The June 2006 Edition of Street Spirit

A publication of the American Friends Service Committee


National AFSC AFSC Economic Justice BOSS Website



In this issue:

From Prison to Priesthood

Interview with Father James Tramel

Protest Demands Housing for Poor Families

Oakland Judge Blocks Evictions

Fresno Police Demolish Tent Encampment

Extremists Call for Attacks on Immigrants

Unjust Senate Bill on Immigration

World Bank and IMF Face Crisis

Corporate Media Fail to Address Global Hunger

Raise Minimum Wage for All

The Journey of Charlotte Tall Mountain

Dying for Nixon, Dying for Bush

In Santa Cruz Dreams Come True

Tourists Ignore Kenya's Poverty

June Poetry of the Streets


May 2006

April 2006

March 2006

February 2006

January 2006

November 2005

October 2005

September 2005

August 2005

July 2005

June 2005

May 2005

April 2005

March 2005

February 2005

Street Spirit is published by American Friends Service Committee.

All works are copyrighted by the authors.

The views expressed in Street Spirit are those of the individual authors alone, and not necessarily that of the American Friends Service Committee.

IMF and World Bank Face a Crisis of Legitimacy

Contributing to the understanding that the IMF and World Bank will never fulfill their development mandate, is the growing recognition that these institutions actually benefit from the failure of poor countries to develop.

by Roxanne Lawson

Art by R. Dondis Ferrera

The International Monetary Fund (IMF) and World Bank met in Washington, D.C., on April 20-23 as part of their annual spring meetings. This year, along with the plethora of police barricades, the crowds of people protesting these institutions and their neo-liberal policies were not just in the streets -- they were also taking part in media actions, press conferences, policy briefings, street theatre and strategy meetings.

Among the dissenters were economic justice staff of the American Friends Service Committee (AFSC). Jessica Walker Beaumont, AFSC Trade and Debt Specialist, Imani Countess, Coordinator of the Peacebuilding Unit's Africa Program, and Roxanne Lawson, Coordinator of AFSC's Life Over Debt campaign, attended many of the activities.

These events included a Jubilee USA campaign meeting with advocates from Africa, Asia, the Americas and Europe that focused on questions around the status of the Highly Indebted Poor Countries Initiative's conditionality and responsible financing standards; a steering committee meeting of the newly formed Freedom from Oil, Freedom from Debt Network; and a two-day strategy session hosted by the 50 Years is Enough Network with 70 campaigners from around the globe aimed at developing new strategies that reflect the current state of the IMF and World Bank.

Central to these meetings were discussions on the strategic opening created by the reality that the IMF and World Bank are facing a legitimacy crisis and weakened power as a result of shrinking portfolios.

Lacking, however, was an effective dialogue on the reality facing many indebted African nations; and the need for true development options that exist outside of the prevailing neo-liberal model that has been so devastating to human growth -- options that are not predicated on a future of reliance on the world's wealthiest nations.

IMF's new role amidst crises

Today the IMF's mandate, established in 1944, to stabilize currency exchange rates among trading countries and use emergency loans to address economic crises, is being reevaluated internally and externally. The last decade has seen a downward spiral for the legitimacy of the IMF. Not only have there been worldwide campaigns against the institution's harsh conditions for past loans and debt relief; but criticism has also come from leading economists like Nobelist Joseph Stiglitz, and through actions taken by former debtor countries that are deliberately disentangling themselves from the IMF for local political reasons.

Since the Asian financial crisis in 1997, China, India and Thailand have abstained from borrowing from the IMF because of the disastrous impacts of IMF-imposed conditions. In the Americas, led by Brazil and Argentina, countries are paying off their debts and declaring "independence" from the Fund.

Rejection of the IMF as a legitimate development force by some of its former large borrowers has caused the Fund's current loan portfolio to shrink to $35 billion -- its smallest since the 1980s -- generating less interest income and diminished influence over global economic policy. As a result, the Fund is predicted to run budget deficits of as much as $297 million between 2006 and 2009.

Furthermore, as impoverished nations like Botswana see development improvements partly as a result of their rejection of IMF policies, the development paradigm on which the organization is predicated is being questioned not just by protesters in the streets, but also by finance ministers and development experts alike.

In response, the IMF has begun to reinvent itself as a multilateral consultation agency that will try to act as a global trade mediator and secure agreements to reform economic and exchange rate policies in order to close massive trade gaps and prevent a financial reordering of the world's economies.

The IMF is placing itself in the center of helping to resolve imbalances, not just between China and the United States, but also between rich and poor nations. Indebted African nations and other least developed countries, who have been the hardest hit by trade imbalances amplified by IMF structural adjustment policies, remain skeptical.

As a result of IMF conditions, many countries continue to divert funding from health, education, development and poverty-alleviation spending in order to pay back loans. They also focus energy and resources on advancing export-led growth driven by raw materials and cash crops. This has lead to a heavy reliance on importing finished goods and even food, thus widening the trade deficits for African and other least developed countries.

The Fund seeks to bolster its policy analysis in order to add to its toolkit of pressure mechanisms. For example, the new IMF will research and publish reports on the effects of Chinese financial policies on the U.S. trade deficit and attempt to mediate agreements between the two nations.

