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by Sonja Jacobs '00 There are no other organizations in the world that have as large an impact on global labor as the International Monetary Fund (IMF). The IMF is a global institution which loans money to countries to finance projects and the development of infrastructure and resources. However, many countries have become mired in debt to the IMF (along with other lenders). The role of the IMF has shifted dramatically in the past fifteen years to focus on economic bailout packages for countries whose debt and mismanagement has led to an economic crash. The most recent example is the economic crisis in Southeast Asia, but the IMF has been involved in bailout packages to Africa, Latin America, the Middle East, Russia, and Eastern Europe. Overall, the effects of the bailout packages have been detrimental to the poor, the environment, long-term prospects for an independent economy, and labor rights. Structural Adjustment Programs (SAPs): The IMF has only one criterion for assisting a country with an economic bailout plan: the country must implement a Structural Adjustment Program (SAP), which is designed by the IMF to reduce inflation in two ways: *Interest rates are increased, which lowers the amount of credit available. This is meant to solve the problem of "too much money chasing too few goods" (the traditional definition of inflation). *Government spending is reduced overall (usually by cutting social services like health care and education), taxes are raised, wages are lowered, and prices are returned to their market value (by removing subsidies and price controls). Effects of SAPs on Labor: First, the increased interest rates mean that small businesses and small farmers cannot get credit to buy inputs for their industries. This, combined with the restructuring of land use to cash crops for export, ensures that small farmers will probably be bought out by larger farms. When a country focuses heavily on producing cash crops for export, there are often local food shortages, which further increases prices, and usually means that a country has to import food (which may mean getting another loan). Although SAPs are meant to increase the chance of investment in countries, the investment that comes has tended to be exploitative. All investment, including sweatshops and natural resource exploitation, must be welcomed under the IMF's SAP. Governments need the money, and so have very little clout in enforcing safety regulations or restrictions on environmental damage. Second, there are obvious effects when a government cuts social spending on welfare, health care and education. It means that those who are unemployed have no formal safety net to fall back on, that sickness and preventable death rises dramatically, and that most children cannot afford to go to school. The long-term prospects for an economy to strengthen depend on the strength of its youth. In twenty years, a new uneducated, malnourished generation will take control of the economies of developing nations, making it more difficult for countries to get themselves out of the debt trap. In Indonesia before 1997, the government had heavily subsidized the prices of basic goods such as rice and cooking oil. When an SAP was enacted after the economic crisis in 1997, prices on those basic goods rose so much (some five to ten times) that people took to the streets in riots because they could not afford food. Women were especially affected. IMF SAPs hurt the poor most of all, making a difficult economic situation even harder. The Future? Getting rid of international debt (debt relief) is one sure way to help the poor people in developing countries (see http://www.j2000usa.org for one example, the Jubilee 2000 campaign, of an organization trying to do this). But the very structures of the IMF and the global economy must be reformed too. Global economics is so dominated by Western countries and the G-7 countries that democratic processes on a global scale are difficult. The very definition of development must be questioned. Right now, economic development entails a nation being able to be consumer-oriented and capitalistic; usually the United States is held as the epitome of a well-developed economy. But there are many problems that come with this understanding, and many other alternatives that must be explored. We must also question the processes of the IMF and other lending institutions. Can we make economic reforms that genuinely empower poor people in developing countries, rather than serving our own interests? Sources: Jubilee 2000 http://www.j2000usa.org/ accessed 10/24/99 50 Years is Enough (U.S. Network for Global Economic Justice) http://www.50years.org/ accessed 10/24/99
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