Friday, April 14, 2000, 12 noon EDT

Mark Weisbrot, co-director of the Center for Economic and Policy Research in Washington, D.C., will be online Friday at 12 noon EDT to discuss the case against the International Monetary Fund and the World Bank. Weisbrot's opinion pieces have appeared in the Washington Post, Los Angeles Times, Boston Globe, San Francisco Chronicle, Chicago Tribune, and many other newspapers throughout the country. He has also appeared on CNN, PBS' Nightly Business Report, NPR's Marketplace, Fox News, and a variety of other television and radio programs.

Weisbrot received his Ph.D. in economics from the University of Michigan, with specialization in international economics and political economy. His most recent work, co-authored with Dean Baker, is Social Security: The Phony Crisis (University of Chicago Press). Other publications include, Globalization: A Primer, Globalization for Whom? (Cornell International Law Journal), and Writing the Constitution of a Single Global Economy: A Concise Guide to the MAI. He also was a consultant to the Government of Haiti during the presidency of Jean-Bertrand Aristide.

washingtonpost.com: Today's guest is Mark Weisbrot, co-director of the Center for Economic and Policy Research in Washington, an organization that is supportive of this week's protests against the World Bank and IMF.

A first question: An article in yesterday's Post described the employees of the Bank and the Fund as feeling misunderstood by the protesters? What would you say to those people?

Mark Weisbrot: I'm sure there are many well-intentioned people at these institutions-- probably more at the Bank than the Fund, because the Bank does set poverty alleviation as one of it's stated goals. Whether these people are misunderstood, in terms of their intentions, by the protesters, is difficult to say.

But the protesters seem to understand the IMF and the Bank very well. The policies of these institutions cause enormous economic and social destruction around the world. In Russia, the Fund's program was adopted in 1992 and the country lost 40% of its income within a few years. Poverty soared from 2 million to 60 million people. The IMF also had a devastating impact in Asia, helping to cause the crisis there in 1997-98, and then making it enormously worse. I have written about these and other examples in detail elsewhere (see www.cepr.net). The Bank, of course, has its own mission and projects-- and these have been widely criticized for environmental destruction (e.g. the Chad- Cameroon pipeline), population displacement, and other abuses. But one thing everyone should know is that most of their lending is dependent on the recipient country first agreeing to IMF conditions; so the Bank must accept responsibility for the IMF's disasters as well.

Washington, DC: Was there greater stability, prosperity, and equality in the world economy before or after the creation of the World Bank and IMF?

Mark Weisbrot: The IMF and WB were created in 1944, towards the end of World War II. Prior to the war was the decade of the Great Depression. And of course if we go further back, there was more instablility and inequality, as well as poverty, than there is today.

But I think a more relevant comparison is the last 20 years-- because the Fund and Bank began their "structural adjustment" polices in the early 80s-- with the previous 20 years. And their influence has been greatest in Latin America and Africa.


In Latin America income per person has hardly grown at all over the last two
decades: about 5.6% total for 1980-97. If we compare this to the previous two decades, before the "Washington Consensus" of liberalized trade and investment was
adopted, the contrast is striking: from 1960-1980, income per person grew by 73%. In Africa, per capita income grew by 34.3% from 1960-1980, but has since fallen by about 20%.

And of course income inequality has increased both within and between countries over the last two decades. I think that if these figures were more widely reported-- even just the growth figures, ignoring poverty and inequality-- it wouldn't be assumed that these institutions are following a generally helpful program.

Arlington, VA: As a longtime denizen of DC, may I say that the kids forming the human chains in our streets over the weekend seem to still be hung over from Spring Break and eager to get on camera. Has our cult of celebrity gone so far that people adopt a cause simply because of the attention it brings them? I am skeptical of your protestation that these folks know that Chad is a country and not a surfer dude's name.

Mark Weisbrot: Well actually you don't have to know that much to come down on the right side on these issues. I tend to focus on the economic mistakes and abuses of these institutions, because I am an economist, and I think these issues have been under-emphasized. But these are colonial institutions-- they concentrate the power of Washington's financial and foreign policy elite over the lives of hundreds of millions of people throughout the world. All you really have to do is hold a basic political or moral belief that this is wrong-- e.g. if you believe in democracy, or even national sovereignty, than you would want to expose and curb the power of these institutions.

