IMF, World Bank: Forced economic medicine kills Africa

The IMF and the World Bank have increasingly come under fire for the way it forces European governments to take up austerity measures. Greeks, the Irish, the Portuguese as well as the Spanish took to the streets demanding that the IMF should go home. But this has not been the same in Africa where the docile masses were fed poisonous austerity doses which impoverished the continent

The Zambian director of the anti-poverty group, Women for Change Emily Sikazwe, frustrated by the International Monetary Fund and the World Bank’s policies in her country asked:

“What would they [the World Bank and the IMF] say if we took them to the World Court in The Hague and accused them of genocide?”

Sikazwe asked the question in 2007 years before the financial crises hit Greece, Portugal, Ireland and Spain. It was the time when most African countries under the IMF’s Structural Adjustment Programs (SAPs) were reeling from shortages.

Her concerns came after several analysts have, over the years, voiced their concerns with the way the IMF and the World Bank adopted destructive policies which left the continent in a far worse situation.

While the affected in Europe have voiced their concern, the majority in Africa have been fed the IMF and World Bank’s starvation diet silently.

Maybe the international writer on politics specialising in US policy towards the Third World, Asad Ismi, aptly summed up what the IMF and the World Bank do to Africa in his report titled Impoverishing a Continent: The World bank and IMF in Africa.

Robert Naiman and Neil Watkins of Centre for Economic and Policy Research (CEPR) in their 1999 paper, A Survey of IMF Structural Adjustment in Africa: Growth, Social Spending and Debt Relief say for about 20 years, the World Bank and the IMF have forced developing countries to create conditions that benefit Western corporations and governments. 

“These conditions are known as Structural Adjustment Programs (SAPs). SAPs require governments to cut public spending,(including eliminating subsidies for food, medical care and education); raise interest rates, thus reducing access to credit; privatise state enterprises; increase exports; and reduce barriers to trade and foreign investment such as tariffs and import duties. 

“These measures are supposed to generate export-led growth that will attract foreign direct investment and can be used to reduce debt and poverty.”

Dr Gloria Emeagwali, a professor of History and African Studies at Central Connecticut State University, New Britain, United States concurs with Naiman and Watkins in her study Market Reform and Corporate Globalisation.

But Naiman and Watkins, Emeagwali adds that IMF policies cause forced currency devaluation which leads to a free fall in the value of domestic currencies and ultimately lower purchasing power and living standards.

 

In addition, IMF policies cause massive unemployment through retrenchment of workers and bring about high prices which trigger food riots and social unrest.

The effects of privatisation are, among others, the de-industrialisation of economies and   reduce local ownership of companies because they can’t afford buying into companies. 

The removal of health subsidies has led to widespread increased mortality rate while that on education is responsible for massive school drop-outs and child labour. Most often, subsidies on education affects girl children because parents will opt to send boys to school. The long term effect is an uneven and the feminisation of poverty, she writes.

When the economy declines because of IMF policies, Emeagwali further notes, democratic governance is prejudiced and it gives rise to ethnic politics as well as possible military dictatorships.

Ironically, the IMF measures have led to increased debt for nations which saw a transfer of as much as 40% of domestic budget to debt repayment to creditors or bankers of Euro-America. Once that percentage of a budget is reserved for debt repayment, a nation losses its sovereignty.

A three-year multi-country study released in April 2002 that included Zimbabwe, Ghana and Cote d’Ivoire done by the Structural Adjustment Participatory Review International Network (SAPRIN) in conjunction with World Bank, national governments and civil society says SAPs have been “expanding poverty, inequality and insecurity around the world”.

“They have] torn at the heart of economies and the social fabric...increasing tensions among different social strata, fueling extremist movements and delegitimising democratic political systems. Their effects, particularly on the poor are so profound and pervasive that no amount of targeted social investments can begin to address the social crises that they have engendered,” the report titled The Policy Roots of Economic Crisis and Poverty: A Multi-Country Participatory Assessment of Structural Adjustment says.

SAPRIN further says IMF reforms impoverish and increase economic inequality, “First, trade and financial sector reforms have destroyed domestic manufacturing leading to massive unemployment of workers and small producers. Second, agricultural, trade and mining reforms have reduced the incomes of small farms and poor rural communities as well as their food security. Thirdly, labour market flexibilisation measures and privatisations have caused mass lay-offs of workers and resulted in lower wages, less secure employment, fewer benefits and an erosion of workers’ rights and bargaining power.”

Privatisation, the report also notes, of major national assets and essential services has also allowed multinational corporations to remove resources and profits from countries as well as increase rates for water and electricity which has hit the poor the hardest. 

In addition, the cutting of health and education spending under SAPs and the introduction of user fees for these services, when combined with higher utility rates, has resulted in a severe increase in the number of poor as well as a deepening of poverty.

In the process, the report says, “Third World countries are forced to open their economies to Western penetration and increase exports of primary goods to wealthy nations. These steps amongst others have multiplied profits for Western multinational corporations while subjecting Third World countries to horrendous levels of poverty, unemployment, malnutrition, illiteracy and economic decline. The region worst affected has been Africa.”

