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Friday, October 28, 2016
- European civil society organisations continue to demand that international financial institutions (IFIs) such as the World Bank and the International Monetary Fund apply the same standards of transparency and accountability to their internal affairs that they demand for governments across the world.
These demands are being made just ahead of the spring meetings the IFIs will hold later this month in Washington D.C., and refer in particular to the nomination of a new president for the World Bank.
“The election of the new president of the Bank is typical of the lack of transparency and democracy that reigns in the international financial institutions,” Peter Chowla, an economist working for the Bretton Woods project (BWP), told IPS.
The BWP, a London-based international coalition of economists and anti-globalisation activists, focuses its work on the IFIs, to challenge their power, open policy space, and promote alternative approaches.
Traditionally, the U.S. government and the European Union share the leading positions at the IFIs. While the U.S. government occupies the coveted presidency of the World Bank with a candidate of its own, the EU places one European technocrat at the helm of the IMF – no fair election process precedes either of these appointments.
Last year, the French government obtained the backing of European governments to name former French finance minister, Christine Lagarde, managing director of the IMF, despite vociferous opposition from developing countries.
Although there are two alternative candidates for the position, the present Nigerian minister of finance Ngozi Okonjo-Iweala and her former Colombian counterpart José Antonio Ocampo, it is taken as given that Kim’s candidacy will obtain the support of European countries, and that he will be elected during the bank’s board hearings scheduled to take place in Washington from Apr. 9-11.
It is expected that the confirmation of Kim as new president will be announced on Apr. 11.
Chowla recalled that such “opaque processes” of nomination were conceived more than 60 years ago, when the IFIs were founded, and no longer fit into “the present global economic and political structures.”
But disagreements between European civil society organisations and the IFIs go beyond nomination procedures, and include the institutions’ policy recommendations for governments about management of climate change financial facilities.
Jeroen Kwakkenbos, policy and advocacy officer at the European Network on Debt and Development, told IPS that the World Bank had “neither a mandate nor the qualifications” to participate in the management of the future Green Climate Fund, which is supposed to administrate future financial resources for adaptation and mitigation of climate change, or of REDD (reducing emissions from deforestation and forest degradation in developing countries).
“We urge the IFIs to remain outside the management of these facilities,” Kwakkenbos told IPS. “Such entities should be managed under democratic principles – that is, one country, one vote, following representation of stake holders in the boards of the organisations.”
Chowla stressed that the main problem with the IFIs is that these institutions continue to apply the neoliberal doctrine that characterised them throughout the 1980s and 1990s.
“These characteristics are deregulation, privatisation, and bilateral free trade agreements between industrialised and emerging countries,” Chowla pointed out. “Four years after the global financial crisis broke out, there are no tangible signs of new regulation of financial flows.”
Chowla specifically mentioned the financial flows to emerging countries, which have triggered important dislocations of exchange rates, leading to what some economists have dubbed “the currency war”.
“(A)symmetry in the recovery of developing countries and the recessions in Europe after the crisis have led to major and unstable short term capital flows to developing countries,” Chowla stated.
These flows have proved to be significantly destabilising, causing sharp appreciation of currencies of emergent developing countries such as Brazil.
Chowla said that the IMF analysis of this destabilising monetary phenomenon on emerging countries is flawed, because it is either based on econometric exercises relying on highly uncertain variables, or on the Fund’s own policy recommendations, which the authorities have not yet even agreed with.
Furthermore, the Bank and the Fund have helped to impose austerity programmes upon European countries already suffering deep economic downturns, regardless of the dramatic social consequences of cuts in public spending and social welfare, Chowla said.
Chowla also mentioned the support the World Bank continues to offer for privatisation programmes across the world.
“In Romania,” he said, “the Bank is the main force behind the planned highly controversial privatisation of the local health system, opposed by unions and civil society groups.”
Other groups, such as the Europe Corporate Observatory, raise similar complaints against the Bank and the IMF, for supporting free trade agreements (FTAs) with developing countries, which obviously damage local public health initiatives and food provision.
The most salient case is the European FTA with India, slated to come into force this year, which would force the Indian pharmaceutical industry to cease producing inexpensive generic medications to treat contagious diseases such as HIV/AIDS, which most of the developing world is dependent on as a cheap alternative to patented drugs.