Under the original Bretton Woods system, IMF loans were aimed at preventing devaluation and propping up demand. U.s. capital accepted these Keynesian measures when the U.S. was the major world exporter, ran large trade surpluses and the rest of the world depended on its currency to pay for those imports. But in the 1980s, the IMF turned all of its previous policies on their heads: It now deliberately imposed devaluation and forced reductions in national income and demand in order to limit imports—all as a means to guarantee repayment of debt to international finance capital.
(...) In the 1980s, 187 structural adjustment loans were negotiated. They were the bitter medicine that only a seemingly objective, nonprofit multilateral organization like the IMF could get away with politically. Structural adjustment led to hunger, malnutrition, poverty, disease and death throughout the Third World. Under IMF surveillance and enforcement, virtually every nation in sub-Saharan Africa entered a structural adjustment program. In every case, they were a disaster for the people of Africa and did nothing to restore growth. In the 1980s, GNP in sub-Saharan Africa fell by 2.2 percent per year, and per capita income fell below pre-independence levels. To pay back the debt, government health expenditures were cut by 50 percent and education by 25 percent. In Tanzania, debt repayment was six times the expenditure for health costs—which is all the explanation one needs to understand why 40 percent of the population of Tanzania dies before age 35.12 Flood-ravaged Mozambique—whose debt was $8.3 billion in 1998—pays $1.4 million per week in debt repayment. It will pay out in less than one year more than it has been promised in flood relief.
(...) In IMF-“adjusted” countries, government spending per capita was reduced yearly from 1980 to 1987 and diverted to ever-increasing payments on debt interest. In Latin America, the portion of government budgets allocated to interest payments increased from 9 percent to 19.3 percent. Under IMF auspices, the 1980s were a lost decade for Latin America. In Chile, IMF loan conditions cut real wages by 40 percent. The IMF loan to Mexico in the debt crisis of 1982 cut real wages in half in the next decade, while investments in health, education and basic physical structure were also halved. Infant deaths in Mexico due to malnutrition nearly tripled in the same period.
(...) Yet, at the end of the decade, the debt of Third World countries was greater than when the structural adjustment programs began. Rather than “saving” these countries, the IMF had enmeshed them in an endless debt trap.
(...) The IMF rationale was that loans would stimulate the economic growth that would allow for debt repayment. In truth, most existing international debts were serviced only by increasing international borrowing. From 1976 to 1982 Latin American foreign borrowing doubled. Seventy percent of new loans went to interest payments on old loans.
(...) The IMF Asian loan conditions went far beyond the needs of stabilizing the situation and repaying debt. The IMF demanded that foreign banks (primarily U.s.) be allowed in immediately—in the depths of the crisis—so that they could acquire existing banks at fire-sale prices. This piece of U.s. robbery was justified in the U.s. press on the grounds that the Asian banking crisis grew out of Asian corruption, or “crony capitalism,” an unholy alliance of corporations, banks and government—something apparently different than the alliance between the U.S. government, U.S. corporations and the IMF.
(...) The human impact of IMF loan conditions on the countries that became its wards was (and continues to be) horrendous. In Korea, the IMF imposed mass layoffs, leading to the joke that IMF stood for “I’M Fired.” Children abandoned by destitute parents were called “IMF orphans.” In Thailand, large numbers of children were thrown into child prostitution. In Indonesia, school enrollment dropped by a quarter. IMF loan conditions for Argentina demanded that labor laws be altered to eliminate national bargaining and grant employers the right to fire workers at will. The IMF program that was imposed on the Suharto dictatorship raised the price of rice by 38 percent, cooking oil by 110 percent and fuel by 70 percent This provoked the rioting that led to Suharto’s fall in 1998. IMF austerity conditions were now becoming dangerous to the health of local ruling classes. The IMF was forced to backtrack; loan conditions had to be less draconian for fear that no local ruling class, no matter how corrupt and subservient to Western capitalism, could carry them out without provoking a major upheaval.
collected snippets of immediate importance...

Saturday, June 6, 2009
Labels:
debt crisis,
facts,
financial capital,
imf,
keynes,
neo-liberalism,
structural adjustment,
US
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