This, according to the report, should not come as a surprise because the US and IMF has become synonymous, “Washington's predominance ensured that whatever their theoretical mandates might be, the World Bank and the IMF would become instruments of U.S. foreign policy. The role of both has been to fully integrate the Third World into the U.S.-dominated global capitalist system in the subordinate position of raw material supplier and open market.

“As such, these institutions complement the US' use of the Pentagon and the CIA to crush Third World governments aspiring to independent development.” 

The report gives the example Chile’s Salvador Allende in 1972 when President Richard Nixon and Henry Kissinger who was his National Security advisor then used Fund to destabilise the South American country.

This action led to the bloody 1973 coup which murdered Allende and ushered in the military dictatorship of General Augusto Pinochet whose regime received $350.5million, almost 13 times the $27.7 million the former received in three years.

The height of US influence was during the tenure of Robert McNamara at the financial institution from 1968 till 1981 when President Johnson worked to speed up integration of Third World countries into the expanding US markets.

But by the 80s, most of the countries could to afford to pay back thereby giving Washington to use the Fund and the World Bank to subject Third World countries to SAPs.

Apart from forcing currency devaluations and other measures, the US also got involved in labour laws, health care, environmental regulations, civil service requirements, energy policies and procurement.

The debt crisis gave the Fund room to be involved with governments and as writer and political commentator for the Toronto Star Richard Gwyn notes in his article IMF Now Defacto Government for Millions, oversaw the lives of more than 1.4billion people in 75 developing countries.

This involvement has, in some cases, become destabilisation when the austerity measures force poor nations to reduce current accounts deficits by contracting money supply; demand strict anti-inflationary policy; privatise public enterprises; liberalise trade and dismantle foreign exchange controls and reduce the size of the public sector.

A the height of SAPs between 1980 and 93, the Fund subjected 70 developing countries to 566 stabilisation SAPs without any positive results and between 1984 and 1990, Third World countries doddering under SAPs paid more than US$178billion to western commercial banks.

This, the report says, left poor countries reeling in poverty and destroyed health and educational infrastructure.

Two prominent figures raised their voices against the Fund in the late 80s and early 90s. These were former World Bank director, Morris Miller and former UN Secretary General, Javier Perez de Cuellar in 1991.

Miller was quoted by Walden Bello is a Filipino author and political analyst, Shea Cunningham author of Dark Victory and consultant Bill Rau in their report  IMF/World Bank: Devastation by Design," Covert Action said, “Not since the conquistadors plundered Latin America has the world experienced such a flow in the direction we see today.”

Quoted by journalist John Raymond in IMF Medicine is Killing Those it Aims to Save, The Globe and Mail in 1991, De Cuellar said, “The various plans of structural adjustment which undermine the middle classes; impoverish wage earners; close doors that had begun to open to the basic rights of education, food, housing, medical care; and also disastrously affect employment-often plunge societies, especially young people, into despair.”

Ismi in Plunder with a Human Face: The World Bank that ran in the Z Magazine in 1998 claims that one of the most affected South American countries was Peru where about four million people were left in poverty when their wages were cut.

“Consequently, there was a forced migration of impoverished peasants and urban unemployed into coca growing (for drug traffickers) as an alternative to starvation. 

“In 1991, in exchange for US$100 million from the United States, Peru put in place the IMF structural adjustment clause opening its markets to U S corn. As a result, by 1995, corn cultivation had fallen tenfold and coca production had grown by 50 percent. Under these conditions, corruption flourished; indeed almost an entire economy was criminalized. Increased coca production meant more cocaine trafficking which led to deepening official corruption in Peru as the amount of money in the hands of drug lords increased,” Ismi noted.

Raymond added on the Peru experience, "From one day to the next, fuel prices increased 31 times-by 2,968%. The price of bread increased 12 times-by 1,150%. The prices of most basic food staples increased by six or seven times - 446% in a single month - yet wages had already been compressed by 80% in the period prior to the adoption of these measures in August 1990."

Former South America Newsweek bureau chief and a California-based journalist David Schrieberg in Dateline Latin America: The Growing Fury, Foreign Policy (1997) describes Latin America as experiencing “its worst period of social and economic deprivation in half a century". 

“By 1997, nearly half of the region's 460 million people had become poor - an increase of 60 million in 10 years. 

Populations, overall, were worse off than they were in 1980.” 

Even the United Nations Economic Commission for Latin America and the Caribbean (ECLAC) stated in 1996 that "the levels of [poverty] are still considerably higher than those observed in 1980 while income distribution seems to have worsened in virtually all cases". 

As part of its new mandate, the Fund also had a low-intensity conflict (ILC) policy in 80s pushed by the US targeting Grenada, Panama, Nicaragua, Angola, Panama, El Salvador and Guatemala as well as Philippines.

The LIC involved financing conflicts as a way of controlling the Third World. This was also meant to break and whip it into line a Third World that was demanding a new international economic order.

George Bush also pursued this policy with the help of the Fund and the World Bank such that by 1993 Latin American government considered to be radical and revolutionary had been deposed.

