BY NICOLA BULLARD
The International Monetary Fund's new managing director's intention to "drive change from within the institution rather than have it imposed from outside" does not inspire confidence, given the fund's dismal record of reform so far.
In the past three years, a lot of ink has been spilled proposing ways for the fund to recover from its spectacular fall from grace, when its policy advice during the 1997 Asian crisis made matters worse. Most of these reform proposals have been extremely modest, but even so, on the Richter scale of change, the IMF has barely tipped the needle.
The fund's defences stayed firmly in place so long as Michel Camdessus was still at the helm.
It is only now that the first rumblings of change are being heard from the new managing director, Horst Koehler, the second choice German candidate, who was selected through a highly political, non-transparent but strangely public round of horse-trading between the US and Europe.
Four months into the job, Koehler has signed an agreement with the World Bank aimed at reducing the overlap of responsibilities (US Treasury secretary Larry Summers has been pushing this for some time), approved disclosure of the bank's sources of financing, hinted that developing countries need a "larger voice" and pushed for faster debt relief.
But even though Koehler has made great play of the fund "withdrawing to its core competencies of fiscal, monetary and exchange rate policy", in reality the mission creep and expansion of powers continue.
First, in the realm of standard setting, codes of practice, surveillance, monitoring and information disclosure, the fund's activity — often in the name of transparency — has expanded. This is consistent with the fund's view that the Asian crisis was a result of institutional failure, corruption and lack of information. In practice, the fund is demanding more information from governments, is publishing more information about national economies and is forecasting on the state of these economies. It has, in effect, become a de facto international ratings agency.
The fund is also now talking about expanding its technical assistance, which means more Ivy League-educated economists giving more advice to more Third World ministries. This hardly sounds like "withdrawal" but rather a strategic advance in financial globalisation.
The fund has also picked up new agendas along the way and is now dabbling in debt relief, poverty reduction and good governance, and even tries to "engage" civil society from time to time.
However, the proposals that go to the heart of IMF power — such as democratising voting and decision-making, systematically engaging in external reviews of programs or questioning some basic assumptions about the benefits of financial liberalisation — have been shelved, ignored or changed.
For example, the fund's proposal to establish an independent evaluation office (EVO) is a hopelessly inadequate response to demands that the IMF be more accountable to both its shareholders and clients. The EVO, recently approved by the board, will be an entirely in-house operation, although it is envisaged that staff could be recruited from outside.
The background paper on the evaluation unit states that one of the main purposes of the office is to "enhance the learning culture within the Fund" yet further on warns that "management will need to commit to ensuring that EVO staff who return to regular Fund staff ... are in no way discriminated against because of authorship of reports that are critical of potential receiving departments". So much for the learning culture.
Reform of the voting system seems unlikely. Although Koehler talks about giving developing countries a stronger voice, it is clear that this will not be at the expense of the majority shareholders, which makes one wonder how it might be achieved. At present, the US carries 17.5% of the votes and the combined EU members 32%.
Developing countries themselves seem reluctant to press for reform. Trevor Manuel, South Africa's minister of finance and chair of the IMF World Bank Board of Governors, is concerned about voting rights for poor countries and "wants to prick the consciences of other government and persuade them that system [gives] too small a voice to the poor". The main flaw in this approach is the assumption that there are consciences to be pricked.
Former World Bank chief economist Joseph Stiglitz, writing about the IMF's role in the East Asian crisis, said:
"Bad economics was only a symptom of the real problem: secrecy. Smart people are more likely to do stupid things when they close themselves off from outside criticism and advice ... But, with the IMF insisting its policies were beyond reproach — and with no institutional structure to make it pay attention — our criticisms were of little use. More frightening, even internal critics, particularly those with direct democratic accountability, were kept in the dark."
The IMF is like an armadillo, burrowing deep into its own reality and blinking when it steps into the daylight of public debate, but it also has a tough and impenetrable shell. There is no evidence that the "culture of reform" has taken root.