Washington DC: How, specifically, is the IMF "responsible" for the Russian and Asian Crises? Do you think that these situations would have been better, or avoided altogether without the IMF activities? In what ways has the IMF helped the world?

Mark Weisbrot: Again, for more detail, see our web site.

For Russia, it was the IMF's program that the Russian parliament adopted in 1992. And the government met most of the IMF's requirements (rapid de-control of prices, as well as privatization) and fiscal and monetary targets.

The IMF helped cause the Asian financial crisis by convincing countries like Indonesia and Thailand to open their financial markets to enormous foreign, short-term borrowing. They then made the crisis much worse through unnecessarily and extremely high interest rates, fiscal tightening, and other mistakes.

Missoula MT: Can you elaborate on how the loans are distributed in the countries. What I'm referring to is are they mainly for financial institutions within the country, government institutions, the poor, etc? Also, what do you make of the term "structural reajustment," and what does it mean for the poor within the loan accepting countries.

Mark Weisbrot: "Structural Adjustment" refers to a set of polices imposed by the IMF and the Bank as conditions for their loans. These policies often include high interest rates (as in Asia, Russia, and Brazil in their crises in the last 2 and a half years), and fiscal tightening (reducing a government budget deficit). Other measures such as privatizing state-owned industries may be attached. Often these measures cause economic recessions and increase poverty and unemployment. They may also harm domestic industry, when they insist on opening up domestic markets to foreign competition, without regard to consequences.

Washington, DC: Since the IMF and World Bank are assisting in the increase of the gap between haves and have-nots in the world, what is your suggestion of how to change these organizations. Do you think that the elimination of these organizations would help?

Mark Weisbrot: I think the most important thing right now is to reduce their power. They are effectively enforcing a creditor's cartel against many debtor countries, and literally making the most important economic decisions for 50 or 60 countries.

The debt owed to the the IMF and WB by the poorest countries should be cancelled, out of IMF and WB resources, and without conditions. If the World Bank really wants to help poor people, they could give unconditional grants for such things as public health and research programs to fight tropical diseases like malaria.

Over the long run, it is possible to imagine some international institutions playing a net positive role in terms of stabilizing financial markets, and more importantly, helping alleviate poverty. But the IMF and World Bank, respectively, are very far from doing this, and until Congress cuts their funding, there's no reason to believe that we will see serious reforms.

Washington, DC: I feel it wrong that I have to loose time at work because of this. WHat do they feel the need to block the people who not involed and prevent them from making a liveing. Whyy couln't they protest on the mall?

Mark Weisbrot: I can't speak for the protesters, but there is a long tradition of civil disobedience, e.g. in the civil rights movement, to demand change from undemocratic and unaccountable institutions. While I sympathize with people who are inconvenienced, it seems that these actions are necessary to call attention to abuses which are costing millions of lives-- for example, the millions of children in Sub-Saharna Africa whose lives could be saved if money now paid for debt service to the IMF and WB were spent on primary health care.

Arlington, VA: You seem to make the same mistake as was made by UNICEF et al in the 1980s in criticizing structural adjustment lending for having negative impacts on the poor in Africa and Latin America. The fallacy is that you compare economic conditions in a country before and after WB/IMF intervention rather than economic conditions with or without WB/IMF intervention. The analysis shows that conditions after intervention were generally better than there would have prevailed without intervention. That is, the WB/IMF mad conditions better than they would have been absent their interventions. Those were economies hell-bent on screwing up just about every macroeconomic, fiscal and monetary balance. Further, the analysis is also fairly clear that it was often the better off urbanites who suffered due to SAPs because they sttod most to gain from the preexisting distortions and rent-seeking opportunities. In Africa, the poor, particulary rural poor, benefited from the removal of export controls, devaluation, and food price controls while the urban poor benefited from privce stabilization and the urban construction booms that followed liberalization.

Mark Weisbrot: Regardless of distributional effects, with the growth differences I cited, it is difficult to make any case that Africa and Latin America are better off from the economic experiment that has been performed on them over the last 20 years.

