Monday, January 26, 2009

The Bretton Woods Institutions and Africa

African Leaders should ignore them; after all they seem not to be serving our interests; rather confusing us.

To understand the World Bank and IMF (International Monetary Fund) with regards to the roles they play and in whose interests they preserve in world affairs; one must first ask the question; who set them up?

It is best to go back to history. Rewind to 1944, the 2nd World War was coming nearer to an end; the allies were determined not to have the war finished and end up in the mess of the 1930’s. At Bretton Woods, New Hampshire, delegates from 44 allied and associate countries arrive for the opening of the United Nations monetary and financial conference.

The key institution that was set up was the International Monetary Fund and the purpose of the fund was to have a bank they could turn to for short term borrowing, and to serve the short term trading interests of the winners of the war. The United States treasury secretary, Morgan Thaw, was the head of the American delegation, in his submission he discussed the plan of the U.S for a stabilization of world currency.

At the same time, the World Bank was set up to provide capital for the rebuilding of Europe; unfortunately its original name-International Bank for Reconstruction and Development (IBRD) is rarely used. It is quite instructive to know that at the time, what we now know as the third world did not exist. There were a few major powers, each of which had a large empire. Most African countries, including Ghana, were simply without structures of their own. African countries were just part of the power structures of Britain, France etc.

After independence, African and Caribbean countries found it overwhelmingly daunting and challenging building their own economies. This was made possible by the neo-colonial agenda and arrangements which seem almost impossible to extricate ourselves from.

Clearly, the lines had been long drawn and the seeds of debts had already been sown which we cannot even attribute to the oil shock of 1973-74 as some western propagandists have made us to believe. But that can be a subject for another discussion later.

The debt problems that Africa faces today also arise from the notions that the third world must naturally import capital; and that private capital can, and should handle the major part of capital flows to the third world. These I think the IMF and the World Bank have carefully managed and designed draconian short term policies and programmes for third and developing countries to adopt.

Even in the long term, the negative effects take a multiplying toll on our economies, because we are always ready to heed to conditions opposite of what is practised in the West.

In the 1980’s it was said that it was imperative for Ghana to adopt the Economic Recovery Programme (ERP) and the subsequent Structural Adjustment Programme I & II (SAP I and SAP II) in the early 1990’s rolled out by the IMF as a panacea to economic woes at the time.

After religiously going through the three programmes, the World Bank Representative in Ghana, Seung H. Choi, in an interview to THE POST on 17Feb.1987 said,

“I think these adjustment programmes are really protecting the interest of the producers and farmers and interest of the people at the grassroots level…the whole essence of the recovery programme is to shift the emphasis from people who are not producing but are merely trading and consuming to those who are really producing and creating national wealth, like toiling cocoa farmers and factory workers, etc.”

In 2001, there was a totally different picture of Ghana’s economy; I suppose it was a gloomy one as the economists conjectured to make us believe. We were told by the same Bretton Woods establishment how it was urgent to declare the country HIPC (Highly Indebted Poor Country) to garner some social benefits for the masses. As usual it was another tailored-facility which also came with its strait-jacket conditions.

There was also the need for the government at the time to implement the Ghana Poverty Reduction Strategy (GPRS) document, which took the nation through three stages in the attempt to alleviate poverty from the Ghanaian society. Let me spare you the boring details, we made it through HIPC.

So what went wrong after 1987 when we were following the handbook hook-line and sinker? Quickly the next question to ask is whether the HIPC initiative solved our problems?

Here we are in 2009, there’s a shift in power once again. A party is about to hand over to another democratically elected one. On the eve of the hand over and the inauguration of a new president, the World Bank country Director, Ishac Diwan, signs and releases a report to the incoming administration.

The report has been infamously described in the media as “the love letter from the world bank”, in which the Country Director emphasised that the “the macro-economic situation in the country was extremely worrisome.”

What again has gone wrong? Is it a matter of the World Bank and the IMF just finding favour with every new administration when there’s a change of power? Or perhaps I should ask what the real deal is?

This has no doubt triggered debates and counter-debates between the now majority and the out-gone administration, now minority. The question has been who inherited or who left what economy back in 2001 and now. In the confusion, the Graphic Business’ Tuesday 20th Jan. put out boldly on its front page headline asking, “Is Ghana broke?”

This posturing by the World Bank and their agents are clearly unacceptable. They proffer to us policies and programmes that send our economies awry while singing praises to incumbents and looking on as we sign unfair trade agreements with their masters in the west.

The IMF/World Bank set conditions that African governments cannot meet, and when the governments fail to meet them, they are forced to go back to renegotiate new loans with tighter conditions, for instance dictating how much to specifically spend on health and education which will sometimes compel governments to cut certain programmes which were hitherto beneficial to the masses.

They ask governments to devalue their currencies, essentially to make the currency cheaper, by expanding exports and diminishing imports to make foreign currencies expensive.

And since our economies have become hugely dependent on imported food, oil, medicine etc, the cost of all these products and others we import go up again just after devaluation. Therefore the economy becomes controlled by foreigners’ not through direct ownership but through the mechanism debt.

We end up accumulating more debts by this arrangement and as the debts keep rising, the capacity to produce and export also become less.

Maybe HIPC was necessary then, as it was been touted by the just out-gone administration. For the past two years, they consistently drummed home how the economy was robust and resilient, with the cedi also being stable. But I asked some simple questions, those of a lay man perhaps.

“For what reason and purpose do you re-denominate the stable currency of a resilient and robust economy?”

“For what same reason again do you introduce the LEAP (Lively-hood Empowerment Against Poverty) programme when you’ve come out HIPC through the GPRS?”

Obviously, there are even more questions than answers. And the more you raise the questions, the more you wonder about the agenda of the IMF/World Bank and whether their intentions for African and Caribbean countries are genuine.

Its time Africa takes a paradigm shift from the status quo, the old ways of subjecting our economies to the dictates of the west and the Bretton Woods institutions must come to end now. For me, there’s no even one success story on the African continent that can be attributed to IMF/World Bank. Their economic hitmen have always succeeded in helping to dislodge our economies to the advantage of Western economies, read John Perkins-The confessions of an Economic Hitman.

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