IMF knocking article. Photo shows the grim reaper against an orange backdrop

What happens when the IMF comes to town?

In the face of devastating economic and public health crises, Lebanon has entered into talks with the International Monetary Fund (IMF) in order to secure a loan –although, there is reason to be skeptical this will happen at all.

Lebanon is seeking as much as $10 billion of aid from the organization. The IMF, however, is no charity.  Not only will Lebanon have to repay this loan, it also must enact policies which are in line with the IMF’s vision of the world. Just whose vision is that? And since Lebanon is clearly not the first country in crisis to come, palms extended, to the IMF, what has become of the countries who came before?

An “International” Fund?

The IMF was born in 1944 in a small New Hampshire town, as the Second World War ravaged the majority of the globe. Representatives from the United States, Canada, Australia, and Western Europe (the ‘Allies’ of WWII) met at the Mount Washington Hotel, and conducted the Bretton Woods Conference, creating the international monetary system we know today (although technically the system ended in 1971).

It is no mistake that among the authors of the Bretton Woods system, and founders of the IMF,  there are no nations of the Global South. Even the Soviet Union, a massive empire and, at the time, ally against the Nazis, did not approve of the results of the conference.

The U.S. Secretary of the Treasury, Henry Morgenthau, Jr., addresses the delegates to the Bretton Woods Monetary Conference, July 8, 1944 (Credit: U.S. Office of War Information in the National Archives).
The U.S. Secretary of the Treasury, Henry Morgenthau, Jr., addresses the delegates to the Bretton Woods Monetary Conference on July 8, 1944 (Photo: U.S. Office of War Information in the National Archives).

The Soviets worried the IMF and World Bank represented “branches of Wall Street” who were “subordinated to political purposes which make it the instrument of one great power.”  That great power, of course, was the United States.

Thus, the IMF, stumbling out of rural New Hampshire, came to represent the interests of the US, Europe, and their empire. Even today, the United States maintains veto power (by share of votes) in the byzantine IMF voting system.

Votes within the IMF are allotted by number of currency-based shares, with the US maintaining 16 percent of the total voting shares.  What a coincidence, then, that changing the allocation of voting shares requires a vote of 85 percent.  

Adjust Your Structure

Once the US-European dominated IMF has decided to offer your country a loan, what happens? The process is known as “structural adjustment.”  

The structural adjustment programs required by the IMF are largely centered around privatization and austerity. These programs enforce a neoliberal consensus, and more often than not, include gutting whatever government programs still remain in the borrowing country.

In Sudan, in particular, the effects of these reforms were brutal. Having granted Sudan a loan, the IMF demanded two “adjustments” be made to Sudan’s “structure:” gas subsidies would have to go, and the local currency would have to be devalued.

Without subsidies for gas, basic goods became far more expensive in the country, and with a purposeful currency devaluation, all prices skyrocketed. It seems the cure may be worse than the disease.

While Sudan was a failure, does it always go this way?  The IMF’s calls for privatization have always found sympathetic ears the world over. Surely, we’re forced to wonder, this wouldn’t be the case if all countries who let the IMF in crash and burn?

The IMF’s Track Record Across the Globe

Greece vs. The IMF: A Sisyphean Task 

Greek riot policemen rest in front of graffiti written on the wall of a bank during violent demonstrations over IMF-imposed austerity measures in Athens, May 5, 2010. (Photo: Yahoo! via Reuters)

In recent years perhaps the most high profile IMF intervention was in Greece, following their economic collapse. Greece received loans from the IMF, and other institutions, in 2010, 2012, and 2015, eventually racking up more than 300 billion Euros of debt.

Famously, the conditions of the loans were so terrible, that the left-wing Syriza party came into power promising that Athens would abandon repayment (they did not). Even the IMF now admits that implementing austerity in Greece was a disaster.

Further supporting the proposition that the IMF serves the interests of the Global North, the institution flatly refused to renegotiate with Greece’s creditors. Rather than accept the fact that Greece was entirely unable to repay its European loan sharks, the IMF attempted to wring water from a stone. 

An article in the British medical journal The Lancet made the case that the payment of IMF loans harmed public health. Forced to make deep cuts to repay the IMF, Greece lost 26,000 public health workers, innumerable hospital beds, and made cuts to intensive care units, according to the same Lancet study.  

