BY SEAN HEALY
There were no major announcements, no new policy initiatives, all the drama was outside with the protesters, and the meetings finished a full day early. Nevertheless, when the annual meetings of the World Bank and International Monetary Fund finished in Prague on September 27, the members of the institutions' boards of governors would have breathed a sigh of relief.
After a year of unprecedented crisis, in which not only the peoples of the Third World, but also many in First, rose up in massive protests against the poverty inducing policies of the Bretton Woods twins, and in which even erstwhile allies had the knives out, the governors finally have a plan: admit the need for reform, remodel the rhetoric and surreptitiously change things for the worse.
The problem institution is not the World Bank; it foresaw its crisis of legitimacy long ago and acted to forestall it. The bank has had a sophisticated defence strategy in place since president James Wolfensohn took over in 1995.
Through a combination of minor concessions, heavy rhetoric, a re-targeting of some of its projects and the painstaking cooption of many of its critics, the bank has largely weathered the storm of worldwide protest, so far at least.
Wolfensohn has even managed to engage in some empire building. He has turned his institution into (by its own description) "the world's premier development agency", has taken ground from his critics through shiny new initiatives such as the Comprehensive Development Framework, which institutionalises and simultaneously guts a "holistic, country-owned approach" to poverty reduction, and has added to its mandate (and funding) what it calls "global public goods", such as the fight against HIV/AIDS.
The World Bank wore its sheep's clothing again in Prague, and it fitted perfectly. Wolfensohn hosted consultations with more than 350 non-government organisations, listening patiently to their questions and oozing sincerity in his answers. At the same time, he sought (with some success) to split the NGOs off from the "violent" protesters in the streets by appealing for "dialogue" and "bridge building".
The problem institution is the IMF. Its role as the United States' attack dog, the enforcer of the pro-Western structural adjustment policies which are so disastrous for the Third World, has made it hated around the world. According to the World Development Movement, there have been at least 50 episodes of serious civil unrest directed at the IMF so far this year.
The IMF's refusal, under the dogmatic former managing director Michel Camdessus, to depart from neo-liberal economic prescriptions in any way, even rhetorically, left it with little defence against widespread criticism of its operations.
At the same time, its credibility in elite circles was blown by its disastrous handling of the 1997-98 Asian economic crisis, when its early enforcement of tight budgetary and monetary policy on crisis-hit Asian economies nearly caused the general collapse of the world's financial system.
A US Congressional inquiry in April released the Meltzer report, which recommended a massive scale-back in the IMF's mandate and sphere of operations, while Japan and other Asian countries have kept alive their formally shelved plan to form a competing Asian Monetary Fund. For the first time since the mid-1970s, the IMF faced possible euthanasia.
On the PR road
Not any more — or at least not for now. The major Western governments, the US especially, which control the majority of votes on the IMF's board of governors and set its agenda, have instead decided to rescue their wounded enforcer, nurse it back to health and unleash it on the world again.
Under new managing director Horst Kohler, the fund will now make a serious effort to follow the World Bank down the PR road. Having for decades rebuffed any suggestions that its policies were hurting anyone, least of all the poor, the IMF has now embraced the global capitalist elite's official response to criticism of rising world inequality: admit problems, promise better in future.
On September 5, Kohler released a joint statement with Wolfensohn pledging that the fund would work more closely with the bank with the aim of halving absolute poverty in the Third World by 2015, in particular through debt relief tied to poverty reduction plans.
In his opening and closing remarks to the annual meetings, Kohler spoke forcefully of how the IMF would seek to "make globalisation work for the benefit of all".
"We must help our member countries take advantage of the opportunities of the global economy while finding ways to contain the risks", Kohler said. He even told a meeting of NGOs, "Privatisation should not be seen as an ideology".
To add some substance, the IMF board agreed to proposals to establish a semi-independent evaluation office, the first time the IMF has had such scrutiny, and promised greater transparency and less secrecy in the fund's operations.
Debt relief
Enhanced attention to its public image and rhetoric isn't the only thing the IMF will copy from the World Bank. Far from putting the IMF on a tight leash, as many had demanded, the US has ensured that the IMF will emerge from its make over with extra, sharper teeth, just as the World Bank has done.
The centrepiece of its repackaging and repositioning effort will be the administration of the Heavily Indebted Poor Countries initiative. First announced in 1996 and expanded at last year's annual meeting, the details of the initiative were formally confirmed in Prague.
Under HIPC, 20 of the poorest countries in the world should qualify for US$30 billion worth of debt relief by the end of the year; presently 10 have achieved their "decision points" and entered the scheme. The annual meeting extended the "sunset clause" for gaining admission from the end of 2000 to the end of 2002, which could allow more than 20 into it.
