Institutionalising poverty
At the dawn of the 21st century, the developing countries' economy is at a dangerous cross-roads. The process of structural adjustments is a condition for the renegotiation of their external debt, which has led to the brutal impoverishment of large sectors of the population in these countries. We are raising slogans of poverty alleviation at a time when the burden of external debt of the developing countries has reached 1.9 trillion dollars, and the reforms proposed by Washington based institutions are conducive only to a globalisation of poverty and institutionalising dependence, a process which undermines human livelihood and destroys civil society in countries like Pakistan.
The restructuring of the economy under the guidance of IMF, the World Bank etc increasingly denies individual developing countries the possibility of building a national economy. Their policies transform poor countries into open economic territories and national economies into "reserves" of cheap labour and natural resources. The restructuring of individual national weakens the State, for the internal market is undermined and national enterprises are pushed into bankruptcy.
These reforms --when applied simultaneously in more than one hundred countries-lead to the collapse of internal purchasing power, eruption of famines, closure of health clinics and schools, and denial of the right to primary education to hundreds of millions of children. Today the Chief Executive of Pakistan proudly announces the opening of Micro-credit Bank promulgating that it would end the poverty in Pakistan without keeping in mind that these institutions have reached their limit of taxing and extracting from the governments. It is getting hard for the international monetary institutions to force the poor governments to further depreciate their currencies, hike the prices of essential commodities and further tax the already taxed-to-death public. As a result, they have chosen to indebt the poor and gradually transform the government debt into public debt. This process of "debt conversion" is a central feature of the new Western approaches to poverty alleviation.
Ironically, the very process of "reimbursing the global debt" has been conducive to its enlargement through the systematic creation of new debts - this time at the grassroots level. A vicious circle is being set in motion to extend credit to the poor and marginalized and establish such a system that the recovery is made by the grassroots support organisations comprised of the same indebted community members. The recipients of World Bank "hand-outs" are becoming the capitalist's creditors and the ultimate benefit of inculcating such permanent dependency at the grassroots would trickle-up to the capitalists on the helm of affairs.
It is important to note that the Halifax Summit communiqué failed to assess the seriousness of the debt situation affecting both developing and developed countries and the destructive impact of debt collection on national economies. No concrete solutions are put forth in view of alleviating the burden of debt servicing. Same is the position at every economic policy makers meeting. The international lenders have failed to recognise that the crisis of the global economy is structural rather than cyclical. "Economic stabilisation" and "structural adjustment" including the deregulation of financial markets cannot constitute "solutions" to the global economic crisis. Introduction of mass scale micro-credit to the poor is useless without mass human resource development programmes. Micro-credit alone used as a "poverty alleviation instrument" cannot be a "solution." Similarly, "poverty alleviation" and "job creation" cannot be realised through the deregulation of the labour market and the compression of social sector budgets.
The World Bank and IMF, however, unreservedly endorses the continuation of the structural adjustment programme while calling for an "effective system of surveillance of national economic policies" (Halifax Summit Communiqué, para. 16 ). The meaning of "IMF surveillance" (ie. the annual monitoring of a country's economic performance in the context of "Article IV consultations") has been redefined. A new "triangular division of authority" between the IMF, the World Bank and the World Trade Organization (WTO) has unfolded. "Surveillance" has been redefined (countervening the substance of Art. IV) with a view to providing the IMF with more power to intervene in the internal affairs of sovereign states: "We urge the IMF ... provide sharper policy advice to all governments and deliver franker messages to countries that appear to be avoiding necessary actions" (para. 16c).
The G7 have firmly endorsed the new trade order which emerged from the completion of the Uruguay Round at Marrakesh. In this context, the relationship of the Washington based institutions to national governments is to be redefined. Enforcement of IMF-World Bank policy prescriptions will no longer hinge upon ad hoc country-level loan agreements (which are not "legally binding" documents). Henceforth, many of the clauses of the structural adjustment programme (eg. trade liberalisation and the foreign investment regime) will become permanently entrenched in the articles of agreement of the new World Trade Organization (WTO). These articles will set the foundations for "policing" countries (and enforcing "conditionalities") according to international law. In such a situation, even if Pakistan realise the great game of institutionalising dependency at the grassroots level, it cannot refuse the micro-credit funds extended by the World Bank in the name of poverty alleviation..
On the agenda of the G7 is the enlargement of IMF reserves (discussed at Madrid in October 1994) including a review of the SDR system. An expansion of the IMF's lending capabilities has been portrayed by the IMF as a means of securing a "durable, more broadly based sustained high-quality growth [with a view to raising] living standards worldwide." Yet what these loan agreements imply in practice is something quite different: the proposed expansion of lending rather than "helping the poor" would reinforce the IMF's and World Bank control over national governments. It would provide the IMF with added political leverage to impose sweeping macro-economic reforms.
An enlargement of the IMF and World Bank lending (without redefining their mandate) will contribute to increasing rather than alleviating the burden of global debt and poverty.
This intended expansion of the debt recipients at the grassroots would largely support the interests of international capitalists. In addition to obliging governments to faithfully abide by capitalists' policy prescriptions, the new loans also require the signing of parallel agreements regarding debt servicing with the official and commercial creditors. In a sense, the "inflow" of multilateral money acts as "a catalyzer" which promotes and ensures a substantially larger "outflow" of financial resources from indebted developing countries and this time from the grassroots with a difference.
The proposed solutions are becoming the "cause" of the poverty problem. The creditors have nothing to lose. If failed the private debts would be conveniently recycled and transformed into public debts. In turn, the economy will be crippled for years to come leading to a far deeper political and social fracturing. Accepting funds in the name of poverty alleviation without looking into the approach of its utilisation and their far reaching consequences exhibits a lack of foresight in assessing the workings of the global financial system in the interest of the capitalists in the North. We have failed to understand that the macro-economic framework has contributed since the 1980s to exacerbating rather than alleviating the debt crisis. The accumulation of large public debts (and the pressures exercised by creditors on the State system) are at the heart of our poverty crisis, requiring effective investment in human resource development at national and intervention in financial markets for "financial disarmament" on international level.
Concrete financial mechanisms which secure the cancellation of the external debt of developing countries are also required alongside regulatory policies, which carefully monitor the activities of the Bretton Woods institutions and "democratise" the structures of central banks. The World community should recognise the failure of the dominant capitalist system. Of crucial importance, is the articulation of new rules governing World trade as well as the development of an expansionary ("demand side") macro-economic policy agenda geared towards the alleviation of poverty and the worldwide creation of employment and purchasing power.
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