Committee for the Abolition of Illegitimate Debt

Asia continues to draw attention as the “most important engine of global growth,” according to IMF IMF
International Monetary Fund Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.

http://imf.org Managing Director Christine Lagarde. Yet, as growth on the continent intensifies, countries are also experiencing deepening income and wealth inequality.

Income disparities in 11 economies – about four-fifths of the region’s population – are widening Income disparities in 11 economies – about four-fifths of the region’s population – are widening, and while inequality gaps within countries are closing elsewhere, they have been growing in Asia. By the World Bank World Bank
WB The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 189 members in 2017), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.

’s own account, “inequality in Indonesia has reached historically high levels,” with the wealthiest 10 per cent consuming as much as the poorest 54 per cent in 2014, which is an increase from 42 per cent in 2002.

Inequality, however, is not a recent phenomenon. In contexts of already sharp inequalities in the 1980s, the World Bank and the IMF extended loan packages with stringent repayment conditions that compelled borrowing countries to align their economic policies with market-based approaches. Deeply encroaching on national economic policy, structural adjustment Structural Adjustment Economic policies imposed by the IMF in exchange of new loans or the rescheduling of old loans.

Structural Adjustments policies were enforced in the early 1980 to qualify countries for new loans or for debt rescheduling by the IMF and the World Bank. The requested kind of adjustment aims at ensuring that the country can again service its external debt. Structural adjustment usually combines the following elements : devaluation of the national currency (in order to bring down the prices of exported goods and attract strong currencies), rise in interest rates (in order to attract international capital), reduction of public expenditure (’streamlining’ of public services staff, reduction of budgets devoted to education and the health sector, etc.), massive privatisations, reduction of public subsidies to some companies or products, freezing of salaries (to avoid inflation as a consequence of deflation). These SAPs have not only substantially contributed to higher and higher levels of indebtedness in the affected countries ; they have simultaneously led to higher prices (because of a high VAT rate and of the free market prices) and to a dramatic fall in the income of local populations (as a consequence of rising unemployment and of the dismantling of public services, among other factors).

IMF : http://www.worldbank.org/ programmes (SAPs) called for the unfettered cross-border flow of goods, services and capital, privatisation of state facilities, broad-based taxes and social spending cuts as part of austerity measures.

SAPs failed to attain their avowed aims of increasing industrial capacity and competitiveness, among others. Much-touted export growth was found very narrowly based on resource extraction and cheap labour, and was eventually eroded by deteriorating terms of trade and costlier imports. Trade and current account deficits swelled as this extractivist model was imposed, aggravating the external debt situation that the international financial institutions (IFIs) sought to solve in the first place with SAPs.

Trade and current account deficits swelled as this extractivist model was imposed, aggravating the external debt situation that the international financial institutions (IFIs) sought to solve in the first place with SAPs.

Domestic production deteriorated and triggered lay-offs and closures of local business enterprises. In Bangladesh, the rapid removal of tariffs, “opened a floodgate of imports from better-financed transnational corporations.” Import-substituting industries such as cotton and sugar waned, as industry-led employment substantially shrunk, especially in manufacturing. In the Philippines, a formerly booming garments sector contracted as cheaper goods flooded the global market, leading to a fall in export demand. SAPs’ promotion of market flexibility and wage caps dealt harsh blows to labour rights. In addition to promoting wage stagnation, they impeded the protection of collective bargaining and freedom of association rights. Labour flexibilisation brought greater job insecurity, especially for women who were already marginalised in insecure, low-paid employment. Thus, even without specific reference to labour conditions, SAPs “[represented] a substantial shift in the political balance Balance End of year statement of a company’s assets (what the company possesses) and liabilities (what it owes). In other words, the assets provide information about how the funds collected by the company have been used; and the liabilities, about the origins of those funds. of power between organized labour and business in recipient countries, as labour groups [lost] influence to the benefit of capital,” according to research in the journal International Union Rights. The persistence of the IFIs’ support for labour market flexibilisation is most recently evidenced by the World Bank’s draft 2019 World Development Report on the changing nature of work, which has attracted much criticism (see Observer Summer 2018).