The condition for entering the scheme is that countries successfully complete a program of IMF-supervised structural adjustment and then produce a Poverty Reduction Strategy Paper (PRSP), a detailed plan of economic reforms ostensibly designed to tackle poverty and disadvantage.
The HIPC initiative is woefully inadequate. The bureaucratic hoops debt relief recipients are required to jump through to reach both their "decision points" to get into the scheme and their "completion points" to actually receive the relief will delay any debt cancellation for years, possibly a decade or more.
Even if all the Third World countries potentially eligible for HIPC relief reached their "completion points", bank spokespeople admit that these countries will have no more than US$50 billion of their debts cancelled.
The Third World's debt chains, worth an additional US$320 billion, would still be in place. The Prague annual meetings explicitly ruled out deeper debt relief.
The PRSPs differ little in their economic prescriptions from the SAPs which have so impoverished many Third World countries. Mali's, for instance, signed in September, includes 100 measures to be implemented, including massive privatisation. As part of its PRSP, Zambia was forced to sell its copper mines, at the cost of 60,000 jobs.
The conditions attached to debt relief, contained in the PRSPs, give the IMF greater jurisdiction over not just economic policy but also non-economic policy, under the guise of paying attention to issues of "governance" and "technical assistance". The debt relief plan will allow it to bark orders even more than it currently does.
The device of linking debt relief to the PRSP will serve the IMF well. The nomenclature of debt relief and poverty reduction will give it an all-over gloss, while its new duties, guarding the gate to debt relief, make the IMF the ultimate arbiter over Third World plans for poverty reduction.
Financial surveillance
The IMF's masters have responded similarly to intense criticism of the IMF's handling of the 1997-98 economic crisis and calls for reforms to the "international financial architecture": by conceding on the rhetoric while increasing the powers given to the IMF.
The IMF's powerful International Monetary and Finance Committee, which met before the annual meetings, agreed that the fund should investigate measures to voluntarily involve private investors in bailing out crisis-hit countries. If this occurred, it would be a major departure from standard IMF procedure, which is to indemnify the big Western banks and ensure they lose nothing if their loans go bad.
That vague concession aside, the annual meetings confirmed the wish list of the July G7 meeting of rich, industrialised countries, which will ensure the fund can (in Kohler's words) "play a central role in safeguarding the stability of the international financial system" and "put crisis prevention at the heart of Fund surveillance".
To this end, the annual meetings enhanced the fund's system of surveillance powers, strengthened its ability to monitor national financial systems, exchange rate regimes and other detailed financial data and increased its ability to ensure Third World governments' compliance with a host of international financial and accounting standards and codes.
Further, while its articles of agreement haven't been formally expanded to give it a mandate to facilitate Third World countries' capital account liberalisation, which would allow easy flow of money across borders, the IMF has received the signal to increasingly "advise" such a course.
While the guise is financial stability to ensure "economic growth which benefits all people of the world", the primary beneficiaries of this "crisis prevention" will be the major Western investors, the big investment and commercial banks in particular. They will be able to invest (or rather, speculate) more easily, get earlier warnings about danger signs in national economies and pull out sooner, with smaller losses.
Risky strategy
While the Bretton Woods twins' bosses might leave Prague with smirks on their faces, thinking they'd hoodwinked their critics, the course they're following is a risky one.
For the plan to work, the two institutions need to succeed in "bridge building". If they can't gain some backing from Third World governments and NGOs, they can't re-win lost legitimacy.
There are positive and negative signs for the IMF and World Bank on both counts. While the government of a country as strategic and influential as South Africa has backed the IMF and World Bank's plans (finance minister Trevor Manuel chaired the annual meetings), other Third World countries' delegates sympathised with the protesters, as they did during World Trade Organisation talks in Seattle. Congo's IMF governor, for instance, said protest "helps public opinion in the countries where it matters".
Similarly, while the NGO organisers of an alternative forum titled "A Different Message" denounced the "violence" at the protests, saying that such actions "undermine the efforts to advocate positive changes within these institutions", others were taking another direction. Jubilee South's Dennis Brutus, for instance, told the forum he would never again share a platform with a representative of the World Bank or IMF.
A larger issue looms: while it may be able to coopt Third World governments or NGOs which need and want dialogue with the Bretton Woods twins, the IMF and World Bank can do little about the growing international protest movement, which doesn't need to talk to them and generally doesn't want to.
So long as that protest movement goes from strength to strength, the double-edged "reforms" decided upon in Prague might end up wounding the IMF and World Bank. Rather than assuaging their opponents, the repackaging efforts may simply convince opponents that muzzling these institutions is a real possibility.
Even more disastrously for the IMF and World Bank, the repackaging may convince opponents that no genuine reform is possible and that it would be more humane for everyone if the terrible two, the cause of so much misery, were put down instead.