IMF: One Step Closer to a Global State
When the International
Monetary Fund (IMF)
and World Bank held par-
allel annual meetings in Washington
last month, Latin America portfolio
managers were paying attention.
Investors wanted to know if the
IMF would succeed in doubling its
capital base to 200 billion dollars,
and-a related issue-if it would be
able to finance a reduction in devel-
oping-country debt burden. “The
perceptions and subsequent discus-
sions that emerge from the meet-
ings,” a Latin America specialist at
Salomon Brothers told the Mexican
newspaper El Financiero, “will be
the pivotal event for markets in the
coming weeks.”
The money folks were also
watching for any new programs
designed to aid the poor of Latin
America, although when it comes to
lending a hand to the poor and the
indebted, the brokers are of two
minds. As they say on Wall Street,
“markets believe” that programs of
debt relief and poverty control can
boost profitmaking by restoring
purchasing power and easing social
discontent. At the same time, the
very same “markets believe” that
such programs cut into profits by
distorting markets and raising costs
of production.
As they say on the Street, it’s not
the programs but the spin on the
programs that counts. Or to para-
phrase John Maynard Keynes,
money managers don’t really know
very much about the long-term
prospects for Latin American devel-
opment, but they do keep very close
tabs on the short-term confidence of
other money managers. And neolib-
eral Latin America depends more
than ever on that short-term confi-
dence.
With the aim of keeping those
money managers happy, the parallel
annual meetings reiterated a com-
mitment to free-market reforms and
continued privatizations, but also
acknowledged that those policies
were insufficient to guarantee a sta-
ble investment climate in the devel-
oping world.
The two multilaterals stressed
the need for programs to combat
the poverty and income inequality
their very own policies have exac-
erbated. Having successfully creat-
ed conditions for short-term profit-
making by taking the developing
world through privatization, labor
discipline, budget cuts and deregu-
lation, the world bodies are now
concerned with questions of social
and economic stabilization. And
they have the power of the purse–
and the one-dollar-one-vote repre-
sentation-to act on their concerns.
Both World Bank President
James Wolfensohn and IMF
Managing Director Michel
Camdessus reiterated the need–
and pledged support-for national
economies to engage in “social
investment” to combat poverty in
order to create a more stable invest-
ment climate. “Simple economics
gives the industrialized countries
sufficient reason to assist the devel-
oping countries,” Wolfensohn told
the press, putting a bit more spin on
the story for the investors. “With
their 4.5 billion people, these are
the markets of tomorrow.”
To “improve incentives for pri-
vate sector activity,” said
Camdessus, national governments
must reduce “unproductive outlays”
in order to “make more room for
spending on such critical areas as
health and education.”
Even more important, he said, national governments must be
reformed to create an atmosphere in
which there is “no tolerance for cor-
ruption in any form.” In the guise of
fighting corruption, the world bod-
ies will now oversee sovereign
activities more closely than ever,
setting tight limits on the proper
range of state activities. Govern-
ments going beyond these limits
will be looked upon unkindly at the
lending window.
The most urgent task for the mul-
tilaterals, said the managing direc-
tor, was to take care of “the
Achilles heel of the global econo-
my today-the fragility of national
banking systems.” A likely direc-
tion here is the globalization of
banking. Indeed, transnational
banks are well placed to inherit
many of the region’s collapsing
banking systems.
f we learn nothing else from a
close observation of these
meetings, it is that the man-
agers of the global free-market
project know it cannot work with-
out an effective global govern-
ment, a government whose func-
tion is exactly what Adam Smith
said it should be in 1776, to create
the best conditions for the func-
tioning of markets and the accumu-
lation of capital. Neoliberalism is
not about abolishing the state. It is
about transforming it into an effec-
tive vehicle of private capital accu-
mulation.
As the multilaterals become
proxy governments, and transna-
tional banking institutions become
truly global, being the president of,
say, Mexico has become much like
being the mayor of Detroit. And
soon, being the head of a national
bank like, say, Mexico’s Banamex, will be like being a branch manager
of Fleet Bank in Poughkeepsie,
N.Y. Wolfensohn and Camdessus
are just telling it like it is: national
governments and financial sys-
tems-especially in Latin
America-have been weakened,
perhaps beyond repair. The stability
and legitimacy of profitmaking are
now global responsibilities. So meet
the new state. Same as the old state.
Just a little bit bigger.
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