Weisbrot points to a serious threat to real peace in Sri Lanka in the
article below. It points once again to the need to understand the conflicts
and peace processes in which we propose to intervene in global and not
purely local terms.

As the IMF and World Bank officials convene for their annual Spring
meetings this weekend amidst Washington's blooming cherry and magnolia
blossoms, they will be breathing a sigh of relief. Unlike in 2000, when
thousands of angry protesters converged on Washington, or the Prague street
demonstrations the following fall that caused them to fold up early, their
meetings will take place in relative calm.

The Fund and the Bank claim to have heard and answered their critics, and
in 1999 they created a new lending program called the Poverty Reduction and
Growth Facility. Its previous incarnation was the Enhanced Structural
Adjustment Facility, and the words "Structural Adjustment" had become a
catch-all phrase for the pain inflicted on poor people in developing
countries by faceless bureaucrats based in Washington.

But the new lending facility was supposed to be more than just a name
change. "Central to the PRGF is the principle of broad public participation
and greater country ownership," said the IMF, "...with active participation
by civil society--including the poor..." In addition, the Fund was now
committing itself to poverty reduction as an explicit goal of its lending
and macroeconomic policies.

Now let us look at this project in practice. As a requirement for lending,
the government of Sri Lanka -- with considerable help from the IMF and the
World Bank -- drew up its Poverty Reduction Strategy Paper (PRSP) last year.
The paper is chock-full of the IMF/World Bank's standard policy
prescriptions. These include an increased role for the private sector in
education and health care, labor law reform to make it easier to fire
workers, and land-law reform designed to help bring millions of Sri Lanka's
mostly rural population into the cities.

The Fund and Bank's plans for the rural population are potentially
catastrophic, reminiscent of the enclosure movement during England's
industrial revolution. The PRSP anticipates increasing the country's urban
dwellers to 50 percent of the population, from the current 23 percent --
over the next 8 years! Where will all these refugees from the countryside be
employed?

The Sri Lankan case is also striking because the country has been
relatively successful in its social as well as economic progress -- as
compared to other countries at its income level -- over the last two
decades, in spite of a terrible civil war since 1983 (currently there is a
cease-fire and peace negotiations are proceeding). Life expectancy in Sri
Lanka is 73.1 years and literacy is 91.6 percent.
> This compares to 65 years and 68.6 percent in Guatemala, which has
slightly more income per person.

Over the last 20 years of IMF and WB-directed reforms, the vast majority
of low-and-middle-income countries have suffered a drastic slowdown in
economic growth. Sri Lanka has not: income per person grew by 91 percent
from 1980-2000.

Given Sri Lanka's success relative to the IMF and World Bank's main
clients, it is strange to see the Fund and Bank economists so eager to
transform the country's economy according to their textbook models.

As for the required consultations with civil society, these appear to have
been very minimal, with organized labor excluded entirely. And the PRSP
document was only available in English, which is not spoken by the majority
of the people (especially the poor).

The IMF has good reason to think they will not be held accountable if
their experiment in Sri Lanka fails. Over the last decade the Fund's
economists have presided over some of the worst economic collapses in world
history. Russia lost half of its national income under IMF programs in the
nineties (and resumed growth after the Fund-supported currency regime
collapsed in 1998). Argentina went from IMF poster child to basket case and
has yet to pull out of its deep depression.

In these and many less prominent failures, Fund economists were able to
wash their hands of the whole mess and blame it on the locals, even when
their own prescriptions were followed diligently. So who is going to notice
what they do to Sri Lanka, a country the size of West Virginia [USA] with 19
million people?

The IMF and World Bank are among the most powerful institutions in the
world, because of their ability to cut off credit -- not only from
themselves, but from other sources as well -- to countries that do not
accept their advice. The case of Sri Lanka illustrates how dangerously
unaccountable they remain, and how little they have traveled down the road
to reform.

Mark Weisbrot is Co-Director of the Center for Economic and Policy
Research, in Washington D.C. (www.cepr.net)

> Mark Weisbrot
> Co-Director
> Center for Economic and Policy Research
> 1621 Connecticut Ave NW, Suite 500
> Washington, DC 20009-1052
> Phone (202) 293-5380 x228
> Fax (202) 588-1356
> (202) 333-6141 (home)
> (202) 746-7264 (cell)
> www.cepr.net

TOP