• Thu
  • Aug 28, 2014
  • Updated: 1:40pm

Professional pillow-talkers prime advisers

PUBLISHED : Wednesday, 29 September, 1999, 12:00am
UPDATED : Wednesday, 29 September, 1999, 12:00am

Practitioners of the world's oldest profession will gather in record numbers this weekend in Washington, if anecdotal evidence is any guide.


They will come because delegates to the annual meetings of the International Monetary Fund and the World Bank have a reputation for being fond of evening diversions after a hard day's dialogue in pursuit of the good of mankind.


But those delegates who indulge themselves may also do well to take a few lessons from their night-time private-sector service providers on what money is, how hard it can be to make and how easy it can be to lose.


Two questions facing the IMF and the World Bank at the moment are worthy of some examination. The first is whether political issues should play a role in their decisions to provide official aid to crisis-hit countries and the second is whether commercial banks should help them.


The first question is easily answered. Politics has always played a big role in both. They are Cold War creations set up by the United States and its allies in part to reward wavering countries for not wavering into the Soviet camp.


That astounding black hole of vanished foreign aid, Pakistan, is a good example, as is Indonesia, where IMF and World Bank staffers on the ground may have known that money was being wasted but could not override their Washington-based bosses who wanted to be on the right side of President Suharto.


So why make an issue of politics now? No-one will be served if the IMF decides that it will concern itself only with economic matters at a time that it could invoke political considerations for the right reasons instead of only the simplistic them-or-us politics that it practised in the past.


One of the clear lessons of its short history, and of the World Bank's, is that funnelling aid into countries with tyrannical and corrupt governments is worse than useless.


It only winds up funding and thus perpetuating the tyranny and corruption. Far more money is wasted and far more misery inflicted as a result than would be the case if such governments were forced to confront the bankruptcy to which they lead themselves.


This kind of aid stalls reform and the record clearly shows that, although the IMF may demand reform as a price of aid, it is rarely exacted.


The IMF is constantly duped by crooks in government and its invariable response has been to throw good money after bad.


Why not recognise it and recognise that a political framework that protects civil liberties, maintains law and order and gives free rein to individual enterprise is an essential precondition of any foreign aid? Why not recognise that countries which have this essential precondition in place rarely need foreign aid and that the problems of countries which do not have it have never been solved by foreign aid and never will be? Why not concede that the best way of imposing reform on such countries is to cut them off? It is time for both the IMF and the World Bank to practise politics as they have never before. They are political entities whether they like it or not. They should face up to it.


As to commercial banks helping them out, not with my money, if you please. Big commercial banks do it the right way. They lend for a return, the best way of ensuring that money is used for the right purposes and, if they don't get the return, they don't lend.


That is the way it should be done. The IMF and the World Bank need to go to commercial banks for advice, not for money.


But when you read of European finance ministers drafting communique's about 'the modalities relating to the inclusion of the most appropriate collective action clauses in foreign currency sovereign bond issues' you know they haven't got the picture yet.


Those evening service providers congregating in Washington for their own 'modalities' will once again be the only ones to practise real business at this annual talk-up.


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