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Banking on world poor

Caitlin Hall
By Caitlin Hall
Arizona Daily Wildcat
Wednesday October 23, 2002

Since my column "Lessons in Īcapitol' punishment" ran a few weeks ago in the Wildcat, I have received a number of letters insinuating that the Washington, D.C., protests were nothing more than an excuse for privileged, misguided college students to work out some residual childhood anger. While it is worth noting that these letters ÷ most of them viciously personal ÷ were written almost exclusively by older male professionals and government employees, their existence brings up an important point: There is extreme ignorance on the part of the public as to what the International Monetary Fund does and why it is so objectionable.

This shortcoming is in no small part due to a mainstream media that would much rather lend coverage to the events of a protest than the ÷ admittedly unprofitable ÷ motivations behind it. However, it is not because grounds for objecting to the IMF are not authentic or palpable.

The IMF ÷ a major financial tool of the World Bank ÷ provides developing nations with a source of loan money, supposedly to facilitate the improvement of infrastructure and bolster faltering economies. In practice, however, the IMF has yet to rescue a single fledgling country from the throes of the business cycle; that is, unless your definition of "rescue" encompasses the street cat swept into the safe haven of the Humane Society only to be euthanized when there's no room at the shelter.

Here's how the scheme works. A country of the so-called "global South" racks up a large debt and, just like the person with poor credit who opts into a credit card with a 25 percent APR, is forced to borrow money on whatever terms are offered by an international organization such as the World Bank. Along with that capital comes a list of stipulations, which are advanced and enforced to different degrees, depending on the particular agreement. These provisions, guised as means of freeing up capital for debt repayment, include:

· Cutting social spending ÷ Predictably, cutting education and healthcare funding lowers the standard of living in compliant nations. It contributes to an increasingly poorly prepared work force in countries already desperately in need of skilled labor. It means people do not get adequate healthcare, and even more women are forced out of schools and into homes where they can monitor the welfare of their families.

· Reducing the size of the government ÷ As the saying goes, it doesn't take a weatherman to look around and see the weather. You don't have to be an economist to understand that such "reductions" can be disastrous in countries in which the government is often the largest employer.

· Increasing the interest rate ÷ This recommendation is usually justified on the basis that it combats inflation. However, this logic only follows if people are able to invest and save their money, rather than taking out new loans. For many in poor nations, that is simply not an option; like their governments, they rely on loan money to keep their businesses afloat.

· Eliminating regulations on foreign businesses ÷ Proponents say such policies encourage foreign investment, and they're right. Unfortunately that investment is worth little when accompanied by low taxes, lower wages, and the utter devastation of natural resources.

· Cutting subsidies for basic goods ÷ These policies make it even more difficult for people to afford basic necessities, which drives down the standard of living and leads to acute civil unrest.

· Reorienting economies to favor exports over subsistence crops ÷ In short, these policies promote the usurpation of tenable land to support cash crops such as coffee and cotton rather than subsistence crops necessary to feed poor nations' populaces. It leads to soil erosion and environmental destruction, and also encourages the proliferation of sweatshops.

The situation brings to mind the scene from "Romeo and Juliet" in which Romeo buys the poison he will use to kill himself. Attempting to soothe his troubled conscience, the apothecary explains, "My poverty and not my will consents," to which Romeo replies, "I pay thy poverty and not thy will." Though impoverished governments are doing their citizenry a disservice, it is abject poverty and the promise of prosperity, no matter how ill-gotten, which compels them to do so.

If debtor nations are Shakespeare's apothecary, the IMF is his Romeo ÷ minus the whole tragic-lover mystique. The only difference is that in this version, the apothecary gets the money, but keeps the poison.

Some facts for this column were provided by Check it out.


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