[ IMF and the World Bank ]

Social standards as guiding principles

The conditions that the International Monetary Fund (IMF) and the World Bank impose on poor countries have been criticised by non-governmental organisations (NGOs) for a long time. However, the reproaches seem contradictory. Some NGOs, predominantly those working on debt, oppose credit terms, while others, mainly environmental organisations, want more and tougher environmental, social or human rights conditions. A conference held by WEED, Misereor and Inkota Network, three German NGOs, in Berlin in early April tried to find ways towards a conclusive stance.

Economic conditionalities such as the privatisation of state-owned enterprises, the revocation of customs duties and the salary cuts in the public sector have led to more inequality and less economic growth in Africa and Latin America, according to Peter Hardstaff of the British World Development Movement. Although the World Bank and the IMF meanwhile have begun to list poverty reduction and local support for reforms as objectives, nothing has changed at the core of their specifications. Hardstaff rejects their conditionalities and only accepts rules of procedure such as transparency and democratic decision-making.

On the other hand, Knud Vöcking of the environmental NGO Urgewald demands stricter conditions, so-called safeguards, for World Bank projects. They should safeguard the observation of ecological and human rights standards, for example, when dams or pipelines are built. Vöcking also wants to see sector loans, which ministries retain for specific programmes, to be subject to such standards. In spite of his criticism of the World Bank, he considers this institution to be “the most important authority for the implementation of safeguards”.

How does one tell legitimate conditions from the unjustified variety? Ann Kathrin Schneider of the German NGO WEED (“World Economy, Environment, Development”) suggests orientation along international conventions, such as those for human rights and labour rights. Of course, the call for economic stability was also legitimate, she says. However, nations should be given leeway to determine the appropriate path to achieve this. After all, there is no international agreement on correct economic policy.

Peter Bosshard of the International Rivers Network, on the other hand, does not consider conditions for the economic use of loans to be fundamentally wrong. According to him, one cannot demand release from debts that stem from economically dubious loans, and at the same time approve new dubious loans. However, according to Bosshard, it is impossible to rely on the World Bank and the IMF to consider the facts in this regard. On the contrary, they had frequently used borrowers’ difficulties to implement ideologically motivated conditions such as privatisation or to promote trade policy in favour of wealthy countries. It was in this manner that the IMF forced South Korea into opening the markets after the Asian crisis – measures that could be traced directly back to demands of the US Chamber of Commerce. Such conditions are clearly illegitimate. It is imperative to have human rights and environmental standards. Essentially, creditors are jointly responsible for the use of the funds and for the consequences of their projects.

Nevertheless, a grey area remains of conditions that are difficult to assess. That is hardly avoidable since the allocation of credit often follows political considerations and therefore must also be politically judged. It is all the more important that non-governmental organisations account for the basis of their assessments, particularly as NGOs in the South understandably find many conditions suspicious in view of the North’s hypocritical trade policy.