At IMF Headquarters

At IMF Headquarters

 

By John Burgess, Washington Post Staff Writer

Thursday , April 13, 2000 ; A01

 

Jeffrey Waite feels "a little bit under siege." He's an education specialist at the World Bank and from his office can see police

barriers below, put up as defense against demonstrators who have very publicly pledged to "shut down" the bank and its sister

institution, the International Monetary Fund, this weekend.

 

Waite spends a quarter of his year on the road in such places as Morocco, overseeing programs that aim to enroll more

children in school, particularly girls in villages. "People who work here are committed to making sure that the poor are

becoming less poor," he said yesterday.

 

The Foggy Bottom headquarters of the bank and the IMF are full of such experts on schools, electric power for villages, clean

water, AIDS, river blindness, road building, financial management. And what many want to know this week is this: How is it

that we are being called the cause of world poverty?

 

Many of the demonstrators "would benefit from going and working in a poor country for a few years, seeing what it's like and

how difficult it is to make progress," said Ian Johnson, a bank vice president who spent five years in Bangladesh in the 1970s

helping get emergency food and clean water to villages.

 

Johnson and Waite say they welcome informed debate with the bank's critics, many of whom they respect as deeply committed and concerned about the issues, but they wonder whether its really radical opponents understand the basics of how the bank and poverty alleviation work.

 

To many people in the bank and fund, there's a paradox in the air. They feel they've never done their job so well--they've

reformed their huge institutions, making them more responsive to local concerns. Two years ago, they helped pull the world

back from near financial collapse with $100 billion in emergency loans.

 

Yet so often the thanks they get is fire from all directions: chants and sit-ins from demonstrators; accusations from members of

Congress of incompetence, waste, environmental abuse and secrecy; lectures from academics that the two organizations need

to be downsized.

 

The defenders contend they have made significant reforms and more are on the way. A "quiet revolution" is underway at the

IMF, said interim chief Stanley Fischer. He cites the write-off of debt owed by desperately poor countries, the phase-out of

obsolescent lending programs, and the release of once-confidential documents: "We now publish about everything. If you don't

believe it, look at our Web site."

 

"We have never done more in the history of the institution to reach out," echoes James D. Wolfensohn, president of the bank.

"The clear future of development is in engagement with the local communities."

 

Half a century old, the two institutions are the twin pillars of the world financial order. The bank focuses on long-term lending to promote economic development, while the IMF works to coordinate economic policy and provide shorter-term aid to

countries running low on foreign currency.

 

No one foresaw how big they would grow. The bank today employs about 11,300 people. It made $29 billion in new loans in

its last fiscal year, a record, bringing the total on the books to about $200 billion.

 

The IMF has a smaller balance sheet and payroll (2,200 employees and $90 billion in loans) but arguably greater clout in

day-to-day affairs of the world economy. When its managing director flies into a country, the visit tops the news. Financial

markets pay close attention to his every word for clues to shifts in exchanges rates and the safety of investments.

 

The institutions see themselves as essentially democratic shops, financial co-ops that are owned by their member nations. Every few days, board directors appointed by member governments meet and hash out policy. No corporate chief executive gets as much direction from the boardroom as do the heads of the two institutions.

 

Wolfensohn, a former Wall Street financier who became president of the bank five years ago, likes to say the organization he

inherited simply doesn't exist anymore.

 

He's now got about 3,200 people in field offices, up from about 1,800 five years ago, in an attempt to combat a culture of

direction from headquarters. He's replaced most of his 30-plus vice presidents and is about to bring on board an African as a

managing director, a powerful job in the tier just below him. She is Mamphela Ramphele, a black South African physician and

university vice chancellor who was active in the movement against apartheid.

 

For years, the World Bank was known for never hearing a dam or pipeline proposal it didn't like, though critics said these often harmed the environment. Under Wolfensohn, it has continued underwriting big-ticket items but has branched out toward

smaller, community-oriented things.

 

Earlier this year, in the towering atrium of its headquarters, the bank convened a "Development Marketplace" competition for

$5 million in grants. People with ideas for small, community-oriented projects set up booths and vied for the money. Winners

included projects to use merry-go-rounds to pump water and carry AIDS awareness posters, to combat female genital

mutilation, to help households purify water and help Africa build a digital library.

