlled by the large global corporations.
For this reason, the progressive resolution begins by calling for "democratic control over the global economy." Attention to democratic process and participation is evident throughout the act’s 20 pages. Drafted with input from dozens of nongovernmental organizations, labor unions, and intellectuals, the bill addresses virtually every aspect of the global economy, from trade, to international debt, to environmental destruction. Among numerous suggestions, the resolution would:
• Cancel debts of poorer countries to alleviate world poverty.
• Regulate international money flows to prevent currency crises and reduce financial instability.
• Develop binding codes of corporate conduct and mandate that international trade agreements raise labor standards to protect the rights of workers.
• Make environmental sustainability a priority in all trade, lending, and corporate conduct negotiations.
• Support green development projects by establishing new public lending facilities.
In each of the many proposals, drafters paid careful attention to the political composition of the international bodies that would implement changes and set standards. The resolution may not be the answer to all the ills that trouble the global economy, but it correctly locates the source of those ills in the degradation of democracy and popular accountability.
In the past, sterile debates — over jobs versus the environment or free trade versus isolationism — have stymied political discussion of globalization and environmental sustainability. The plan’s creators strove to transcend these roadblocks by proposing institutions which, in their mandate and structure, would be forced to address the human and ecological failings of unfettered markets. In proposing reforms of international lending institutions like the IMF, for example, the resolution insists not only that the IMF consider workers’ rights in loan negotiations, but mandates that "a representative from the International Labor Organization [will] take the lead in negotiating labor issues [and] local labor unions shall participate in these negotiations."
The resolution repeatedly emphasizes the political, rather than the strictly economic, nature of global economic reform. With this emphasis, the drafters clearly perceived the essential failing of official reform proposals. Technical matters of money, exchange rates, tariffs and trade, while important, are not at the heart of the what is wrong with the global economy. At the recent IMF meetings, for example, officials were at least as preoccupied with who would participate in reforming the global financial architecture as they were with the reform itself. Despite appeals from other governments, the G-7 rejected "a task force with participation from a broad, representative group of countries" to discuss financial reform, according to Nancy Alexander of the Globalization Challenge Initiative, a progressive nonprofit. There was widespread resentment of U.S. efforts to "handpick" countries to participate in the reform process.
Reasonable people may disagree on the precise details of global economic reform, but it is not only the details that policy elites worry about. Ensuring that decisions are made outside of public view and with input from only a few powerful nations and institutions is the hallmark of official economic policymaking.
Issue #233, January-February 2001
Copyright © 2002 Economic Affairs Bureau, Inc.