Nicaragua fell victim to this during Ronald Reagan’s tenure when the Contras attacked the Sandinista government while the World Bank, under Thomas Clausen, a Reagan appointee pulled the plug on funding.

Sub Saharan Africa too was caught up in the scheme of things and as of 1980 36 out of 47 countries were under SAPs.

In Africa IMF and World Bank policies slowed down growth; increased poverty levels; lowered income; caused low human development; increased debt burden; decreased health care and caused an increase in diseases; and affected education.

American economist, columnist and co-director of the Centre for Economic and Policy Research (CEPR) in Washington Mark Weisbrot, Naiman, and Joyce Kim in their paper The Emperor Has No Growth: Declining Economic Growth Rates in the Era of Globalization, CEPR, November 27, 2000 say during 1960-1980, Sub Saharan Africa's GDP per capita grew by 36% but fell by 15% in the 1980-2000 period.

 “These are enormous differences by any standard of comparison and represent the loss to an entire generation - of hundreds of millions of people - of any chance of improving its living standards,” they say.

The World Bank notes that in 1994 about 200 million people lived below the poverty line of US$ per day but by 2003, the figure had increased by 75% to 350million.

The bank further notes that per capita incomes for most Sub Saharan countries fell by 25% during the 1980s and for 18 countries these incomes were lower in 1999 than in 1975. 

United Nations, Development Programme (UNDP), Human Development Report, 2001; UN, Economic Report on Africa 1999 says 80% of low human development countries - those with low income, low literacy, low life expectancy and high population growth rates - are in Africa.

“Average life expectancy for Sub Saharan Africa is only 47 years (the lowest in the world), a drop of 15 years since 1980. Forty per cent of the population suffers from malnutrition that causes low birth weight among infants and stunts growth in children. In 2000, 30% of children under five were underweight in Sub-Saharan Africa; thirty-seven percent of such children were under height,” the reports states.

Assistant director for policy analysis and communications at Africa Action, Ann-Louise Colgan in her position paper Africa's Debt - Africa Action July 2001 argues that under SAPs, Africa's external debt has increased by more than 500% since 1980 to $333 billion today. 

“SAPs have transferred $229 billion in debt payments from Sub-Saharan Africa to the West since 1980. This is four times the region's 1980 debt. In the past decade alone, African countries have paid their debt three times over yet they are three times as indebted as ten years ago. 

“Of Sub-Saharan Africa's 44 countries, 33 are designated heavily indebted poor countries by the World Bank. Africa, the world's poorest region, pays the richest countries $15 billion every year in debt servicing. This is more than the continent gets in aid, new loans or investment,” she says.

According to the UNDP, if such payments were not made African would have ‘saved 21 million people and given 90 million girls and women access to basic education by the year 2000’. 

The All-African Conference of Churches, a fellowship of churches and religious institutions described Africa’s debt as ‘a new form of slavery, as vicious as the slave trade’ while Africa Action, a Washington DC-based advocacy group says the US and rich countries are using Africa’s debt as ‘leverage to manipulate the continent’s economic fate to serve their interest’.

“The US appears unwilling to support debt cancellation for Africa because the US actually gains a great deal from Africa's economic enslavement,” the organisation says.

Colgan in another paper Hazardous to Health and BBC's News Online environment correspondent Alex Kirby in Water key to ending Africa's poverty 2002 say Africa spends four times more on debt interest payments than on health care.

“This combined with cutbacks in social expenditure caused health care spending in the 42 poorest African countries to fall by 50% during the 1980s. As a result, health care systems have collapsed across the continent creating near catastrophic conditions. 

“More than 200 million Africans have no access to health services as hundreds of clinics, hospitals and medical facilities have been closed; those remaining open were generally left understaffed and without essential medical supplies.

“This has left diseases to rage unchecked, leading most alarmingly to an AIDS pandemic. With about 12% of the world's population, Africa accounts for 80% of the world's deaths due to AIDS and almost 90% of the world's deaths due to malaria. More than 17 million Africans have died of HIV/AIDS and an estimated 28 million of the 40 million people living with the disease worldwide are in Sub- Saharan Africa. 

“More than 12 million African orphans have lost their mothers or both parents to AIDS. Presently, Malaria is killing 900,000 people annually across the continent and according to the World Health Organization (WHO) 3.3 million Africans will have tuberculosis by 2005,” their two reports say.

Africa Action, Africa's Right to Health Campaign: Background Links on Africa's Health say, “More than half of Africa's population is without safe drinking water and two-thirds do not have access to adequate sanitation.”

Oxfam Briefing Paper no. 19 notes that because of SAPs, ‘10 African governments spent more on debt repayments than on primary education and health care combined in 2002’. 

This, the paper observes, leaves 40% of African children out of school, “Between 1986 and 1996, per capita education spending fell by 0.7% a year on average. The adult literacy rate in Sub-Saharan Africa is 60%, well below the developing country average of 73%. More than 140 million young Africans are illiterate.”

Emily Sikazwe, director of the Zambian anti-poverty group Women for Change tells New Internationalist Magazine journalist Mark Lynas that  SAPs cause poverty in 2007.

“And poverty has a woman's face,” she says.