As part of the IMF’s austerity program for Greece, workers’ rights were severely hampered. The Fund insisted on allowing the mass firing of workers (priorly illegal in Greece) curtailing the power of labor unions, and slashing pensions.

Sharan Burrow, International Trade Union Confederation General Secretary, explained in 2016, “The IMF seems to have little if any understanding of what is really happening in Greece and indeed in the world in general.”

“Six years of imposing the will of financial capital at the expense of workers has been an utter failure, and left the Greek economy with no pathway for a return to growth and job creation. Ideology has again trumped sensible economics with this latest round of demands, which even a beginner economist can tell will drive the economy into deeper trouble and leave even more people in severe poverty.” 

Argentina: Greece Part II 

Protesters in Argentina holding a banner that reads "No to IMF. Hateful debt." (Photo: Emergentes)
Protesters in Argentina holding a banner that reads “No to IMF. Hateful debt.” (Photo: Emergentes)

Latin America has received more than its share of IMF loans, and underwent massive “structural adjustment” throughout the Reagan era, as US-backed coups and deregulation swept the continent.

In recent years, the trend has not abated.  Argentina is currently struggling to renegotiate the terms of their 56 billion dollar loan –the largest single loan in IMF history.  

Former Argentine president Mauricio Macri signed this agreement in 2018, and attempted to enact the same reforms demanded by the IMF as Greece. 

Labor unions were swiftly crushed, fuel prices rose, and the country slid into deeper crisis.  Macri attempted to avoid the typical disaster which accompanies austerity by encouraging “foreign investment” –a claim some also make in Lebanon. This failed. With the economy cratering, Macri was soundly defeated at the next election by a margin of more than 15 points. 

On August 11 (before the election) the exchange rate between the Argentine Peso and the dollar was 45 to 1. The very next day, falling by 25 percent, it was 60 to 1. Why? The new president, Alberto Fernandez, sought to refinance the loan and resist austerity to what extent he could. Backing away from the IMF seems to carry almost as heavy a price as adhering to their austerity measures. 

The IMF in the Middle East

Protester holds bread with the words “Corruption = Hunger” written on it in June 2018. Protests erupted in Jordan then against controversial IMF-backed economic plans of the government.

While many countries in the Middle East have sought or received loans from the IMF, including Iraq and Algeria. Jordan and Tunisia present two of the most salient cases for Lebanon. Both were given loans, much like the one being considered for Lebanon, to address deep structural concerns in addition to transient crises. 

Jordan accepted a three-year loan from the IMF in 2016 to the tune of 723 million dollars. The country swiftly imposed the IMF’s required “adjustments,” hiking the prices of basic goods including bread via tax increases, and increasing overall taxes on employees.

Angered by a growing economic crisis, thousands of Jordanians took to the streets to protest the measures. These protests were fixated on the Prime Minister, Hani al-Mulki, who was eventually forced to step down in 2018

Eventually the situation became so dire that a report filed by Philip Alston, the UN Special Rapporteur on extreme poverty and human rights, made a scathing criticism following the disaster in Jordan: “To date, the IMF has been an organisation with a large brain, an unhealthy ego, and a tiny conscience. If it takes social protection seriously, rather than making a tokenistic commitment to minimal safety nets, it can show the world that it has actually learned from its past mistakes.”

If Tunisia is any indicator, the IMF certainly has not “actually learned from its past mistakes.”  Under an IMF dictated program coinciding with a 2.9 billion dollar loan to Tunisia in 2016, Tunisian currency has lost more than 90 percent of its value over the past five to six years.

The IMF also lost a lengthy fight with the Tunisian General Labor Union in 2018. Remaining consistent with their operating procedures, the IMF had demanded cutting public sector salaries.  In the wake of two nation-wide general strikes organized by the union, salaries were raised once again.

There is a particularly brutal irony to the current struggle between Tunisia and the IMF. Only last year, Tunisia’s Truth and Dignity Commission –established to investigate the human rights violations of the Tunisian government since 1955– named the IMF and the World Bank as perpetrators of human rights abuses in Tunisia.

The Commission reported that the IMF abused the country “through loan conditions and structural adjustment plans imposed inappropriate policies that were at the root of the serious violations that followed the popular uprisings.”

The Commission goes on to lay partial blame at the feet of the IMF for the 1983 Tunisian bread riots, which were directly tied to the IMF removing subsidies, and resulted in at least 83 deaths.  There are, however, many other times when the IMF directly caused death and havoc.

