Here’s a riddle: What is the difference between Tony Soprano and the International Monetary Fund? Answer: Nothing, except that Tony and his Mafia pals, who extort and impoverish a handful of people in New Jersey, are a television creation. The IMF, on the other hand, does this to hundreds of millions in the real world.
The organization’s latest victim is Argentina, where Latin America’s third largest economy has been derailed by IMF policies that have devastated populations and economies from Moscow to Jakarta while stuffing the coffers of financial organizations and banks. And those policies were made right here in the USA.
The prevailing myth about the IMF is that it is an “international” body. Indeed, it has lots of members, but the United States and its allies make all the decisions. The Netherlands, for instance, has more voting power than China and India. “International” is a handy fiction that allows the organization to avoid congressional oversight.
And what the IMF does is to make an offer you can’t refuse.
When Argentina hit an economic rough patch back in the early ’90s, President Bush (senior) and the fund offered a loan. But the money was contingent on Argentina pegging its peso to the dollar, privatizing everything from banking to utilities, removing all tariffs and allowing the free flow of capital.
Argentina took the bait, and foreign capital surged in. For some — the wealthy — the economy took off. But tying the peso to the dollar made Argentina’s exports prohibitively expensive, while the flood of cheap foreign imports blitzed the country’s industrial base. Factories closed, unemployment spread and the debt exploded.
The free flow of capital allowed foreign companies to bleed profits overseas and opened the gates for “vulture funds,” which bought up the debt to make a killing on higher interest rates. The Toronto Trust Argentina market fund made a 79.25 percent return on debts it purchased — 30 times what it would have made holding U.S. Treasury bonds. Privatization drove up prices. A French company purchased the country’s water system and hiked rates by 400 percent.
The Mafia works with blackjacks and sawed-off shotguns. The IMF does its mayhem with opaque-sounding documents, like the “Technical Memorandum of Understanding” that Argentina signed in 2000. The agreement required Argentina to cut its budget, slice civil services salaries by 15 percent and cut pensions 13 percent.
Not to worry, the IMF said. Do what we say, and production will jump 3.7 percent. Instead, it fell 2.1 percent (until it dropped off the charts four months ago). “Hey, but we’re here for you guys,” said the IMF. “We’ve got a $26 billion loan to help you out.” Not exactly. You see, the Argentinians can only get the loan if they pay off their debts in dollars. But because of the meltdown, they have to pay a 16 percent premium to get the dollars. A year’s payment on their $132 billion foreign debt, plus the added premium, comes to $27 billion. No Argentinian will even get a whiff of that IMF “loan.” It will go straight into the vaults of Citibank in New York and Fleet Bank in Boston.
The IMF also insists that Argentina balance its budget by the end of 2002, which would require the government to cut $7 billion from the budget and raise taxes $4 billion — the equivalent of the United States implementing spending cuts and tax increases of $400 billion in a single year, or $2,500 per family.
No one should be surprised by any of this. The IMF’s track record is one of unalloyed disaster. It was the IMF that help bankrupt Russia and turned the 1997 Asian monetary panic into a full-fledged economic disaster. When the Asian bank crisis started, the IMF arrived with loans, but only if everyone privatized and opened their markets. The result was a major meltdown in every Asian economy except Japan and Taiwan. In Indonesia 100 million people — half the population – now live on less than $1 a day.
When Argentinians asked the Bush administration for aid, you would think they’d have gotten it. After all, Argentina was one of the few Latin American countries to actively support the 1991 Gulf War, is a strong supporter of NATO, and is sending peacekeepers to Afghanistan at a cost of $20 million.
But like Tony Soprano and the goodfellas, the administration doesn’t let friendship and alliances get in the way of business.
The Bush administration has washed its hands of any responsibility, in spite of the fact that Washington’s fingerprints are all over the crisis. “It was very clearly the Department of the Treasury that pushed Argentina over the edge and allowed it to collapse,” Walter Molano of BCP Securities argues, “so I think the issue of accountability has to come up.” Indeed it should.
The White House says it wants to stop terrorism. It can start by reining in an organization that has terrorized populations across the globe.
Examiner columnist Conn Hallinan is a journalism lecturer and provost at the University of California, Santa Cruz. His column appears every other Friday
Conn M. Hallinan is a columnist for Foreign Policy In Focus, “A Think Tank Without Walls, and an independent journalist. He holds a PhD in Anthropology from the University of California, Berkeley. He oversaw the journalism program at the University of California at Santa Cruz for 23 years, and won the UCSC Alumni Association’s Distinguished Teaching Award, as well as UCSC’s Innovations in Teaching Award, and Excellence in Teaching Award. He was also a college provost at UCSC, and retired in 2004. He is a winner of a Project Censored “Real News Award,” and lives in Berkeley, California.
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