Europe: 'Reform the Reformists'

By Federico Nier-Fischer

VIENNA, (IPS) - It is time to reform the economic reformist NGO activists from around the world recommended at a meeting in Vienna earlier in January.
The Structural Adjustment Policies (SAP), the international financial organisations are imposing, point to a need for reforming these organisations rather than the countries they seek to correct, participants said.

The seminar evaluated 30 years of SAP in Latin America and 10 years in Central and Eastern Europe. Participants called for a world economy based on participation, accountability, political responsibility and transparency - all of which qualities were missing with the World Bank and the International Monetary Fund (IMF), speakers said.

The meeting organised by the Vienna-based EU programme 'Trialog' sought to promote communication between the East, West and South on development issues.

Held under the shadows of the Argentinean crisis, the increasing difficulties with enlarging the EU, the attack on the World Bank from both left and right, and the dominating role of the U.S. Administration after September 11.

The bankruptcy of Argentina, once a prodigious pupil of structural adjustment policies had shown up again the lack of regulatory bodies for the international financial system, and the failure of such that there are, said Oscar Ugarteche, an economist from Peru.

The growing crisis in Argentina could have been averted long before, but the international financial institutions had failed to play a responsible role, he said.

There was no arbitration procedure available to effectively tackle such developments, he said. Worse, arbitration that did take place was left to those who were a part of the failure, and who refused to take responsibility for it.

Argentina is only the latest in a series of long-lasting crises which has produced such prominent victims since the mid-nineties as South Korea, Thailand, Indonesia, Brazil, Russia and Turkey.

After all the economic disasters brought by adjustment policies based on privatisation and the deregulation of markets, ''reactionary tendencies'' are rising, he said. ''We have to think if we should respect democracy and the free market,'' he said.

The picture for Central and Eastern Europe is just as gloomy, said Hungarian economist Joszef Feiler. People had been told that ''suffering is necessary to build up another future,'' he said. But that had only meant that people are suffering from reforms.

Feiler distinguished three categories of countries in Eastern Europe, depending on their capacity to build up institutions supportive of economic changes. One, he said, were the supposed winners like Hungary and the Czech Republic which had managed in ways to catch up with the capitalist market.

Second, countries like Bulgaria and Romania that are encountering serious difficulties in offering attractive conditions for foreign investment.

The last category, he said, was Russia and some countries of the former Soviet Union where he said broad sectors of the population are coming down to the level of living in some African countries.

These European stories are not encouraging even at the top end, he said.

After ten years of economic reforms Hungary has only the GDP level it had before the reforms. Hungary had also become very vulnerable to foreign investment. Exports are higher than those of Singapore but are controlled mostly by transnational companies.

Across all of East Europe the population is shrinking because of the uncertainties experienced in confronting drastic changes in life, he said.

But there are attempts at reforming, or even dismantling the World Bank, said Nancy Alexander from the Globalisation Challenge Initiative in the U.S.

The European Union is resisting such attempts, she said.

Alexander, a widely respected expert on the international financial organisations, condemned U.S. attempts to transform the World Bank into an agency supportive to privatisation of basic services in the poorest countries.

The Bank had sought to do this, she said, by providing subsidies conditional to the introduction of fees for privatised basic services.

But the World Bank could take up new strategies this year, she said. This follows recommendations of an advisory commission to the U.S. Congress (the Meltzer Commission) in March 2000 that the poverty reduction mission of the World Bank is irrelevant in creditworthy countries and that it should be dismantled and turned into a grant-giving agency for poor countries.

Alexander pointed to other reforms needed to change the performance of the international financial institutions: more transparency with full information on projects and programmes given to parliaments and civil society; participation in decision making, with those affected deciding what their frontier sectors are; and finally, the involvement of trade unions in decision-making.