To understand how exactly this happens, it is important to remember that the United States largely controls voting within the IMF, and therefore their two agendas align. When the IMF cannot enforce its will through purely economic means, it has the might of the US Empire arrayed behind it. This might is displayed brutally in South and Central America, particularly Venezuela, El Salvador, and Bolivia. 

Murderers’ Row: When The IMF Stops Playing Nice

Thousands of Venezuelans protesting in Caracas against neoliberalism, IMF policies, and US imperialism. (Photo: AVN)

“I’m afraid that the other option in the near future is for the terrible situation in Venezuela to continue and even to get worse.  You saw Maduro appeal to the IMF for a $5 billion loan. And the IMF immediately rejected his request, saying that it did not have –Venezuela did not have a government that had international [read: US] recognition.

Elliott Abrams, U.S. Special Representative for Venezuela, issued this warning to President Nicolas Maduro’s Venezuelan government. With the US aligned against you, you have no hope of “reprieve” from the IMF. 

Not only was Venezuela rejected by both the US and the IMF, the US has taken repeated steps to overthrow the leftist Maduro government. As recently as last May, US forces (private security contractors) attempted to enact a ridiculous plan to remove Maduro from power.

In addition to this latest attempt, the US has backed efforts to overthrow the Venezuelan government in 2002, and as recently as 2019.

While it is impossible to tie these assaults singularly or directly to the involvement of the IMF, given the fund’s relationship with the United States and its willingness to finance regimes far more brutal than Maduro’s, it is equally difficult to call it “coincidental.”

Elliot Abrams was not always a “Special Representative for Venezuela,” he has a long history of being involved in regime change in Latin America. He also advocates for IMF involvement in Palestine, specifically the West Bank and Gaza.

His most odious position, assuredly, was in another country of interest to the IMF: El Salvador in the 1980s. Abrams assisted the US (and, not coincidentally, the IMF) in supporting the El Salvadoran armed forces.  

Catholic priest Reverend Daniel Santiago recounts the horrors (content warning, a graphic description of a war crime) committed by Abrams’ American-backed Salvadoran forces in terrifying detail:

“Entering the house, Tonita [a peasant in a rural village] was greeted by the grisly spectacle of a feast macabre. Seated around a small table in the middle of her house were her mother, sister, and three children. The decapitated heads of all five had been placed in front of each torso, their hands arranged on top, as if each body was stroking its own head. This had proven to be difficult in the case of the youngest [18 months old] daughter. The difficulty had been overcome by nailing the hands onto the head.”

Elliot Murphy, On The Mind and Freedom (2011)

While the IMF refused Venezuela, these types of horrors in El Salvador were not enough to deter them from offering loans to the right wing junta. As these massacres were ongoing, with the backing of the United States and Elliot Abrams, the IMF regularly dispersed loans to the El Salvadoran regime.

The message is clear: Toe the US/IMF line, and you can commit as many atrocities as you desire. Seek independence from them, and you will be severely punished.  

Bolivia faced just such a punishment for resisting the IMF.  

After being ousted by a US-backed military coup, now former president Evo Morales proclaimed, “And our sin, our crime, is to have proven that Bolivia can develop without the capitalist system, without the IMF.”

In May, following the coup, the IMF lent 327 million dollars to the new Bolivian dictatorship. It was the first loan given to Bolivia in 17 years. If the IMF were purposefully trying to prove Morales right, they could not have done much better. Decades of Bolivian financial independence collapsed overnight, as the country was brought back into the post-Bretton Woods fold.

What does all of this mean for Lebanon?  Austerity, subservience, and debt

Given this long and sordid history, what use is it to ask the IMF to “prioritize human rights in Lebanon,” when they never have before?

If allowed into Lebanon, the IMF would surely follow its standard operating procedure around the globe: privatization, attacks on workers rights, and the elimination of the social safety net.

If Lebanon accepts IMF “aid,” it is difficult to imagine the situation or the strength of the Lebanese Lira improving. Greece and Argentina both also wracked up startling amounts of debt to the international fund, a position Lebanon can hardly afford to be in.

Unfortunately, as seen in Venezuela, El Salvador, and Bolivia, the IMF is extremely hard to deny. The IMF waits in the wings like a vulture. They approach countries like Lebanon when they are in times of extreme crisis, and have no other way out. While the deals they offer are poisoned fruit, it’s hard to resist if you’re starving.