Vol. III, Bulletin No. 14.                                                                       July 22, 1998 

The IMF/World Bank Story in Indonesia and Beyond

Fake Figures + Faulty Assumptions = Failure
Take a look at page 33 of The East Asian Miracle, published by the World Bank in 1993 . There the Bank lists a spectacular drop in the number of Indonesians with a standard of living below the poverty line: from 67.9 million to 30 million in a single decade.  That dramatic decrease was a major reason why the World Bank hailed Indonesia as a "high-performing Asian economy," one that achieved an "Asian economic miracle."

Trouble is, the figure of 30 million is fake.  Many were skeptical at the time.  Now, at long last, comes a story in the Wall Street Journal (7/14, p.1) that exposes the fakery:

Jeffrey Winters, a Northwestern University professor who was a U.S. Agency for International Development in Jakarta in 1989, recalls an incident he says shows that Indonesian poverty numbers were "pulled completely out of thin air."  He recalls President Suharto insisting in public that poverty had dropped to 30 million, even though the World Bank was in the middle of a three-year study that showed 60 million poor.  He says AID officials tried to forge a compromise between the World Bank and the Indonesian government. In the end, the bank report put the number at 30 million.

"It was a huge collusive effort," says Mr. Winters. "The number has been reported over and over, but it's a lie."

Revelations That Spare Some Guilty Parties

The Journal sketches the causes behind what it calls "a historic setback" in Indonesia.  The article indicts the World Bank for "subsidizing corruption" (in the words of a former UN official stationed in Jakarta) and also for helping to sustain the doomed Suharto regime.  That's interesting news coming from the Journal, but old news to those who years ago learned what was rotten in Indonesia.

Welcome though it is, the article's criticism ignores some important realities:

A systematic debunking of such beliefs rarely appears in the daily press.  But Jerome I. Levinson, professor of international law at American University and research associate at the Economic Policy Institute, has contributed two insightful analyses of the controversy to the op-ed pages of the Washington Post.

Getting the Fundamentals Terribly Wrong

The first appeared in the Washington Post on Dec. 31, 1997, well before Suharto fell from power. Titled "One-Dimensional Bailout," it criticized the huge rescue package that the International Monetary Fund (IMF), the U.S., and other governments mobilized for Indonesia and other East Asian governments.  A key part of Levinson's criticism:

The financial mismanagement in Indonesia is a direct consequence of the absence of such democratic institutions as a free press, free trade unions, an independent judiciary, and an effective political party opposition.  Without such institutions, there was no one to demand accountability of the Suharto government.

The result has been a crony-capitalism that has enabled President Suharto's family and a clique of close associates to loot the banking system abetted by the same international banks that are the primary beneficiaries of the rescue plan.  The IMF rescue plan does not address this issue.

In their defense, World Bank and IMF officials say they are bound by the charters of their respective institutions to be guided by "economic decisions" alone. The charters do not define "economic decisions," except to distinguish them from those based on the "political character" of the regime involved.

Would They Have Given 'Economic' Support to Nazi Germany?

The Bank and IMF have chosen to define these general guidelines narrowly. Their interpretation is "unnecessarily restrictive," Professor Levinson writes in a subsequent (6/15) article in the Post.  The charters were written in 1944, before the end of World War II, by men "whose democratic credentials were impeccable,"  Levinson points out, and so it "defies reason and common sense" that they intended the World Bank and the IMF "to provide financing in the future for governments that, like the Nazis, if on a lesser scale, were egregious abuses of human rights."  (Unfortunately neither of Levinson's important articles is available on the Web.)

A frightening thought: the charter rules as interpreted by the IMF and World Bank  today would have permitted loans to Adolph Hitler in the mid-1930s.  After all, under the World Bank/IMF's present myopia, it would be wrong to make loan decisions based on the "political character" or the human rights practices of the Nazi regime.

Thus far, the U.S. administration has not challenged this myopic policy,  because many of its officials are indoctrinated with the same deleterious value system. Congress should step in to clean house. The choice today is either to revise the charter to clarify its original intent, or to boot out the officials who insist on misinterpreting it.

At last we're learning much about the evils of  "crony capitalism" in Indonesia and elsewhere.  But what about its American counterpart--the cozy relationship between the U.S. Treasury Department and Wall Street?  For an economist's perspective on this conflict of interest, see Jagdish Bhagwati's comments, summarized in "Wall Street's Self-Interest in IMF Bailouts." 

Focusing on World Trade and Women Workers

More and more, the global economy depends on women workers for its growth. It thereby creates a new dimension of gender issues--a dimension fraught with both problems and opportunities.

A small non-governmental organization based in the United Kingdom, Women Working Worldwide, has a global network of women worker organizations that focus on those issues.  The group's purpose is to support the rights of women workers in an international environment that uses women primarily as a source of cheap and "flexible" labor.

The organization started in 1983 when a group of researchers and activists came together to organize a conference on women and the international division of labor.  Its Website at http://www.poptel.org.uk/women-ww contains information on the organization's projects, partners, publications, and campaigns, as well as background information on codes of conduct and "social clauses" for trade agreements.  It's a good source for anyone, male or female, concerned about social justice in the modern world.

(A new section of Human Rights for Workers lists past Bulletins with articles on women workers, as well as other sources of information on the same subject. I'm working on a China index.)

Worker, Worker's, or Workers' Rights--Which?

You'll find three slightly different terms covering the same idea: worker rights, worker's rights, and workers' rights.  Which one is grammatically correct?  All of them, of course.  And all have precedents in usage.

In the constitution of the International Labor Organization, representatives of workers and of employers are called workers' delegates and employers' delegates. That traditional usage makes some people comfortable with the possessive form: workers' rights. Often, however, that apostrophe slips to the left, from plural into the singular.

I was converted to the expression worker rights long ago.  That happened while I was working with an AFL-CIO international institute, and Tom Kahn, then head of the AFL-CIO international department, one day opted for consistency.  He choose the simplest formulation.  And it's still the one that, at least to my ears, sounds the best.  Simply worker rights.  Without sticking in an extra, tongue-tripping S.

Diary: Root Canals and Roots of Human Rights

What is the basis for human rights?  I've been wondering.  The question is especially timely now that we are celebrating the 50th anniversary of the UN Universal Declaration of Human Rights. I thought about its roots this month during an hour-and-a-half session in a dentist's chair. I was there for two root canal procedures.

Between waiting for the Novocain to take hold, X-rays to be developed, and drillings to be refined, I jotted down some ideas in the Notes & Memo pages of my July Day-Timer booklet.  Here's a transcription of my scribblings:

Any fuzziness here I blame on the Novocain.

Human Rights for Workers: Bulletin No. III-14, July 22, 1998
Robert A. Senser, editor

Copyright 1998
hrfw@senser.com. (Send e-mail)

Back to Human Rights for Workers Home Page
A short cut to a list of previous Bulletins in 1998, 1997, and 1996