The biggest winners of these policies, then and now, are wealthy, politically well-placed elites and multinational corporations.

The biggest winners of these policies, then and now, are wealthy, politically well-placed elites and multinational corporations.

As these issues manifest in more contemporary accounts of inequality, they highlight the persistently adverse outcomes of neoliberal policy on the working poor. A third of the region’s workers still remain below the international poverty threshold of $1.90 per day in purchasing power parity. Wage workers were paid only $73 per month in Nepal in 2008, $119 in Pakistan in 2013 and $121 in Cambodia in 2012. For Southeast Asia, wage growth has been noted by the International Labour Organization as even slower than in South Asia and East Asia.

Many women in poorly remunerated, insecure employment are among the most adversely affected by regressive taxes such as Value Added Tax (VAT) (see Bretton Woods Project briefing, The IMF, Gender Equality and VAT). Bangladesh, the Philippines and other developing countries enacted VAT laws as part of loan agreements with IFIs. Still commonplace today, tax-related conditionalities in loan agreements, including implementing or raising VAT, rose tenfold globally between 2006 and 2010.

In any crisis, those without the means and support to survive external shocks suffer the harshest consequences. Many Asian developing countries, including recipients of IFI lending, are also marked by inadequately financed, badly equipped and understaffed public health systems. In 2010, Asia had the largest concentration of people with “catastrophic health spending” (i.e. exceeding a household’s ability to pay) and the highest rate of “impoverishing health spending” or cutting back on other essentials due to an adverse health event.

The climate crisis also clearly illustrates how risks are multiplied by inequalities of income, access and opportunity. Six of the 10 most climate-threatened countries are in Asia.

Six of the 10 most climate-threatened countries are in Asia In these countries and other developing regions, mortality rates from climate disasters are four-to-five times higher than in developed countries. Millions of those supposedly lifted by growth over the last two decades are being pulled back into poverty, yet the IFIs continue to invest in climate-threatening fossil fuels. The International Finance Corporation (the private sector arm of the World Bank) for example, is currently the subject of a complaint submitted by the Philippine Movement for Climate Justice before the IFC Compliance Advisor Ombudsman for allegedly helping to finance 19 active or proposed coal-fired power plants through investment in financial intermediaries in the Philippines (see Observer Winter 2017-18).

Privatisation, a key pillar of SAPs, has recently been met with growing rejection, as demonstrated by the success of Indonesian civil society in reclaiming water services from the privatised set-up imposed as a loan condition in the 1990s (see Observer Autumn 2018). Yet, this policy advice persists, together with social spending cuts, wage ceilings, reduction of employers’ social contributions, poverty targeting rather than universal social protection, and regressive instead of sharply progressive taxation. The more unorthodox views of some IMF staff reports, such as increasing public investments, a higher wealth tax and charging a financial transactions tax, do not seem to have made a dent on policy statements, much less actual policy. Without a shift away from fiscal neoliberalism, this “hybridisation” in IFI thinking can be no more than part of the efforts to save their diminishing legitimacy and relevance.

The dismissive remarks of top IFI officials such as those of Lagarde that “we don’t do that [conditionality] anymore” only bares what lies behind their pronouncements of change and reform.

One is reminded of the emperor insisting he is wearing new clothes, as the IFIs essentially pursue the same neoliberal path that brought us to where we are now One is reminded of the emperor insisting he is wearing new clothes, as the IFIs essentially pursue the same neoliberal path that brought us to where we are now – in an inequality trap that stretches across generations, past and present.

A just framing of this narrative is urgently required – one that holds the IFIs, complicit states and elites accountable for their key roles in deepening inequality and is grounded in lived experiences of poverty and deprivation. But more importantly, this alternative narrative should be a hopeful one: a clarion call for transformative actions to end inequality and injustice in all its forms is required. From the waves of opposition by those in the North and the recent protests in the Middle East, to the resistance movements in Asia that will intensify beyond the 2018 Annual Meetings, that narrative is already being written by the peoples of the South.

Source: https://www.brettonwoodsproject.org/2018/09/imf-world-bank-aiding-abetting-inequality-asia/