The IMF: A globalising debate

JAKARTA — The debate between minister Kwik Kian Gie, who is in charge of the National Economic Planning Board, and the other ministers in President Megawati Sukarnoputri's cabinet about extending Indonesia's relationship with the International Monetary Fund is an important development in Indonesian politics. It is also a debate that brings Indonesia closer to world trends.

The economic strategy proposed by the IMF — along with the World Bank — has been under attack from many quarters ever since these institutions were formed at the initiative of the US government at the end of World War II. But they have come under particular attack in the last few years. Most interestingly, the criticisms of these institutions have also given birth to a substantial new political movement in the US, Western Europe and Australia: the anti-globalisation movement, or, more accurately, the anti-neo-liberal globalisation movement.

This movement burst onto the scene with the big demonstrations against the World Trade Organisation in Seattle two and a half years ago and has continued to grow since then, with more large demonstrations in many European cities. There have also been several major conferences raising criticisms of the IMF, World Bank and WTO, the largest being the two gatherings at the World Social Forum in Porto Alegre, Brazil. At the last World Social Forum in January, more than 80,000 people gathered to discuss alternatives to the strategies proposed by the IMF and World Bank.

At the heart of these criticisms is an analysis that during the last 10 years, Western governments (particularly the US) have been using the IMF and the World Bank to push forward a process of centralisation of capital accumulation in the West (and again particularly in the US). There has been no real globalisation of productive investment — that remains centred in the US, Western Europe and Japan. There is a globalisation of roaming speculative capital which has often caused financial instability but a centralisation of productive investment.

The critique goes: the IMF is using its hold over indebted nations to force developing countries to do away with any protective measures they have against the predatory activities of the stronger Western countries. While the US speaks of free trade, it uses the IMF to open up the markets of weaker economies often at the expense of the development of local national industry and agriculture.

The Indonesian economy is smaller and weaker primarily because it was the victim of 300 years of marauding by Dutch and other colonial powers. All the so-called developing countries are still underdeveloped because of colonialism. Conversely, the Western countries have powerful economies because they were able to enrich themselves and grow during their time as colonial powers.

A country like Indonesia has every right to protect itself against the predatory practices of the West. It is outrageous that the West expects Indonesia to pay the so-called foreign debt of US$70 billion. The West took much more than that during the previous 300 years.

Worse still, the West uses this indebtedness to smash the economic sovereignty of countries like Argentina and Indonesia.

The level of detail concerning economic management in the letters of intent signed by the Indonesian government and the IMF is such that the IMF has taken over de-facto control of economic management. This control is used to transform the Indonesian economy into a subordinate extension of the Western economies. This is why the IMF insists that government-managed banks and other assets are sold as quickly as possible, so that they might be bought cheaply by US capital, as was the case with Bank Central Asia.

It is also the reason why the IMF insists that tariff quotas be dropped on almost every item that the US can export to Indonesia. This is being done for sugar and, yes, for rice — which employs tens of millions of people in Java! There have already been scores of protests by rice and sugar farmers as their already miserable livelihoods are squeezed as a result of cheap imported rice and sugar. Their misery has been made worse still by the ending of subsidies on fertilisers.

Solidarity with the victims of these disastrous IMF policies lies behind this growing movement in the West that is calling for the abolition of the IMF and the cancellation of all Third World debt.

In Indonesia, the debate has just started. Economic minister Dorojatun Jakti has already answered Kwik's criticisms of the IMF by pointing out that ending the relationship with the IMF will result in Indonesia being denied important sources of capital, even if this capital comes with interest repayments and all sorts of deleterious conditions.

Dorojatun is right, of course. His reply highlights the direction in which the debate needs to develop. If not from the IMF, then via whom can Indonesia obtain the capital it needs?

Of course, Indonesia does have sources of finance that are available for the long term. The world will still need Indonesia's oil, gas and other minerals. And there will always be those Western countries and companies that will do deals no matter what the IMF says. Even Cuba, under total boycott from the US, receives investment from countries like Spain and Sweden as well as has good trading relations with countries like China and Venezuela.

But in the end, if Indonesia wants to have a sovereign economy and be a sovereign country, it needs to look back, and modernise, an idea born out of the movement to build the Indonesian nation itself: Sukarno's idea of berdirikari (to stand on one's own feet).

This cannot mean isolation from the world's technology or from trade. But it can mean having as a starting point for any economic strategy the mobilisation of all the human and financial resources that are already within the society and economy rather than making foreign private investment the motor. In any case, there is no significant foreign or domestic private investment happening today.

Mobilising existing resources means having an inventory of all the existing and underutilised technology available, at whatever level of development. But most of all it means mobilising and upgrading as quickly as possible the whole of the country's human resources.

This is the greatest crime of the policies being supported by the IMF and implemented by the ruling political elite. Rather than being the central priority, education is relegated way down the list. With millions of children dropping out of school, Indonesia is being prepared to be mainly a “coolie” nation.

But mobilising all of the country's human and technical resources, independently and in defiance of the IMF and the West, is a political problem first, and an economic question second. Government institutions alone cannot draw up a satisfactory inventory and organise 200 million people into collective effort. This requires a social movement; this requires tens of millions of people to be organised and to be conscious of the tasks of development.

There is no doubt the Indonesian people, like all peoples everywhere, are capable of this. In fact, such a social movement was already developing at the beginning of the century in the form of the anti-colonial and independence movement. This created great political parties as well as trade unions, farmers' unions, women's and cultural organisations that fostered mass participation until the mid-1960s.

Any discussion of alternatives to slavery to the West and the IMF cannot avoid this central question: Reawakening and rebuilding mass popular organisations that can democratically mobilise the resources of society.

[The above article was published in the June 19 Jakarta Post. Max Lane is a visiting fellow at the Centre for Asia Pacific Social Transformation Studies, University of Wollongong. Lane is also national chairperson of Action in Solidarity with Asia and the Pacific. Visit <http://www.asia-pacific-action.org>.]

From Green Left Weekly, July 3, 2002.
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