THE LATEST TURN of Jamaica's money troubles illustrates an interesting point in the relations between the rich countries and the poor. Jamaica, like most of the poor countries, must have credit to develop ts resources. But its commercial bankers -- an international group, led by two Canadian banks -- have now refused to provide more loans.
Why? Because Jamaica has broken off negotiations for further credit from the International Monetary Fund. Why? Because the IMF sets rigorous conditions to its loans to ensure that the money is spent well -- by the IMF's standards. Jamaica has a history of loose economic management, with a heavy emphasis on political patronage. If the government were now to submit to the IMF's conditions, one immediate result would be a jump in unemployment. The government, none too secure at best, would doubtless be voted out -- a thing that may shortly happen in any case. Jamaica has consequently rejected the IMF's conditions and turned instead to the consortium of commercial banks with which it has been dealing. But, having refused to work with the IMF, Jamaica has discovered that the private capital markets are closed to it. The commercial bankers have diplomatically expressed regret and sympathy, but their answer is no.
Enormous influence now resides in those two great silent institutions, the IMF and its sister, the World Bank, that face each other across 19th Street. Set up in the aftermath of World War II, they are run by boards representing governments -- both lenders and borrowers. Their large bureaucracies are drawn from dozens of countries at all stages of development.
The influence of these two institutions is now far out of proportion to the actual amounts of money they lend. Those amounts are small, in relation to the enormous flows of commercial lending into the Third World. But the commercial bankers look to the IMF and the World Bank to maintain the oversight and sanctions that, as a political reality, no North American or European businessman can hope to exercise. When the IMF and the World Bank come into a country to lend, the commercial bankers back off. That's what has happened in Jamaica.
Jamaica says it needs the money desperately to buy food and oil. The IMF, if it were to reply, might well observe that many countries need loans desperately to buy food and oil, and resources are limited. As the IMF sees it, its job is to give priority to governments less disinclined to balance their accounts than Jamaica.