The IMF Fails the World's Poor Yet Again!
Buried in the recent communiqué from the IMF's
highest decision-making body, the International Monetary and Financial
Committee, was an acknowledgement that the governors of the IMF had
failed to reach a decision about increasing the voting rights and voice
of new emerging and developing countries. It is not the first time that
the IMF has failed developing countries, and in all likelihood will not
be the last.
However, if one investigates the workings of the IMF: its governing status; organisational structure; and key staff it is unsurprising that the Fund is a vehicle for serving the interests of Western nations.
While the IMF has grown from representing just 45 countries in 1945 to 185 countries in 2007, western governments remain pre-eminent in dominating the agenda of the IMF today as much as they did in 1945. This is astonishing given that it is the masses of the developing world that are most affected by the decisions made in Washington DC, the headquarters of the IMF.
The key to influence and power in the IMF is the quota system. According to the rules of the game, a member country's quota is broadly determined by its economic size relative to other members. Quotas are denominated in what are known as SDRs or Special Drawing Rights. Quotas determine how much subscription a member country pays to the Fund and, most importantly, how much voting power a Governing Board member has in IMF decision-making.
All 185 countries are on the Governing Board but being the largest economy in the world, the United States has by far the single largest quota with 16.79% of the total vote on all IMF decisions. Indeed, the USA, Japan together with a handful of European countries control comfortably over 50% of the IMF vote on the Governing Board leaving the remaining 170 odd member counties, with approximately four fifths of the world's population, to share the remaining 50%.
Below the Board of Governors in the next tier of the IMF structure is the Executive Board of the IMF, which is also controlled by western nations. The Executive Board is responsible for conducting the day-to-day business of the IMF. While it is composed of both appointed and elected directors, the 5 appointed directors, and therefore not subject to removal through voting, are from the US, Japan, Germany, France and the UK.
Not satisfied with overwhelming voting rights on governance and the control of the Executive Board, the US and European nations have had a long standing ‘Gentleman's Agreement' as to who will head the IMF and the World Bank. It is widely known that neither side opposes the other's nomination as long as the head of the World Bank is always an American while a European always leads the IMF. This was typified again most recently with the selection of France's Dominique Strauss-Kahn who will lead the IMF in 2008 and the US's Robert Zoellick, the new president of the World Bank.
It is quite clear that the IMF, at its core, is structured in favour of the incumbent rich nations. While governments in the Muslim world have done little or nothing to address this situation the strong and rapid economic emergence of China, India and Brazil is forcing the debate on increasing voting rights for emerging economies and a greater voice for developing nations. To what extent the IMF fundamentally changes its structures and workings to serve other than western interests are yet to be determined. The signs though are not hopeful given the unwillingness to reform.
Through loans on compound interest the IMF - the club dominated by bankers and financiers - unashamedly controls, manipulates and dominates weaker nations at their most vulnerable times in order to serve western interests in terms of raw materials and energy resources. The structural adjustment programmes of the IMF impose conditionality which forces developing countries to open their markets allowing heavily resourced western multinationals to usurp competing domestic industries. A case in point is the IMF's insistence on Pakistan to rapidly privatise its strategic energy sectors assets including Sui Gas and Pakistan State Oil. This was outlined in the Pakistan Enhanced Structural Adjustment Facility Policy Framework Paper, 1998/99-2000/01. As recently as September 2007, the IMF, visiting Pakistan for an annual review of the economy, again demanded that the government of Pakistan put the privatisation programme on track as part of its earlier commitment.
This reflects the pattern of behaviour of the Western capitalist states in the last half century-liberal at home whilst supporting dictatorial regimes abroad and subverting international institutions to exploit and subjugate the people in poorer countries to secure their economic interests.
Capitalist hegemony and exploitation is in stark contrast to how the future Khilafah state (Caliphate) will view its relationship with the developing world. While the aims of its economic relationships will primarily be to serve the Khilafah state and its citizens, the Islamic ideology did not allow the Muslims to adopt any means possible to achieve that goal. Over the last century, the Muslim world has witnessed from the western states direct colonisation followed by its support for brutal dictators such as Karimov, Musharraf, Mubarak and the cruel state of Israel, who all serve western interests at the expense of the well being of their own citizens. The Khaleefah's engagement with the world will be guided by the Islamic values of compassion and mercy as well as the propagation of the Islamic call. These contrasting positions between the Khilafah state and capitalist nations originates from opposing ideological stances where the capitalist nations are primarily driven by their insatiable appetite for the world's resources while the Khilafah state's principal objective is to elevate mankind through persuading others to adopt the Islamic creed and system.
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