/The IMF, a useful but dark loan organization

The IMF, a useful but dark loan organization

People around Europe are protesting against the IMF’s role in the European debt crisis. They claim that the austerity measures are imposed by the international organisation undemocratically but, how undemocratic IMF really is?

CIan Buckley during a rugby match in Dublin
Cian Bucley during a rugby match in Dublin

Cian Buckley, José Cardoso and Alex Anyfandakis are young Europeans in their early twenties. They have one thing in common: they come from the three European countries that have been bailed out by the International Monetary Fund (IMF). They don’t know much about the institution but they think of it as a dark and harsh institute. “They impose hard conditions on recipient countries that hit ordinary people the most, while politicians and rich people are still getting wealthier” says Cian Buckley.

Just as these three young mates, other people in Europe don’t understand why austerity measures have to be applied so harshly. From Madrid to London going through the three rescued countries people are protesting on the streets against government cuts imposed by the so-called troika. A Russian word which means to referee a union of three powers that in this case is conformed by the European Commission, the European Central Bank and the much hated International Monetary Fund. This last organization has already lent 103 billion Euros on Ireland, Portugal and Greece but, what are the conditions behind these loans? Are those conditions democratically applied by national governments?

Nongovernmental associations such us Global Exchange and World Development Movement (WDM) claim that the IMF strongly threatens democracy. In a report called How the IMF take power from people the WDM says “the Articles of Agreement of the IMF say nothing about specific conditionality and do not require the IMF to impose free market economic policies” but at the end “loans are given on the condition that certain policies are implemented by the recipient country”.

 

Greek protesters against the IMF in Atheens

A useful organitation

Michel D. Bordo from the Rutger University of New Brunswick and Harold James from Princeton University defend the institution in an article called “The IMF: its recent role in Historical Perspective” and claim that “critics of the IMF downplay the extent of market failure and the scope of public goods provided”. Other experts agree on the IMF harshness but say that the institution has a more realistic view of economic reality and provides a very useful services such as advising and lending .

 

The International Monetary Fund was created in 1944 at the Breton Woods conference with the aim of providing a framework for international economic cooperation. Today, it’s an international organization composed of 188 countries. According to its web page, one of its main aims is to “provide policy advice and financing to members in economic difficulties”. But how does it work? Financial support is always conditional to a program. This program is described in a letter of intent that often has a memorandum of understanding attached to it.  In this memorandum the IMF imposes what they think are the best policies for that country circumstances and even though national parliaments have to ratify those policies, people feel that they can’t decide on social policies anymore.

As Richard Laming, the director of Federal Union –a British association that looks at democracy and accountability at all levels of government– says “Most concepts of democratic accountability include answering before a parliament representing the citizens. There is no such a role within the IMF, or any global institution. No wonder so many are angry. The problem with globalization is not that it is capitalist per se, but that it enables capitalism to escape the controls of democracy”.