Famine in Africa:
 

 Unelected and unaccountable: The International Monetary Fund and the World Bank 
 have assumed the role of assisting the poorer nations, but now their policies
 are being criticised for being unhelpful and out of date.

 By Charlotte Denny

 Pick up a copy of the local newspaper in most African capital
 cities and you could be forgiven for thinking that the International
 Monetary Fund was a branch of government. Fund staff issue warnings that
 public sector pay claims are unaffordable, admonish ministers over their
 failure to cut trade barriers and advise central banks to keep a strict
 rein on inflation. 

 Meanwhile the World Bank instructs cash-strapped local
 health ministries to introduce hospital fees despite the fact that African
 households simply cannot afford to pay for their treatments. For a
 westerner, it is almost unimaginable that a foreign bureaucrat would dare
 to instruct an elected politician on how to run the economy. The last
 western economy forced to submit to the Fund's strictures was Britain,
 more than a quarter of a century ago.

 The reason why two institutions wield so much power in Africa is
 simple: money. Cash-strapped African governments have no choice but to go
 cap in hand to the Washington duo because few commercial banks would risk
 lending to them. With the loans come a cat's cradle of conditions on how
 to run their economies.

 The close watch the two cast over Africa today would probably
 surprise John Meynard Keynes, one of the leading lights at the Bretton
 Woods conference where the two institutions were born in the dying days of
 the second world war. Their original tasks were nothing to do with Africa:
 the Bank was set up to help reconstruct the shattered economies of
 war-torn Europe while the Fund's job was to help countries facing
 balance-of-payments crises.

 With the breakdown of the fixed exchange rates in the early 1970s
 and the development of Europe, the twins' original role became gradually
 redundant. But by then, they had turned their attention to other regions,
 notably Africa.

 Confusingly, their names should probably be reversed. The Fund acts more like a bank:
 lending at concessional rates to support countries facing balance-of-payments
 troubles. Because it is more concerned about short-term economic
 management issues, its loans come with conditions about things like controlling
 inflation and budget deficits. Without a Fund program other donors won't consider
 helping a country, giving it an even more crucial gatekeeper role.

 The Bank is really a development fund. It lends for long-term investment projects
 at even more concessional rates than the fund; for the poorest countries,
 its loans are practically free. The strings it attaches deal with longer-term 
 structural issues such as privatisation, regulation and trade tariffs.

 Today the Bank and Fund's sweeping remits give them enormous
 powers over the day-to-day running of the average African country.
 But the voting structure of the two institutions reflects their post-war
 role rather than today's reality: western governments who foot the bills
 control the votes. While the United Nations is based on one country one vote,
 in the Bank and the Fund, it is more like one dollar one vote, and the US has
 enough votes to have an effective veto.

 "They are rather like latter-day proconsuls with huge influence across the 
 region," says Duncan Green of the Catholic Agency for Overseas Development. 
 "The problem is that along with that comes a circa-1980s view of economics."

 Their critics charge that the Bretton Woods twins prescribe a
 simplistic recipe of privatisation, deregulation and liberalisation to
 vulnerable economies which has resulted in many African countries being
 poorer today than they were 30 years ago. "Economic thinking has moved on
 in the countries that run the Bank and the Fund, but the two are still
 pedaling the same old snake oil to developing countries," says Green.

 "In the last two decades Africa's least developed countries have
 seen their share of world trade fall from 0.6% to 0.3%," says Concern's chief
 executive Tom Arnold. "We deny them the means to earn a living and condemn them
 to the welfare of aid."

 Telling governments with no money to cut their spending programs may make
 sense from the point of view of keeping the budget deficit under control, but it
 is a disaster for social programs. Health and education ministries have been
 forced to introduce fees which cash-strapped African households can't afford.

 The Bank has reversed its policy on user fees in education, after
 it caused a disastrous fall off in school enrolment rates, but it continues 
 to advocate "cost-sharing" in health. The Fund's big failing according to Kevin 
 Watkins of Oxfam is that it gives economic policy advice without any regard for 
 how this will affect their ability to reach internationally agreed goals for poverty 
 reduction. "They continue to set fiscal targets which are inconsistent with 
 millennium development targets," he says.

 A recent paper by Oxfam argues that while the immediate cause for
 the crisis is a succession of poor harvests caused by bad weather, the
 region has been made more vulnerable to food shortages by the advice doled
 out by donors in the early 1990s.

 Mozambique, Zambia and Malawi all undertook radical reform of their agriculture
 sectors, abandoning state controls and moving to a system of minimal
 intervention. The state marketing boards that, although riddled
 with corruption, provided a vital source of support and advice to farmers,
 were abolished. In previous famines, these boards prevented the prices of
 staple crops like maize from spiraling and imported supplies to fill the
 gaps. Now price controls have been removed, prices are highest when the
 poor can least afford to pay them.

 Under fire from aid agencies, anti-globalisation protestors, and a few
 more enlightened donor governments, the two organisations argue that they are
 changing their ways.
 

 The Bank now champions a new approach to dealing with client countries
 which, it argues, puts them in the driver's seat. Countries prepare poverty
 reduction strategy programs (PRSPs) in consultation with local interest
 groups, advised by the Bank and the Fund. The buzz-word is "country
 ownership" but opinions differ as to how much difference PRSPs really have
 made. Like good exam candidates, when they prepare their PRSPs, countries
 know what the IMF and the Bank want to see. 

 The big macro-economic decisions are still made by finance ministries rather than 
 social spending ministries. Finance ministries in most African governments are 
 staffed by officials who hold very similar views to Bank and Fund staff.

 Further, while there is an increasing openness to debate in the headquarters of the 
 two institutions, out in the field there is less evidence of change.

 

 +++++++++++++++++++
 Neil Watkins
 World Bank Bonds Boycott
 Center for Economic Justice
 733 15th Street, NW, Suite 928
 Washington, DC 20005
 Tel: (202) 393-6665
 Fax: (202) 393-1358
 Web: www.worldbankboycott.org