Famine in Africa:
Unelected and unaccountable: The International Monetary Fund and the World Bank have assumed the role of assisting the poorer nations, but now their policies are being criticised for being unhelpful and out of date. By Charlotte Denny Pick up a copy of the local newspaper in most African capital cities and you could be forgiven for thinking that the International Monetary Fund was a branch of government. Fund staff issue warnings that public sector pay claims are unaffordable, admonish ministers over their failure to cut trade barriers and advise central banks to keep a strict rein on inflation.
Meanwhile the World Bank instructs cash-strapped local health ministries to introduce hospital fees despite the fact that African households simply cannot afford to pay for their treatments. For a westerner, it is almost unimaginable that a foreign bureaucrat would dare to instruct an elected politician on how to run the economy. The last western economy forced to submit to the Fund's strictures was Britain, more than a quarter of a century ago. The reason why two institutions wield so much power in Africa is simple: money. Cash-strapped African governments have no choice but to go cap in hand to the Washington duo because few commercial banks would risk lending to them. With the loans come a cat's cradle of conditions on how to run their economies. The close watch the two cast over Africa today would probably surprise John Meynard Keynes, one of the leading lights at the Bretton Woods conference where the two institutions were born in the dying days of the second world war. Their original tasks were nothing to do with Africa: the Bank was set up to help reconstruct the shattered economies of war-torn Europe while the Fund's job was to help countries facing balance-of-payments crises. With the breakdown of the fixed exchange rates in the early 1970s and the development of Europe, the twins' original role became gradually redundant. But by then, they had turned their attention to other regions, notably Africa. Confusingly, their names should probably be reversed. The Fund acts more like a bank: lending at concessional rates to support countries facing balance-of-payments troubles. Because it is more concerned about short-term economic management issues, its loans come with conditions about things like controlling inflation and budget deficits. Without a Fund program other donors won't consider helping a country, giving it an even more crucial gatekeeper role. The Bank is really a development fund. It lends for long-term investment projects at even more concessional rates than the fund; for the poorest countries, its loans are practically free. The strings it attaches deal with longer-term structural issues such as privatisation, regulation and trade tariffs. Today the Bank and Fund's sweeping remits give them enormous powers over the day-to-day running of the average African country. But the voting structure of the two institutions reflects their post-war role rather than today's reality: western governments who foot the bills control the votes. While the United Nations is based on one country one vote, in the Bank and the Fund, it is more like one dollar one vote, and the US has enough votes to have an effective veto. "They are rather like latter-day proconsuls with huge influence across the region," says Duncan Green of the Catholic Agency for Overseas Development. "The problem is that along with that comes a circa-1980s view of economics." Their critics charge that the Bretton Woods twins prescribe a simplistic recipe of privatisation, deregulation and liberalisation to vulnerable economies which has resulted in many African countries being poorer today than they were 30 years ago. "Economic thinking has moved on in the countries that run the Bank and the Fund, but the two are still pedaling the same old snake oil to developing countries," says Green. "In the last two decades Africa's least developed countries have seen their share of world trade fall from 0.6% to 0.3%," says Concern's chief executive Tom Arnold. "We deny them the means to earn a living and condemn them to the welfare of aid." Telling governments with no money to cut their spending programs may make sense from the point of view of keeping the budget deficit under control, but it is a disaster for social programs. Health and education ministries have been forced to introduce fees which cash-strapped African households can't afford. The Bank has reversed its policy on user fees in education, after it caused a disastrous fall off in school enrolment rates, but it continues to advocate "cost-sharing" in health. The Fund's big failing according to Kevin Watkins of Oxfam is that it gives economic policy advice without any regard for how this will affect their ability to reach internationally agreed goals for poverty reduction. "They continue to set fiscal targets which are inconsistent with millennium development targets," he says. A recent paper by Oxfam argues that while the immediate cause for the crisis is a succession of poor harvests caused by bad weather, the region has been made more vulnerable to food shortages by the advice doled out by donors in the early 1990s. Mozambique, Zambia and Malawi all undertook radical reform of their agriculture sectors, abandoning state controls and moving to a system of minimal intervention. The state marketing boards that, although riddled with corruption, provided a vital source of support and advice to farmers, were abolished. In previous famines, these boards prevented the prices of staple crops like maize from spiraling and imported supplies to fill the gaps. Now price controls have been removed, prices are highest when the poor can least afford to pay them. Under fire from aid agencies, anti-globalisation protestors, and a few more enlightened donor governments, the two organisations argue that they are changing their ways.
The Bank now champions a new approach to dealing with client countries which, it argues, puts them in the driver's seat. Countries prepare poverty reduction strategy programs (PRSPs) in consultation with local interest groups, advised by the Bank and the Fund. The buzz-word is "country ownership" but opinions differ as to how much difference PRSPs really have made. Like good exam candidates, when they prepare their PRSPs, countries know what the IMF and the Bank want to see.
The big macro-economic decisions are still made by finance ministries rather than social spending ministries. Finance ministries in most African governments are staffed by officials who hold very similar views to Bank and Fund staff. Further, while there is an increasing openness to debate in the headquarters of the two institutions, out in the field there is less evidence of change.
+++++++++++++++++++ Neil Watkins World Bank Bonds Boycott Center for Economic Justice 733 15th Street, NW, Suite 928 Washington, DC 20005 Tel: (202) 393-6665 Fax: (202) 393-1358 Web: www.worldbankboycott.org