Leaders of the world's top wealthy and developing economies have reached agreement on tighter regulation of global financial bodies in a bid to spur recovery from a pervasive economic crisis. The G-20 meeting in London also allotted more than a $1 trillion boost to the International Monetary Fund, partly to insulate less fortunate countries from the impact of the worldwide slump.
Critics say a 30-year IMF record of measures that have restrained development goals in Africa and Latin America, rather than promoting them, makes the G-20 designation of the IMF a questionable choice to pursue these protections unless the lending giant enacts reforms on its own tight conditionality for loans. As Africa's largest producer and a prominent exporter of minerals and energy resources, South Africa was the only African country in attendance as a member of the group of 20 nations. Robert Weissman is the director of Essential Action, a Washington-based corporate accountability group. He says African nations have a lot at stake in today's shaky financial environment and were not given adequate representation at the London summit.
"Africa should be represented at international deliberations, not by any single country, whether it's South Africa or Kenya or Cameroon. The continent and its billion people need to have a representative space at international negotiations that is comparable to the space given to other groups of a billion people at a time. And we're really seeing here rules of the global economy being remade to some considerable extent. And the people that are being worst affected by the existing rules have virtually no say whatsoever in how they are going to be re-crafted," he claimed.
Weissman and other critics argue that IMF lending has imposed stringent conditions on poor countries that have prevented them from making enough progress in their local development agendas to catch up with the rest of the world. As such he says, the G-20's turning over of hundreds of billions of dollars to the IMF could make impoverished countries more vulnerable to the current economic shortfall unless the lending institution reforms the terms of its credit practices.
"The IMF has a record of preventing countries from expanding their spending in the areas of health care and education, and other social needs. We and many advocates have said that they need to exempt those sectors from the kind of budget caps that they impose on countries. We'd rather those budget caps weren't imposed at all, but if they are, spending in these sectors has to be permitted to be expanded. That's a very important first step for the IMF. There also needs to be expanded debt cancellation from the IMF so that countries are no longer pouring their money out into endless debt payments, but are able to spend it on local investments in health care and education and the rest of the national economy," he said.
The G-20 leaders pledged to prevent banks, investors, creditors, and top corporation executives from committing the excesses that spurred the massive decline in value that rattled major economies for the past seven month. They said they hoped that poor nations which depend on creating markets for their export goods will benefit from the large IMF infusion, designed to boost trade and extend credit for developing countries to produce the goods they sell. But Weissman says there are more effective ways to accomplish these goals for African nations.
"It would have been much better if they had been transferred to developing countries through other institutions, including regional institutions. But if it's going to go through the IMF, the G-20 countries really ought to specify that they will adopt changes or insist on changes at the IMF before the money goes through so that there's a certainty that we don't see this replication of the last 30 years where the IMF is putting money into countries, but imposing on them such harmful conditions that their economies have been in either chronic recession or failing to meet their potential," he cautioned.
Among the most immediate concerns that Weissman says the world crisis could aggravate for countries in Africa is food production. Countries that have lost food self-sufficiency have no choice but to import, and he believes that the international financial institutions need to promote a shift in countries' systems of food production so they are able to feed themselves.
"Here again, we see that the IMF, as well as the World Bank, have played a really harmful role in having countries dismantle their agricultural supports and the systems that have enabled farmers to produce food for the local market and instead, orienting those farmers and those agricultural systems to produce for export markets, where they've fared poorly. It's been a terrible bargain, and it's really put developing countries in a miserably vulnerable situation and led to the expansion of hunger. That whole arrangement has to be readjusted, and the IMF and the World Bank either need to support it or at least get out of the way and not prevent countries from undertaking the kind of appropriate measures to support local farmers producing for local needs," he advised.
Weissman says the US Congress will have a window of opportunity when it holds hearings on the special US appropriations for the Fund to influence IMF policies and push for making lending policies more geared toward the needs of developing countries.
He also points out that President Obama's description of "honest disagreements" that G-20 nations were able to overcome had to do with two major issues. The first dispute involved complaints, mainly from developing countries against the European nations over governance arrangements of the international financial bodies and the desire of developing nations to have a greater say in how they are run.
The other large dispute concerned
groups of countries that favor a large stimulus approach of huge fiscal and
monetary expansions of the world economy, a strategy that is opposed, most
notably by several European nations who have urged using more powerful tools of
financial re-regulation to reverse the global economic slide.