 

"I come in every day thinking I'm doing God's work, as do my colleagues," says Wolfensohn.

 

The IMF in the last five years has moved toward more openness after years of being run with a central banker's love of

secrecy. Its chief meets with reporters more often; it has publicly conceded that it got things wrong early in the 1997 financial

crisis, pressing borrowing countries toward austerity rather than letting them grow their way back into health.

 

In the meantime, the IMF has put in place auditing safeguards to try to make it harder for borrowers to cheat, after being hit by

questionable reporting of foreign-exchange holdings by Russia and Ukraine.

 

Other changes, mainly new bulges in the loan portfolios, have been the result of outside events, notably the financial panic that

erupted in Thailand in 1997. To quell it, the IMF became chief organizer of a global bailout, mobilizing close to $100 billion in

emergency loans from itself and other lenders. The fund's loans more than tripled in 1998 from 1997.

 

Under pressure from industrial-world governments to help, the bank dramatically picked up its "structural adjustment" loans,

which bolster countries' foreign-currency reserves rather than underwrite specific projects.

 

Today, much of Asia has recovered (the economy of South Korea, notably, grew by about 10 percent last year) but Russia

and Latin America continue to drag. Still, the financial world breathes easier, and people at the two institutions think they are a

big part of why that happened. But whether they look right or left in the political spectrum, they see people gunning for them.

 

Many U.S. legislators fault the institutions as big, wasteful and unaccountable, run by an elite drawing large tax-free salaries.

Country bailouts are viewed as poorly planned and executed and unfairly saving Wall Street fat cats who made risky bets in

overheated economies abroad. And why, the critics ask, did the crisis of 1997 catch the two lenders so unaware?

 

Other criticism targets the loans' social impact. Conditions of structural adjustment loans--closing down inefficient factories, for

instance--can put local people out of work (though the bank argues that in the longer term such measures clear the way for

more jobs).

 

Because the United States is the largest member of both institutions (it contributes about 18 percent of the equity to each), what Congress says carries big weight.

 

Earlier this year, a congressionally appointed commission headed by economist Allan Meltzer of Carnegie Mellon University

called for major overhauls, including essentially pulling the World Bank out of better-off countries such as China and limiting

IMF aid in most cases to countries that have carried out reforms before they get into trouble.

 

Bank critics in Congress praise the report and say they'll act on it. "The good news now is we have a road map," said Rep.

Richard K. Armey (R-Tex.). ". . . The IMF has had a long period of mission creep. The report helps us understand what needs to be done, so they can have a positive impact in these countries."

 

Other pressure comes from environmentalists, who note that World Bank projects involving roads and pipelines can literally

redraw landscapes. Under pressure from the groups and some of its own staff, the bank has instituted rules requiring detailed

assessments of prospective projects' impact. But for the most part, environmentalists give the bank mixed marks.

 

"Certainly the rhetoric of the organization has changed in the last five years," said Andrea Durbin, director of the international

programs for Friends of the Earth USA. "But the practice hasn't." Critics contend the bank often violates its own environmental

rules on project lending. The bank counters that it is becoming ever more attuned to these concerns.

 

It would be hard for the institutions to entirely please the environmentalists, as many view development of any kind as bad for

air and water. It's even harder to assuage the more radical political groups that will take to the streets this week. In their view,

many of the world's ills lie at the door of international capitalism. The bank and the fund, they feel, are agents of the

multinational corporations, working to open up countries to economic rape.

 

Certainly the bank and the fund make no bones about their faith in open markets. Its emergency program to stabilize South

Korea, for instance, has been predicated on that country moving to make its financial markets more open to foreign investors

and break up big industrial conglomerates that have traditionally received favored treatment from the government. At times, as

with South Korea, the country is inclined to go in that direction on its own; in others the lenders apply the strong arm, saying no

action, no money.

 

Fischer predicts that in the end, no radical change will result from the debate. "I see the debate going in a direction that reaffirms the value of the IMF as the central monetary institution in the system," he said, "that raises questions about the way we do business, but that does not fundamentally challenge the . . . main things we do."

 

2000 The Washington Post Company