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United Nations and the Crisis of Legitimacy: Part 2

Sunday, March 1, 2009

Mehdi S. Shariati

The Anatomy of One of the Organs of Hegemonic Powers

UN and its Affiliated Agencies:

Throughout its existence, the United Nations system has grown in scope and function. For the most part the cover of legitimacy for various international and supranational organizations demands their association with an organization which is perceived as legitimate and international. In the same manner that the Security Council has been for the most part trying to present itself as a democratic and legitimate component of the United Nations, several of the affiliated agencies have been struggling with the crisis of legitimacy. Two of the most widely criticized UN affiliated agencies are the IMF and the World Bank and all of their subunits. To understand the functioning of the World Bank and the IMF one must understand the philosophy undergirding their being as it is the case for all other institutions. Once there is an understanding of the philosophy and the ontological dimensions, one can readily see the behavior and predict the outcome. The philosophy undergirding the functioning and the structure of the IMF and the World Bank is rooted in the market fundamentalism, private sector dominance, and the ruthless and discredited neoliberalism of the past three decades. It is with an understanding of this philosophy that one pursues truth behind the rhetoric's, slogans and false models and promises.  These two institutions and affiliated agencies work together. Their structure is similar to any private corporation and the voting power determined by the amount of resources put in by a member state. Thus wealthy nations have veto power and therefore in control of these agencies. Historically, wealthy Western countries (particularly the United States) have dominated these two institutions (as it is the case for the rest of United Nations) and will continue to do so. To Volker Rittberger (1973:223) the Bank and the IMF represent "…supranational-bureaucratic peak of the Western controlled international capitalist iceberg which extends across most underdeveloped countries…"

THE INTERNATIONAL MONETARY FUND (IMF): The Epitome of Monetary Terrorism

In April of 1944, the Bretton Woods Conference produced an organization that was to bring "stability" to the chaotic prevailing global monetary system. The previous international monetary system (the Gold Standard) was blamed for all of the economic problem and the two World Wars. The new system designated the United States Dollar as the key currency whose value was determined by gold. Once the value of the US dollar was determined based on gold, then all other currencies were pegged against the dollar. Thus US dollar became the universal currency acceptable in most of the world as means of international payment. But this was the basis of formulating policies at the service of global capitalism. As a United Nations agency, the IMF has been the key global financial institution is empowered to facilitate capital accumulation through economic growth. To that end it dictates policies to member nations particularly those that are not part of the core capitalist states. At first glance, the promotion of capital accumulation and economic growth may not be such a bad policy since they are perceived as positive development. What could be wrong with capital accumulation and economic growth if the benefits reach ordinary people? This is precisely the problem and throughout most of its history, the IMF as indeed it sister organization the World Bank have not had the interests of everyone in mind. Capital accumulation has winners and losers and indeed for the most part it is a zero sum process.

As a United Nations agency, the IMF has the power to monitor and dictate the economic policy of the member states. Its representative in the member country has access to vital national statistics of the country and on that basis it decides the extent of its policy involvement. One very critical factor that the IMF uses to decide the policy is the degree of indebtedness of the member country to international banks mostly located on the core capitalist countries. IMF refers to the policy package it imposes on the member nation as "structural adjustments."  The label of "Structural adjustments" creates an impression that the IMF indeed is looking after the interests of the member nation and all of its inhabitants. The reality, however suggest anything other than the stated intent. If we were to call the IMF policies "austerity measures", we will perceive of the world in an entirely different form.

Austerity simply means hardship and in particular belt tightening for the working class and the poor of the former colonial territories. Austerity measures are imposed when a country in indebt and in order to enable the country to service its debt. Most of the previously colonized territories after independence were left with devastating economic and social infrastructure by the very colonial empires which robbed these territories of their resources (often with the aid of comprador groups and modernizing agents) and after decolonization, they were encouraged to borrow so as to build the needed infrastructure (i.e, roads, schools, hospitals, and other necessary infrastructures). The persistent question is how are they going to service the debt? It is not possible for the debtor to write a check in their own currency to pay the interests on the debt they must obtain hard currency (U.S dollar, the currencies of the pre-Euro and now Euro).

To obtain these currencies, they must earn it. Here where the IMF attempt to help the creditors in the collection process. These countries are then asked to 1) increase their exports which often include food as cash crop in the midst of hunger, 2) lower the wage rate, 3) eliminate or reduce expenditures on social programs, and if necessary borrow just to pay the interests on the existing debt, and 4) privatization which often ends up in the theft of public resources by a very few parasitic and well connected individuals.  These are the components of the austerity program. Calling it structural adjustments will not change the reality on the ground and a great number of the countries around the world are suffering from the debilitating "debt trap." Debt trap (title of a great book on IMF by Cheryl Payer) simply means borrowing just to pay the interest on an existing debt. That is, even increasing exports which include food leading to more hunger, and the other components of austerity measures are not sufficient to pay for the interests on the debt.  Some countries have resorted to the production of illicit drugs (opium, marijuana, cocaine and heroine) in order to obtain the necessary hard currency to pay their creditors. If there is to be any relief, they must be capitalist friendly and that would be good for a limited time.