Cross country comparisions of struc. adj. versus non struc. adj. countries also show negative effects of structural adjustment, but the Fund and Bank argue (with some validity) that inferences are diffiucult here because the countries that agree to these programs are generally worse off to start with.

Mt. Rainier: Some of the policies of IMF and World Bank seem wrong-headed and cold-blooded at best. But how much responsibility should the recipient governments be taking when corruption 'disappears' large quantities of the funds into private pockets? Many of the 3rd world countries are incredibly corrupt starting at the top.

Mark Weisbrot: I don't have any problem assigning blame to corrupt governments. But often the IMF and Bank contribute to the corruption with their lending and conditions. For example, the explosion of organized crime in Russia was in large part a result of rapidly dismantling the existing system, and trying to replace it with markets where there were not sufficient legal insitutions to enforce contracts. In the absence of these insitutions, organized crime became the enforcer of contracts, and grew exponentially.

Washington DC: Do you think that other international development banks (EBRD, IDB, ADB, etc.) share some of the blame you assign to the World Bank and IMF?

Mark Weisbrot: Yes, absolutely. The Inter-American Development Bank, for example, also lines up with the IMF and WB in their creditors' cartel for lending in the America's. So they also help to impose destructive policies.

Washington, DC: What role did the IMF play in the Asian crisis?

Mark Weisbrot: To elaborate on this some more:

When the Thai baht began to plummnet in August of 1997, what was most needed, if anyone was going to help, was a fund of reserves to stabilize the region's currencies-- because investors were rushing for the exits. The Japanese government actually proposed and Asian Monetary Fund to do that, and got pledges of $100 billion-- but US Treasury (which practically runs the IMF) killed the plan because he wanted the bailout to go thru the Fund.

The Fund not only attached destructive conditions to the bailout package, it also failed to help roll over the short term lending into long term loans, which was necessary to restore normal business activity. And it was extremely slow to disburse the funds that were approved-- for example, by March of 1998, the Fund had disbursed only $3 billion out of $40 b9illion approved for Indonesia. By that time, the economy had disintegrated considerably.

Washington DC: How would you propose to implement an "unconditional grant" to the Nigerians for example, or any other of the historically very corrupt regimes with whom the IMF and World Bank deal? Do you really believe that if we just give money to these abusive leaders that they will use it in good faith for the intended purpose? Do you disagree that in many cases the "undemocratic" processes of which you speak are actually protecting the poor citizens of impoverished nations against the corruption and fallacy of their own oppressive leaders?

Mark Weisbrot: In some cases, in which it is not possible to track the money that is disbursed, it should not be granted. I have no problem with any agency that makes grants wanting to make sure that the money is used for the agreed-upon purposes. But the IMF and the Bank impose conditions, e.g. macroeconomic policy conditons, privatization, mass layoffs (as they tried to in S. Korea during the Asian crisis) that are often harmful.

There may indeed be cases where the Fund, e.g., has opposed certain forms of corruption, but these would not make up for its overall destructive role, even on this issue. The Bank and Fund have lent to corrupt and dictatorial regimes for decades, and have generally followed US foreign policy guidelines in this regard-- e.g. Suharto in Indonesia, Mobutu in Zaire, Marcos in the Phillipines. So only when the US foreign policy establishment has decided that a dictatorial government need to change, or was no longer useful, has the Fund changed its policy. On the other hand, it has used its power to undermine democratically elected governments (e.g. Chile and Jamaica in the 1970s) when that was a US foreign policy goal.

Washington DC: How do we know that, if the WB cancels debt, the governments of the debtor countries will spend the recovered funds on social programs for their citizens, rather than arms or other things that don't benefit the poor?

Mark Weisbrot: Some people favor making this "positive conditionality" a requirement for debt relief. But I am wary of this, since most conditionalities imposed from Washington are abused for political purposes. The short answer is we don't know, but that in some cases it will be, and it will be up to the citizens of the affected countries to demand that it is used for helpful purposes. But there is no excuse for contiuing to take 25% of export earnings, on average, from the poorest countries in the world-- in most cases more than they spend on health care or education.

washingtonpost.com: Our time with Mark Weisbrot is up. Thank you Mark and to all of you who participated in today's discussion. For more on the IMF and World Bank, this week's meetings and protests go to washingtonpost.com's special report.