The Imf Formula: Generating Poverty - International Monetary Fund - Statistical Data Included

Ecologist, The, Sept, 2000 by John Cavanagh, Carol Welch, Simon Retallack

Hunger and farmer bankruptcy is also a product of budget cutting under IMF programmes, which often leads to the removal of price supports for essential items, including food and farm inputs such as fertiliser, whose prices then rise dramatically (a problem that is compounded by IMF-inspired currency devaluations which make imports of food and inputs more expensive). This often leads to large-scale riots. In Caracas in 1989, for example, following a 200 per cent increase in the price of bread, riots ensued in which the army responded by firing upon and killing 1,000 people. Higher interest rates, meanwhile, often prevent small farmers from getting the capital needed to stay afloat, forcing them to sell their land, work as tenants, or move to the slums of large cities.

The impact on the environment

The natural environment is another major casualty of structural adjustment. IMF-dictated government spending cutbacks have inevitably targeted environmental ministries, including in Brazil (which slashed funding for environmental enforcement by over 50 per cent), Russia, and Indonesia -- countries that are renowned for their great biodiversity. In all but one of nine countries the World Wide Fund for Nature studied to gauge the impacts of structural adjustment, staffs of natural resource departments were reduced, budgets were cut and mandates were scaled back. The result is a downward spiral of environmental management and protection.

The premium placed by IMF programmes on attracting foreign investment and hence increasing competitiveness also encourages countries to lower environmental standards. In Guyana, for example, under IMF guidance, a new investment code was drawn up in 1988 that contained almost no environmental restrictions on foreign corporations. The IMF's focus on export-led growth has also led countries to extract natural resources at unsustainable rates. In Guyana, large-scale mining permits (largely owned by foreign companies) now cover ten per cent of the country's surface area, and timber concessions span the majority of the country's forests, transforming local ecosystems, polluting waterways, destroying forests and ruining soil.

Failure on their own terms

Although the Fund and the Bank have promoted SAPs as a virtual religion for nearly 20 years, they cannot even claim that they have achieved their own narrow objectives. IMF internal studies reveal that many SAPs have failed to enhance economic growth, reduce fiscal and balance of payments deficits, lower inflation and reduce external debt. In fact, between 1980 and 1997, the debt of low income countries grew by 544 per cent and that of middle income countries by 481 per cent. Poor countries have thus gone through all the pain of structural adjustment only to continue to engage in a net transfer of wealth to the industrialised world.

A decade and a half ago, we likened the Bretton Woods institutions to medieval doctors. No matter what the ailment, they applied leeches to the patient and bled them. At the onset of the new millennium, the doctors' cruel ministrations have been exposed in dozens of studies and in increasingly vocal street protests. Yet thus far, the Fund and the Bank's response has been largely cosmetic. New leeches are applied, dressed up by public relations experts. However, the growing public outcry in North and South alike indicates rough sailing for these institutions in the years to come.