In reality, the IMF lacks the power to force changes in countries' economic polices unless they are or have borrowed from the Fund in the past. In effect, the only countries that would have to comply with these mediations are those impoverished countries that are dependent on the Fund. This will only strengthen the current system of global economic apartheid and further reduce poor countries' sovereignty.

World Bank battles corruption -- but only in some countries

Observing the struggles of its sister organization (the IMF), the World Bank has taken a proactive approach to its own crisis of legitimacy by considering extending invitations to Mexico, Turkey, South Korea and China to become full voting members.

The World Bank is also investing $30 million in a public relations campaign in an effort to position itself as the premiere lending institution for global efforts to end poverty, protect the environment and address the global AIDS pandemic, as well as to reiterate that it is the world's largest "development" research organization.

At the heart of this new media campaign is World Bank President Paul Wolfowitz's new anti-corruption campaign. Given Wolfowitz's recent history as the architect of the Iraq war and occupation -- an undertaking literally drowning under allegations of mismanagement and nepotism -- many see this anti-corruption campaign as grossly hypocritical.

Many African leaders have long said that they need Western institutions to aid them in rooting out corruption and ensure transparent governance, since international institutions based in the Global North are complicit in corruption.

Recently, European countries have pressured Wolfowitz to put greater emphasis on building institutions to fight corruption in the developing world, rather than simply suspending loans where corruption is suspected. As a result, he began working with shareholders to develop a framework to fight and monitor corruption. The framework will be considered at the next IMF/WB meetings in the Fall of 2006 in Singapore.

While welcoming this needed reform, many argue that the World Bank is not applying the same scrutiny to Iraq and Indonesia (where Wolfowitz worked prior to his work in the Bush administration) that is being applied to Chad and the Democratic Republic of Congo.

In January, the World Bank cut off $124 million in loans after Chad changed its laws to siphon oil pipeline revenues away from anti-poverty programs; and in March, the Bank imposed rigid conditions on Congo's oil-exporting capacity. The World Bank maintains that Chad, Congo and Sudan may all be eligible for debt relief in the coming months, provided they show proof of economic stability and government reform.

Civil society reactions

Addressing corruption and the need for basic standards applied to loans and disbursements has been one of the main campaign points of civil society in the Global South for the last 30 years. Campaigners are pleased to see the financial institutions that are the source of so much corruption taking this life-threatening issue seriously.

However, ensuring that debt-servicing funds are properly reallocated to address human needs (education, health, etc.) is a process that must involve partnerships between civil society and governments in indebted countries. This process cannot be achieved solely vis-a-vis international institutions. At present, there are seven international bodies that address accountability and transparency in international fund management. If the World Bank wants to add itself to this list, there must first be a proper analysis of why these existing institutions and bodies have not been wholly effective.

G8 debt deal one year later

The G8 initiative to cancel the debts of the 18 Highly Indebted Poor Countries (HIPC) that was so celebrated last July is riddled with problems. Only 15 percent of sub-Saharan Africa's debt would be cancelled. As the IMF begins to reopen the HIPC eligibility criteria in time for HIPC's 10th anniversary in 2007, the promised debt cancellation in Benin, Burkina Faso, Ethiopia, Ghana, Madagascar, Mali, Mozambique, Niger, Rwanda, Senegal, Tanzania, Uganda and Zambia may, because of possible delays and new benchmarks for completion, be adversely affected. This reality may also impact those highly indebted and poor countries that are next in line for debt relief, including Cameroon and Malawi.

For debt-cancellation campaigners, it is extremely troubling that the only discussion about a cure for the disease (of which debt accumulation is a symptom) are prescriptions for more of the same. The financial institutions maintain that countries have failed because they haven't taken these prescribed policies far enough. What is missing is meaningful discussion on alternatives aimed at curbing the development challenges facing the world's least developed countries, most of which are on the African continent.

Benefiting from the failure of poor countries to develop

Contributing to the understanding that the IMF and World Bank will never fulfill their development mandate, is the growing recognition that these institutions actually benefit from the failure of poor countries to develop. These institutions and their member countries are able to continue to control resources and undermine poor countries' sovereignty.

In a gesture aimed at addressing the development question, the World Bank's shareholders agreed to advance a funding package that will help preserve the role of the International Development Association (IDA), a World Bank fund that provides interest-free loans and some grants for programs aimed at boosting economic growth and improving living conditions for poor countries.

Funded primarily by the wealthy countries that make up the G8, IDA donors also agreed to finance a package that calls for additional donor contributions over time to compensate IDA dollar-for-dollar for the debt relief promised in last July's debt cancellation deal.

What is clear to many debt-cancellation campaigners is that no loan or grant comes without a set of harsh conditions. These conditions do not look much different from the conditions placed on poor countries in the 1980s and '90s that were strongly rejected by governments, economists and civil society across the globe. Even low-interest loans or grants can come at a price too high to pay.

Roxanne Lawson is Associate Coordinator of AFSC's Africa Program. For more information, visit the AFSC website at

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