The social, economic, political and environmental damages caused by indebtedness are enormous. Hunger, deforestation, pollution, soil depletion, spread of diseases, lack of investments in sanitation, education, transportation, health and medicine and overall degradation and repression have been increasing at an alarming rate. Hunger exists because countries are forced to sell food as a cash crop, and if the international market demands a commodity for several years and the framers are encouraged to produce the same crop on the same land (abandon the ancient method of crop rotation), the soil loses its nutrients and that would lead to desertification; deforestation occurs because there is demand for limited food that can be had once the trees are removed and the forest products are dictated from the advanced countries;  the separated population from the land now rendered useless moves to the cities and cities are not built to house so many people, hence the spread of diseases; pollution and the spread of diseases are often ignored as long as they remain within the confines of the peripheral countries. But the moment theses diseases (such as AIDS)  begin appearing in the center, then there is an outcry accompanied by racist labels, and pill pushers sales representatives and catalogues; Current diseases could have been prevented had the world community worked in concert to check the spread of these diseases. But as long as the ongoing brutal, ugly and subtle imperialism on a global scale is not challenged, these problems will multiply.

What is the United Nations doing about these kinds of threats to the "peace and security" of the world (Article 27) caused by the policies of non other than one of its own agencies? The association between the rise of epidemics and worsening endemic diseases with the economic policies dictated by the IMF is becoming much more frequent. The Journal of Public Library of Science reported on the possible link between the role of the IMF in a country and the rise in tuberculoses (TB). "The researchers concluded that "IMF economic reform programs are strongly associated with rises in tuberculoses mortality rates in post-communist Eastern European and FSU [former Soviet Union] countries….." (Multinational Monitor, 2008:8). TB kills 1.7 million people every year and based on the study when countries submitted to the IMF program, they experienced an increase of 13.9 percent in TB incidents and an increase of 16.6 percent in mortality rates.

The IMF has been pushing for privatization and deregulation of everything capable of producing any amount of profit since its inception. There are too many cases of the IMF dictating economic policies to that end and there are too many victims. Just to illustrate, here are a few cases; Ghana's rain water in the country side is fenced and sold. In 2000, the IMF approved a $300 million loan to Ecuador with an existing debt of $15 billion. The preconditions imposed an "Economic Transformation Law" primarily concerned with the interests of international financial institutions (Finer and Huta, 2005).  Perhaps the most sweeping economic policy based on the free-market", globalization, and neoliberalism is the IMF's removal of any kind of barriers to capital inflow and outflow. The elimination of restrictions, regulations and requirements introduced in 1995, were according to the IMF reduced the ability of countries to effectively compete in the international economy. Following the removal of "capital control" mechanisms, several Asian economies such as Thailand, the Philippines South Korea and Indonesia experienced a devastating crash in 1997-1998.

In a matter of a few weeks some one million people in Thailand and 21 million people in Indonesia found themselves in the ranks of poor (Bello and Guttal, 2005). Only those countries such as Malaysia which closed the capital markets, --effectively cutting the hands of speculators, remained outside of the failed economies of the 1990s.

The International Bank for Reconstruction and Development-- The World Bank:

The World Bank Group, which is composed of the International Bank for Reconstruction and Development (IBRD), the international Finance Corporation (IFC) and the International Development Association (IDA), is one of the most controversial organizations affiliated with the United Nations.

The plan for the IBRD was drafted by the meeting of the head of ten industrial countries at Breton Woods in April of 1945 and implemented in 1946 and the other two components were added later.

The International Finance Corporation was primarily concerned with investing in the private sector of the developing world; and the International Development Association which has been for the most part making soft loans (insignificant amount) to the very poorest of all the countries if they qualify.  In its formative years, the Bank concentrated on the Western European recovery and once that task was completed, it turned its attention although for a different purpose to the Third World. A review of the World Bank practices, suggest that its lending practices for specific projects have been primarily at the service of the dominant global private sector led by multinational corporations allied with local capital. Often the practice of granting a project to a corporation is a based on bidding and that as documented is replete with corruption such as kickbacks, bribery among others. The fundamental aim of the World Bank is to promote foreign investments and to enhance the profitability of these investments by multinational corporations, while make some money for itself. Like the IMF, the World Bank works closely with the US Treasury, powerful financial institutions as well as multinational corporations. Citing a U.S. Treasury Department study, Carol Stitt an advisor to the World Bank said  "…. for every $1 invested by the government in the World Bank, $2.50 returned to the U.S. economy through U.S. corporations, which obtain contracts for bank-sponsored projects" (Lernoux, 1980).   

