SUNS  4297 Thursday 8 October 1998


FINANCE: TOWARD GLOBALISATION WITH A HUMAN FACE

Washington, Oct 6 (IPS/Abid Aslam) -- The streets outside the annual meeting  of the World Bank and International Monetary Fund (IMF) turned  ugly Tuesday, with protestors against ''sado-monetarism'' yelling  obscenities at passing officials.

Leaders of the Bank, Fund, and the United States - primary  shareholder in both global institutions - used gentler prose in official talks, but their speeches appeared to strike at the heart  of the demonstrators' anger.

"An international market that fails to work for ordinary citizens will neither earn, nor deserve their confidence and support," said President Bill Clinton.

He warned of "a profound political challenge to the global economic order" and called on world financial leaders to "put a human face on the global economy."

World Bank President James Wolfensohn noted "growing sentiment that there is something wrong with a system in which even countries that have pursued strong economic policies over a period of years are betrayed by international financial markets, where workers within those countries will be thrown out of work, where their children's education will be interrupted, their hopes and dreams destroyed."

Even IMF Managing Director Michel Camdessus, regarded by colleagues and critics alike as chronically technocratic, declared, "Let us be clear: we are speaking not just of countries in crisis but of a system in crisis, a system not yet sufficiently adapted to the opportunities and risks of globalisation."
All three spoke emphatically of the need to respond decisively to the current crisis - and passionately of the longer-term need to ensure stability in world markets, growth in national economies, and opportunity in local communities.

"They're acknowledging that radical reform is needed," commented Angela Wood, economic policy analyst at the London-based Bretton Woods Project. "But they can't provide it."

To support her argument, Wood pointed to the rest of Camdessus' speech, which seemed to toe the orthodox line of blaming the crisis on the countries in crisis while urging countries to persist with
Fund-designed economic restructuring programmes, albeit with some technical modification.

"If we keep a steady nerve, if all countries pursue stability, structural adjustment, and orderly liberalisation of their economies, this crisis can be overcome," Camdessus told finance ministers and central bank governors at a hotel in Washington's affluent Woodley Park area.

Global crisis - exacerbated by Russia's woes, the moribund state of Japan's economy, and putrefaction in its banking system - was sparked by three factors, Camdessus argued. These included large budget deficits, weak banking and financial systems, and "unduly close links"
among states, banks, and corporations.

"This approach of 'managed development' was simply out of tune with the demands of a globalised economy," Camdessus said.

The IMF chief, walking a tightrope between sovereign states and private markets, sought to balance his recommendations. While calling openness in disclosure of financial data - demanded of governments by investors - "the golden rule", he also noted that "market participants must also
expect to offer greater transparency."

Echoing the IMF's policy-making 'Interim Committee', which met here Oct. 4, he underscored the need to minimise the risk of sudden capital flight as well as 'moral hazard', or the repetition of bad investment decisions by private investors let off the hook by publicly-financed international bailouts.

However, Camdessus rejected "outmoded patterns of controls" on capital and reminded governors that, last year in Hong Kong, they gave the IMF a mandate to rewrite its founding 'Articles of Agreement' so one of its basic purposes would be to push free capital markets.

Clinton voiced support for the IMF's "fundamental approach", repeating the oft-heard argument that "the international community cannot save any nation unwilling to reform its own economy. To do so would be to pour good money after bad. But when nations are willing to act responsibly and take strong steps, the international community must help them to do so."

Wolfensohn paid tribute to the IMF's work but shifted focus to "the other crisis" and called for a "new development framework". The priorities of such a scheme would not be revolutionary: good
governance, healthy tax systems, secure property rights, social programmes, sound infrastructure including rural roads, and environmental and cultural protections.

However, the Bank would find two countries in each of the world's regions and start, in the next couple of years, to let the government, civil society, and private sector in borrowing countries take the lead in setting priorities and plans for the Bank support. Progress in meeting these goals would reviewed annually in a process similar to the annual evaluation meetings held by the IMF with members' finance ministries.

Greater social participation in development planning was needed, Wolfensohn said, because "hubris should not allow us to think that we at the Bank or in the donor community can be the cartographers," charting a course to sustainable development.

Wolfensohn's proposals - mainly a synthesis of ideas already circulating in the development community - appeared to have been designed to reassert a distinct role for the World Bank after a year in which it had been pressured by the IMF and U.S. Treasury to provide crisis loans and, in effect, short-term budget relief to hard-hit countries.

That was the Fund's traditional job, Wolfensohn pointedly told reporters last week, and the Bank was not "a second-level IMF."

Such motives notwithstanding, Wolfensohn's comments amounted to a grand vision of "socialised globalisation" that the Bank now would pursue, a senior official told IPS.