$18 Billion for IMF Bailouts? Taxpayers Say "Not So Fast"
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Following the below news story is an editorial, from an unknown source, criticizing IMF policies.
WASHINGTON (Reuters) - The Senate Appropriations Committee approved compromise legislation Tuesday to fund and reform the International Monetary Fund (IMF).
The package, which includes $18 billion for the IMF and sets out specific reforms for the lending agency, was approved by a vote of 26-2.
In a snub to the United Nations, the committee did not include funding to pay for U.S. arrears to that world body. Committee chairman Ted Stevens, an Alaska Republican, welcomed the vote and urged the Senate to move quickly on the package.
But Sen. Mitch McConnell, a Kentucky Republican, said the compromise package would change the way the IMF did business.
``The impact of these reforms will be clear and far- reaching,'' McConnell said, adding that some provisions may not have the support of the Treasury Department. ``I can already hear Treasury's lament.''
The bill includes several reform conditions, calling on the IMF to be more open to Congressional audits and reviews. It will also urge countries that receive IMF aid to treat domestic and foreign creditors more equally and comply with international trade rules. It requires regular reports by the U.S. Treasury secretary on IMF operations.
The vote boosted President Clinton's drive for $18 billion to replenish IMF resources, drained by three rescue packages last year in Asia totaling more than $100 billion. But IMF funding still faces hurdles in Congress that could prove insurmountable.
In the House of Representatives, Republicans have vowed to attach anti-abortion measures to IMF and U.N. funding. The abortion issue killed funding for the IMF last November and could derail it again this year because it would drive away Democrats and invite a presidential veto.
The Appropriations Committee's bill now advances to the Senate floor for consideration.
The IMF economic program imposed on a borrowing nation is a tight- fisted one which appears both logical and necessary, even though it impoverishes working people and places its middle-class in jeopardy. Here are some of the basic elements of that program and their rationale:
Increase interest rates. That's a good way to promote savings and investments, both foreign and domestic, even though it might raise the cost of food and consumer goods for the population.
Shut down or privatize government-owned industries and institutions that require subsidies for their continued operation. Any country steeped in debt cannot afford to finance unprofitable enterprises.
Develop an "austerity" budget. A country must learn to live within its means, especially a chronically debtor one. That requires cutting down or eliminating costly social programs.
Reorganize the industrial system to increase productivity and profitability. It may require depriving hundreds of thousands of workers of a livelihood, but that is the price that has to be paid for past investment blunders and self-enriching policies of the nation's government officials.
We Americans can recall something of the IMF bailout of Mexico. The Clinton administration keeps bragging that the investors were repaid; the U.S. Treasury got its money back with interest, and more investment started coming back to the country.
But what has happened to the Mexican people? Since the Mexican bailout in 1994, some 2,000,000 workers have lost their jobs. The purchasing power of real wages has declined by a shocking 40 percent. About 25,000 small businesses have had to shut down and the country's middle class has been seriously squeezed.
Although the IMF is a voluntary organization of 182 member countries with an executive board and a management structure, its policies and activities, in actuality, are controlled by the U.S. Treasury and, to a lesser extent, the major financial ministries of the European Union and Japan.
In economic affairs, the IMF functions virtually as a super- government, playing a significant role in influencing the financial policies of nearly 75 underdeveloped nations around the world, with a combined population of 1.4 billion.
Not even the experts are sure how the Asian financial crisis and bailouts will play out and the effect it will have on U.S. workers, but we should be wary of the IMF's role.