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Question #6

Q:  Discuss the criticisms of the IMF by the South.  Are such criticisms valid?

            The following are primary criticisms made by opponents to the IMF.  Many nations that accepted IMF aid now have higher debt then before.  Structural adjustment programs, force countries to promote sweatshops, export to rich countries, and engage in high-risk high-return cash investments.  The resulting increased trade led to international regulations to protect the MNCs investing in LDCs.  This ends up sucking wealth from LDCs into the EDCs.  IMF programs enrich the elite and further impoverish the poor.  Increased education fees force parents to pull children from school and illiteracy rates rise.  The resulting uneducated work force is less productive.  The burden on women increases as men go to work for cash.  Higher medical fees mean increased deaths.  Massive layoffs result from the privatization of former government businesses.  Small farmers and businesses go under leaving workers unemployed.  The control of the economy shifts to foreign companies.  Governments don’t enforce labor and environmental laws.  Decreases the capability of local businesses to compete with MNCs.  Raises the cost of survival.  Increase civil unrest.  Exports bring in less money as supply grows.  Best farming fields are devoted to cash crops instead of food crops.  Countries become more dependent on imports and on manufactured goods.  Natural resources are over-exploited, leading to displacement and environmental destruction.

            While many of these accusations of the IMF are valid, many are false or misleading.  Yes, many LDCs have higher debt than before accepting IMF aid, but that would have happened anyway, but at higher interest rates.  The “structural adjustment programs” lead to an increase in international commerce with brings money into the nation.  While the profits of MNCs go back to EDCs, the workers for MNCs still get paid which provides a boost to local economies and decreased hardship.  Instead of increasing deaths, deaths have actually declined as medical aid has improved, and since most poor do not pay for medical aid the argument about increased costs is moot.  Yes, massive layoffs result from the privatization of government services result in unemployment.  However, these same workers are rehired by private companies to do what they had done before.  And the increased unemployment level ends up merely being a temporary spike.  The shifting of control of the economy to foreign companies is actually beneficial.  Unlike local businesses, which aren’t very profitable or safe, MNCs already know how to run a company and are unlikely to go under.  MNCs also hire thousands of workers that would have otherwise been unemployed.  Lax environmental and labor regulation enforcement by governments is a problem, but that is being combated.  The increases in civil unrest come from religious, tribal, and political disputes.  Yes, the amount of money brought in by each individual export decreases as supply grows, but the total income increases.  Natural resources do often become over-exploited, but this is likely to continue till these economies complete the transfer to industrialization.  Yes, the reforms lead to nations becoming less economically sovereign and self-sufficient, however industrialization eventually leads to better standards of living, even though the road to progress is hard.

            Overall, while many of the criticisms are valid from one point of view, they also have another side, which are beneficial to the LDCs.

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