Multilaterals and their bloated ego

By S. Swaminathan

The International Monetary Fund and the World Bank, no less than their lately-arrived sibling, the World Trade Organisation, are increasingly being targeted by worldwide NGO groups as the arch enemies of poorer countries. The impression that these three multilateral institutions are being driven by a dominant commercial world-view of the rich countries is not a new perception but what lends reinforcement to it is the irrepressible spirit of omniscience which seems to guide these bodies, especially on the complex issues of poverty which holds not less than 1.2 billion people across the world in its vicious grip.

At the recent spring meeting of the IMF and the World Bank in Washington, the protesters seem to have been checkmated by the police. But then the substance of the opposition to the policies of the Fund-Bank duo, came to the fore. All the talk about poverty reduction, on the part of the Brettonwoods Twins, sounds hollow in the face of the continued failure to erase the massive debt-burden of the sub-Saharan African nations.

That it is ``morally reprehensible'' for the developed countries to demand repayment of debt owed by Africa's poorest countries and that too when many of them are waging a struggle to fight the AIDS pandemic cannot be too strongly endorsed. Even in cases where the IMF - World Bank do provide assistance to the developing countries, there are far too many conditionalities which result in the governance of these countries being subjected to an opaque model of back-seat driving.

On the controversial subject of IMF conditionalities, the Indian Finance Minister, Mr. Yashwant Sinha, seemed to speak for many beneficiaries of IMF assistance in the past, when he told the International Monetary and Financial Committee of the IMF last month that the design of IMF conditionalities had created a host of problems for the recipient countries and their governments, including proliferation of monitoring agencies, bureaucratic overload and intrusiveness into the decision-making process. It is a notorious feature of IMF assistance packages that they imposed standard prescriptions on economic restructuring, fiscal management and cost recovery with regard to public goods, often without reckoning with institutional realities in the countries concerned or the basic imperative of national sovereign decision- making.

Distorted mandates

Amidst the welter of debate on the restructuring of the world's financial architecture revolving around the IMF and the World Bank, somehow attention seems to have been diverted from the original mandate of these institutions. Economic historians would recall that the Brettonwoods Conference at the end of the Second World War had envisaged the creation of three multilateral institutions respectively for dealing with the dollar shortage, the transfer of capital from the rich to the underdeveloped countries and the promotion of a global order of free trade. The IMF began and grew mainly as an institution helping developing countries out of foreign exchange crises through emergency ``bail-out'' packages of aid. At which point of time in its history did the IMF step out from its ``currency aid'' mission and begin functioning as a protagonist of financial liberalisation including capital account convertibility and then on to emerge as a compulsive counsellor on macro-economic management and on the entire route-map for structural reforms?

The IMF today is a vastly overextended organisation and to that extent it is becoming increasingly inevitable for it to encroach on the economic sovereignty of its member-countries and particularly those which are compelled by volatility of currency markets and domestic economic mismanagement to have recourse to its aid programmes.

In its Annual Report for 1998, the IMF claimed that it had been contributing to second-generation reforms in member countries through ``surveillance'', technical assistance and financing. Guess the agenda it has set for itself! Efficiency and robustness of the financial sector of the member countries is, of course, at the top of the list.

Transparency of fiscal policy, improved governance ``by establishing a simple and transparent regulatory environment and a professional and independent judicial system, that will uphold the rule of law, including property rights'', assisting members in redefining the role of the state in the economy ``as a positive force for private sector activity'' (including through the restructuring and privatisation of state-owned enterprises), improving the quality of public expenditure through, for example, greater attention to education and health spending, and promoting greater flexibility in labour markets - all these are the areas of focus for the IMF in its viswarupa darshan! Is it any wonder that the institution has generated so much hostility all over the world, being perceived as a super-government by stealth?

Poverty reduction - a free for all?

At this year's spring meeting, Mr. James Wolfensohn, the Bank's President, unveiled a new initiative called ``The Poverty Reduction and Support Credit'' (PRSC) which, independently of IMF conditionalities, would help the poor countries. Poverty is, no doubt, a matter of global concern. But to say that a global strategy for poverty reduction (through financial assistance to governments) would be an appropriate response is a failure to recognise that poverty is multi-dimensional in its causation and manifestations and that it cannot be corrected except through sustained local action going beyond financial budgets. Mr. Wolfensohn, in his foreword to the World Development Report 2000- 01, did proclaim that it is the mission of the World Bank ``to fight poverty with passion and professionalism, putting it at the centre of all the work we do''.

Indeed the theme of the WDR 2000/2001 is ``Attacking poverty'' almost suggesting that development cannot have a more worthwhile objective than that of eliminating the injustice of human deprivation. Rightly does the WDR 2000/2001 recognise the reality that poverty is not only low income and consumption but also low achievement in education, health, nutrition, and other areas of human development.

Poverty encompasses all these and more - ``powerlessness and voicelessness and vulnerability and fear''. How can then a global anti-poverty strategy anchored in financial lending ever be a corrective where a synergy between economic growth and social change would be needed to deal with massive poverty? Should the World Bank originally mandated to serve as a catalyst for unhindered movement of capital from the rich to the poor countries, redesign itself as an anti-poverty mechanism and seek to ride roughshod over the governments of these countries, however laudable its global vision could be? Is there a core competence for the Bank? And where is it?

Megalomania of the WTO

If the IMF and the World Bank have meandered far away from their original mandate and purpose, the WTO, after the Uruguay Round, seems inordinately obsessed with the quest for expanding its ambit far beyond the legitimate frontiers of trade.

TRIMS, concerning investments, and TRIPS, relating to intellectual property rights, are clearly extraneous to commonsense concepts of free trade or barrierless approximations to it. Labour and environment issues, can, by no stretch of the imagination, be regarded as being even peripheral to the larger concerns relating to a global system of competitive trade.

Trade in agricultural commodities is, by itself, a fit subject for an international covenant banning quantitative restrictions and arbitrary tariff rates.

There cannot be any doubt, however, that many developing countries including India ought not to be brought into a trade regime which does not recognise that the vast majority of farmers in these countries produce for subsistence and not certainly for competitive global markets.

Is it a mere coincidence or an essential character of these multilateral institutions - the IMF, the World Bank, and the WTO - that they are all seeking to mould the world in terms of the vision of the affluent countries with all its compassionate undertone? Or is it the problem of bloated ego - an inevitable attribute of any supra-national organisation?

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