Who Does the IMF Represent?

from The Progressive magazine July 1998

Editors note:

On April 21, (1998) the House Banking Subcommittee on General Oversight and Investigations held a hearing on the International Monetary Fund. Representative Bernie Sanders, the socialist and independent from Vermont, gave an opening statement and then questioned Timothy Geithner, Assistant Secretary for International Affairs for the Treasury Department. What follows are excerpts from that hearing.

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Bernie Sanders: We are here today, among other things, to find out if the IMF is an institution that serves the interests of the working people and the middle class of the United States-the vast majority of our citizens-or whether the IMF is simply a front group for giant banks, global corporations, and wealthy investors. Who does the IMF represent?

We are here today to find out if the IMF is improving the lives of the people of the Third World, many of whom are living in desperate, grinding poverty, or whether the IMF primarily serves the interests of the local ruling classes and elites in those countries in which the IMF does business.

Further, we want to know whether the representatives of the United States to the IMF in the Reagan Administration, the Bush Administration, and the Clinton Administration have obeyed the law. Some of us spend a lot of time up here doing our best to make laws that we think are sensible, and every now and then we would like the law to be obeyed.

Congress for the last twenty years has repeatedly required specific actions by United States Executive Directors to the IMF, but there is grave doubt as to whether these legal requirements have in fact been carried out.

Some of us want to know if the IMF strengthens or undermines democracy around the world. The New York Times described the IMF and its sister institution, the World Bank, as "the overlords of Africa." Ninety countries with more than half the world's population have lived directly under IMF-imposed conditions. In other words, the IMF has had an enormous impact on billions of people throughout the world.

How well has the IMF performed in improving the lives of the people in the Third World?

Has the IMF helped countries who come to it for loans become more self-sufficient, or has it turned them into loan junkies?

One might think that after the IMF is done with these countries, they would be less in debt than before the IMF got to them in the first place. It is disconcerting to learn, therefore, that from 1982 through 199O, debtor countries in the South paid their creditors in the North $6.5 billion in interest and another $6 billion in principal payments every month, as much as the entire Third World spends on education and health.

Yet the debtor countries were 60 percent greater in 1990 than in 1982. In other words, after cutting all of their basic programs, they were more in debt than when the IMF got to them in the first place. Does that sound like a successful loan program? Not to me it doesn't. It sounds like loan-sharking, to be honest.

Mr. Geithner, you won't mind if I quote: "The United States pursues the advancement of human rights through a variety of diplomatic channels and international institutions. As provided in legislation, the United States Executive Director has opposed IMF financing to countries about which the United States has human-rights concerns or countries harboring war criminals." That is what you wrote, is that correct?

Timothy Geithner: I am not sure. I didn't read it as you were reading it, but I assume that is what I wrote.

Sanders: Well, I am a good reader. I read exactly what you wrote. Having said that you are fighting hard for human rights, trying to obey the law here, this is what the State Department says in its annual human-rights report for 1996 regarding Indonesia, and I quote, "Despite a surface adherence to democratic forms, the Indonesian political system remains strongly authoritarian.... "

Further, the report states, and I quote, "The government continued to commit serious human-rights abuses.... The authorities maintain their tight grip on the political process, which denies citizens the ability to change their government democratically."

Now let me read you from the law that was passed by the United States Congress, and it has to do with an amendment that I played a role in called the Sanders-Frank Amendment of 1994: "The Secretary of Treasury directs the United States Executive Directors of the international financial institutions to use the voice and vote of the United States to urge the respective institution to adopt policies to encourage borrowing countries to guarantee internationally recognized worker rights and to include the status of such rights as an integral part of the institution's policy dialogue with each borrowing country."

Now, it seems to me on the surface you very clearly disobeyed the law. The State Department tells us we have an authoritarian government that does not believe in human rights. The law says you should use your voice and vote against providing loans to those countries, and you provided billions of dollars to General Suharto. Can you please tell me what was going on?

Geithner: We have a set of procedures under which the State Department essentially tells us which countries meet these standards, and we then vote against, or oppose assistance to, countries who the State Department so designates.

The State Department has identified five countries for which it has, so-called, a policy of human rights, and the five countries are China, Sudan, Ecuador, New Guinea, Iran, and Mauritania.

Sanders: Excuse me. I am a little bit confused. I just read to you from a report of the State Department which says that Indonesia is an authoritarian, undemocratic country which, among other things, jails the leader of the labor movement in their country. Now I am a little confused. That is what they say but they don't tell that to you? They keep that a secret from you or what?

Geithner: The law has a different standard than the standard of the report.

Sanders: Ah.

Geithner: We don't make an independent judgment at the Treasury because it is not really our expertise on how to interpret standards of law or how to judge which countries are quote, "gross violators of internationally recognized human rights."

Sanders: You don't know how to do that?

Geithner: We at the Treasury don't believe-don't make an independent judgment on that. We defer to the State Department on that.

Sanders: I read to you from the State Department, which says that you have an authoritarian undemocratic government, but that is not good enough for you, and then the United States Congress tells you not to provide funding for those type of countries. But I am a little bit confused here.

Geithner: You are asking a good question.

Sanders: It is a good question, and I would like a good answer.

Geithner: This law was passed. The law sets the standard. We apply the standard through a set of procedures under which we defer to the State Department on a judgment of which countries meet the standard.

They so inform us, and when they do we oppose loans to that country.

Sanders: Let me see if I can try to translate. The Congress tells you not to provide funding for governments which are authoritarian and suppress internationally recognized workers' rights. The State Department writes a report that says Indonesia suppresses human rights and is an authoritarian country.

But then in connection with the IMF, the State Department suddenly does not include what they wrote in their annual report but they worry about Mauritania and-what?-North Korea?

Some of us aren't that sophisticated. We kind of thought that when the State Department says that a country is authoritarian, when we say don't fund authoritarian countries, that you might want to obey the law.

Geithner: This is not an issue of sophistication. It is that the law has a different standard than the standard in the human rights report, and that is not something that we are responsible for.

Sanders: I think you are responsible for it, and I think that is a very feeble excuse. I think you have done something in violation of the law..

IMF, World Bank, Structural Adjustment