The chameleon
The World Bank, on the other hand, is a chameleon, a master at assuming the colours of its environment.
The World Bank public relations machinery is effective and efficient, regularly churning out op-ed pieces for their president which appear in the International Herald Tribune, co-authored by luminaries such as Nobel Prize Laureate Amytra Sen and former South Korean dissident (now president) Kim Dae Jung. Obviously it is important for a multi- millionaire former Wall Street banker to establish some "street-cred" in development circles by associating himself with the likes of Sen and Kim.
[Bank president James] Wolfensohn has also surrounded himself with a sophisticated army of vice-presidents who act as diplomatic emissaries, deployed to "engage" with the NGOs and schmooze with government officials and financiers (many of whom are their former colleagues).
The bank has pursued a strategy of hostile takeovers or, as one UN staffer described it, "cherry picking". In the past years, everything from the internet to AIDS has been consolidated under the bank's expanding empire. A G24 discussion paper, about the international financial institutions' new mandate on "good governance", described it thus:
"The new mission ... arrived at a moment when growing doubts regarding the purpose and effectiveness of the IFIs seemed to threaten their funding, and even their continued existence. Suddenly the IFIs have jumped in to the front lines of multiple wars being fought by humanity: against AIDS, human rights violations, gender discrimination, environmental degradation, drug trafficking, authoritarian governments, etc. To drive the point home, the World Bank has recently started to draw attention to those objectives, and to its own role, in CNN advertising."
The bank's latest additions to its self-determined terms of reference are signalled in this year's World Development Report (WDR), Attacking Poverty. The report argues that "poverty is more than inadequate income or human development" and that opportunity, empowerment and security are key.
True enough, but while taking up the mantle of institutional reform, social security, political democracy and participation in the fight against poverty, the bank is pushing its own value-laden normative view of social relations and assuming ever higher moral ground, all the while deftly skirting the central issues of redistribution, economic democracy and the unequal relationship between people and capital. So long as the central economic paradigm remains unquestioned, the World Bank will be peddling a hopelessly reformist program which fails to move it any closer to its dream of "a world free of poverty".
The limits of dissent
The bank has a heart of stone. The limits of its tolerance have been tested and have proved to be very short.
For example, during the UNCTAD 10th ministerial meetings held in Bangkok in February, farmers and fisherfolk affected by the World Bank-financed Pak Mun Dam protested outside the Queen Sirikit Convention Centre. They also requested a meeting with Wolfensohn or a representative from the bank in order to present their demands in a letter. Their request was refused.
Later, fresh from his speech to the plenary in which he had equated the proliferation of NGOs with the blossoming of democracy, Wolfensohn responded to a journalist's question about the protesters: "We are very familiar with the local groups and the international groups who support them. There is nothing to be gained by going outside and being part of an incident."
The bank has even less tolerance for dissent in the ranks. The "resignations" of chief economist Joseph Stiglitz and WDR team leader Ravi Kanbur (neither of whom could be classified as anything but mainstream economists) show that the bank culture does not abide deviation, especially when it challenges the authority of the bank and its shareholders.
Both the IMF and the World Bank have shown a remarkable resistance to change. The IMF's attempts to "heal itself" seem doomed from the start, given its extremely technocratic and isolationist mentality, the weight of vested interests and institutional entropy.
The World Bank, on the other hand, is setting a cracking pace and at least is giving the illusion of reform. This is dangerous, especially for civil society groups which are being offered "pseudo-influence" in implementing the Bank's "reform" agenda.
But there should be no illusions. In both institutions, there has been no shift in their two pillars of power: the neo-liberal ideology which underpins their policies and programs and the voting power and influence of their major shareholders.
[Nicola Bullard is the deputy director of Focus on the Global South, a policy research and advocacy organisation based in Bangkok, Thailand.
[Abridged from Focus on Trade, published by Focus on the Global South (FOCUS) c/o CUSRI, Chulalongkorn University, Bangkok 10330 THAILAND. Email: <admin@focusweb.org>. Web Page <http://www.focusweb.org>.]