Almost completely lost in the drama over the war supplemental for Afghanistan, Iraq and Pakistan is a sneaky play by the U.S. Treasury Department to get $108 billion in U.S. tax dollars for the International Monetary Fund through the supplemental. Of course, if Treasury can get the money through the supplemental, it can avoid any Congressional debate over the policies of the International Monetary Fund and whether this is a wise and just use of U.S. tax dollars; and whether Congress should insist on meaningful, observable reforms of IMF policy as the price of new U.S. funding.
After 1980 the IMF became one of the most powerful institutions in the world. The IMF's power largely derived from the fact that it headed a "creditors' cartel" that included the World Bank and other multilateral development banks, and as a result developing countries that didn't obey the IMF's policy "advice" could face a cut-off of international credit, a powerful disincentive. This power was used to impose an agenda of privatization, cuts in social spending, and removal of policies deemed obstacles to profit by foreign banks and corporations. The power of the IMF in middle-income countries has waned in recent years, as Venezuela, Brazil, Argentina and other countries broke free, repudiating a legacy of policies that failed to promote economic growth and reduce poverty. But in the poorest countries, especially in Africa, the IMF's abusive reign has largely continued. Now, rich countries are trying to strengthen the influence of the IMF, using the "opportunity" of the global economic crisis - that's the context of Treasury's request for more U.S tax dollars.
The House so far has rejected Treasury's request. Regardless of what one thinks of the IMF, there's a commonsense, nonpartisan, good government reason not to include IMF funding in the supplemental: funding for the IMF is not an "emergency" and it has nothing to do with funding the wars. The only reason to include funding in the supplemental is to avoid transparency and debate.
But on Thursday the Senate Appropriations Committee went along with Treasury's request. The Senate is expected to consider the supplemental next week; if the money for the IMF is not stripped out, the question will go to House-Senate conference. In a House-Senate conference, the leverage of Congressional leadership is high and that of rank-and-file legislators is weak, so Treasury may get its way even if the majority of Members of the House wouldn't support money for the IMF in a freestanding vote.
That would be a terrible shame. The last time there was a vigorous Congressional debate on the policies of the IMF was 1998, over ten years ago. Real reforms - not changes in rhetoric that have no practical consequence but actual changes in policy that one can verify - would have a tremendous impact on the quality of life of millions of people around the world.
In 2000, at the urging of aid groups and the AFL-CIO, Congress passed legislation that required the U.S. representatives at the IMF and the World Bank to oppose any agreement between these institutions and developing countries that required governments to impose school fees on primary education, a policy previously embraced by the World Bank that had kept many children out of school, especially girls. In part as a result of this legislation, the World Bank publicly repudiated the previous policy, and this opened space for many countries to dramatically expand access to primary education.
Today a coalition of NGOs is demanding that as the price for any new U.S. funding, the IMF agree to the following reforms: the IMF must not impose contractionary policies during recessions, or must provide quantitative justification for doing so; the IMF must exempt health and education spending from any government budget caps; parliaments must be given authority to approve or reject deals negotiated between the IMF and finance ministries.
If the IMF will not agree to stop imposing contractionary policies during recessions, or will not agree to stop promoting cuts in education and health spending, then the much-advertised pretense that funding the IMF bears any relationship to helping poor people in poor countries doesn't pass the laugh test. If we truly want to help poor people in poor countries, there are far better things we can do with $100 billion dollars. Indeed, simply using this money to stimulate our own economy would do far more good for the world, through increasing our capacity to absorb other countries' exports, not to mention the remittances that flow from our economy to Haiti, El Salvador, and elsewhere, than would increasing the leverage of the IMF to impose austerity.