BY SEAN HEALY
Under concerted attack from increasingly vocal protest movements on its left flank, the International Monetary Fund may now face a new threat from its right flank — in the form of the new US administration of President George W. Bush.
Bush's appointees for the key posts of treasury secretary and chief economic advisor are both on record criticising the IMF's role in the financial crises in East Asia in 1997-98 and Russia in 1998 and, during his campaign for the presidency, Bush himself stated "I think the IMF has got a role in the world, but I don't want to see the IMF out there as a way to save the world bankers".
In a February 5 interview with the New York Times, new treasury secretary Paul O'Neill said he wanted the IMF to be more restrained in its approach to bailouts. He called the Russian loan package "crazy" and dismissed the threat of catastrophic currency destabilisation, the standard justification for such intervention.
"Currency stabilisation for whose benefit?", the former chief of Alcoa asked rhetorically. "I really don't understand why someone would take billions of dollars and give it to people who wilfully created their own economic mess."
IMF officials see Bush's chief economic advisor, Lawrence Lindsay, formerly of the conservative American Enterprise Institute and a committed free-market fundamentalist, as an even greater threat. Lindsay argues that IMF intervention encourages "moral hazard", whereby lenders lend recklessly in the belief that no matter what happens they'll be rescued by government.
The man who would have the most hands-on role in dealing with the IMF, John Taylor, the nominee for treasury undersecretary for international affairs, seems to think along similar lines. The Stanford University economist told a television program in 1998 that the IMF "should be abolished".
These figures are a far cry of the Wall Street insiders that Bill Clinton appointed to oversee the Bretton Woods twins: Clinton's last treasury secretary, Lawrence Summers, was at one time a vice-president of the World Bank, while his predecessor, Robert Rubin, was (and now is again) an investment banker.
The nature of the Bush appointments has sparked some hope among left-wing opponents of the fund that Bush may accomplish what they as yet haven't managed: to destroy, or at least hobble, the IMF and its sister institution, the World Bank.
These hopes centre on the chance that the new administration may implement the recommendations of the US Congress' Meltzer Commission, a committee of Republican-leaning economists which handed down a scathing April report on the two institutions.
The commission's report, released just before massive protests in Washington, DC, during the two institutions' joint spring meeting, was a body blow to the respectability and the legitimacy of the Bretton Woods institutions. It found that the IMF's handling of the Asian crisis had made it worse and that the World Bank was irrelevant to the success of its stated mission, to reduce poverty.
While not explicitly stated in the report, the clear message was that the world would be better off without the two institutions, which have determined and enforced the conditions of Third World countries' access to Western capital since the second world war.
One of its members stated the commission "essentially wants to abolish the International Monetary Fund and the World Bank", adding that such a goal had "significant pockets of support ... in our Congress."
However, a closer reading of the Bush administration's signals indicates that reforms to the fund and the bank are far more likely than any radical change — and that those reforms which are being touted may end up being worse for Third World countries.
The most likely of all reforms to the IMF and World Bank is a refocusing of their priorities.
One of the Meltzer Commission's most pointed criticisms of the two institutions was that they concentrated far too heavily on the largest Third World countries, like Mexico, Brazil and Argentina, which have reasonable credit ratings and could get capital from international finance markets, and not enough on the least-developed countries which have little chance of attracting private funds. Eighty percent of World Bank resources, for example, are devoted to the former and only 20% to the latter.
O'Neill seems to back this view, criticising the IMF's December bailout package for Argentina as being unnecessary.
But a redirection of World Bank and IMF funds to the least-developed countries would not necessarily be in those countries' interests, especially if loan conditions are as harsh as they are now and if the new sums simply get added to these countries' already crushing debts.
There has been no indication that the Bush administration is even contemplating easing the terms of the structural adjustment programs which are the condition for such loans and which have caused massive hardships for the world's poor. Structural adjustment programs routinely involve massive privatisation, cuts to basic goods subsidies, cuts to budget spending on social services and user fees on health and education.
Republican critics of the Bretton Woods twins have also been among the more vocal in opposing debt relief, holding up the US's promised funds in Congress. They have argued that it encourages "moral hazard" among borrowers in much the same way as the prospect of easy bailout encourages it among lenders.
Even for the larger Third World countries, a redirection of IMF and World Bank priorities might prove to be only a mixed blessing.
While they may get free of the official structural adjustment programs that come with fund and bank loans, greater dependence on Western bond, equity and currency markets will chain them to other, unofficial but no less devastating, structural adjustment programs — in the form of the sundry, never-ending demands of the big fund managers, speculators and investment bankers.
More to the point, whatever the chances of enforced reform at the Bretton Woods twins, one thing won't change: their use as implements to prise open Third World markets for Western corporations.
In his January Senate confirmation hearing, Bush's secretary of state Colin Powell reaffirmed the US corporate ruling class's view that economic, finance and trade policy are just as essential components of protecting the US's "national interest" as military and diplomatic policy. The US government regards the IMF and World Bank as instruments of war, and it's not about to unilaterally disarm.