The bank monitors member countries in the same manner that the IMF does and it is guided by the same philosophy –free market capitalism and survival of the fittest. The bank facilitates private investments in the developing world and it provides helpful information about the country to foreign investments. In fact it is consistent with the IMF policies of ranking countries in terms of risk and profitability of investment. If either of these two institutions does not have a favorable view of the country or the country refuses their dictates, investors are alarmed and loan applications are denied.

The World Bank compiles an annual report called the Doing Business. The report ranks countries based on their policy on labor unions, wages and working conditions. If a country raises the wage rate above the already low minimum wage and imposes regulations regarding working conditions and bargaining efforts, and it makes it difficult to fire workers, it will receive a low ranking from the bank.

On the other hand countries that regularly violate labor standards and maintain brutal working conditions receive high ranks (Bakvis, 2006).

The Bank has in the past attempted to deal with massive global indebtedness as has been the IMF. What is striking is that both the IMF and the World Bank are the police of the global financial transactions and from time to time as the crisis reaches a boiling point that threatens the entire system, they suggest new strategies. For example the bank in collaboration with the United States Treasury came up with the "Brady Plan" in order to ease the debt burden by the developing world in the 1980s. As a "counter-insurgency" measure the plan reviewed the balance sheet of a total of 42 countries out of 165 developing countries which were determined to be "Highly Indebted Poor Countries" and in need of help. Finally it was decided that the creditors should work with theses countries in the restructuring of their debt if they undertake structural reform—free up money through reduction in social services to pay the creditor. However in 2002, only 20 of the eligible 42 were able to initiate the necessary reform (see Bello and Guttal, 2005 for an excellent indictment of these two institutions in many ways similar to an earlier work by Teresa Hayter 1980, Cheryl Payer 1984, and Penny Lernoux 1980). The presidents of the World Bank since its inception have been interesting.

From prior to McNamara to the architect of Iraq Invasion Paul Wolfowitz who resigned after an scandal to Robert Zelleck who is the 11th President of the Bank and like his predecessors comes either from the ranks and file of CEOs of the private sector or Military Industrial Complex appointed by the President of the United States. there is a long history which confirms the belief that the World Bank group, although affiliated with the United Nations, primarily represents the interest of the dominant few in the global economy.

The promotion of the private sector as a matter of policy for the World Bank has been relentless since its appearance. Step by step guidelines of global capitalist strategy either in the form of World trade through removal of barriers, globalization and project financing have been implemented by the Bank. In 2000, the Bank drafted a new "Private Sector Development Strategy" (PSDS) and was adopted in 2002. In it, the bank reaffirms its commitment to the sanctity of the private sector and to improving the "investment climate" (Tannenbaum, 2002). In 2005, a report by the European Network on Debt and Development (Eurodad) "found that the World Bank still attached privatization, market opening and deregulation requirements to more than 70 percent of its IDA loans and grants." And the economic condition policies viewed by many as devastating have "remained virtually unchanged…." (Multinational Monitor, 2007:7). The World Bank has been actively promoting carbon trading for profit which financing projects that are detrimental to the ecosystem. A report prepared by Janet Redman found that the World Bank promotes the use of fossil fuel by way of carbon trading and found that the Bank charges 13 percent commission on its $2 billion in carbon trading (cited in Wysham, 2008:25).

The push for privatization for the sole purpose of capital accumulation has caused major social, economic and political dislocation around the world. There is no country in the global south hat has not been adversely affected by their policies. The mounting problems around the world from hunger to cholera, to AIDS, to violence against children (in the form of child labor, and the use of children for body parts among others), to soil erosion and deforestation, to persistent Malaria, environmental degradation, chronic malnutrition, to rising illiteracy (estimated to reach 700 million in a few years) to an estimated 1.4 billion people in poverty and as compared to previous years the number is on the rise and so many other problems are addressed among others by other well known United Nations agencies.

Now what is that world at large hears and sees as United Nations' efforts in dealing with the massive socio-economic and environmental problems? The World is familiar with United Nations through the worldwide presence of United Nations Educational Scientific and Cultural Organization (UNESCO) which ostensibly promotes the arts, education and cultural training; International Labor Organization (ILO) primarily concerned with labor issues and interests including the widespread problem of child labor. It is ironic that the very policies of the World Bank and the IMF specifically tailored for indebted countries are the causes of child labor and exploitation of labor; United Nations Food and Agricultural Organization (UNFAO) often at the service of agribusiness and their control of food production and distribution; United Nations Refugee, United Nations International Children's Emergency Funds (UNICEF) concerned with the welfare of children around the world. Yet millions are hungry, abandoned, abused, murdered and sent to work on a daily basis;  United Nations International Atomic Energy Agency (IAEA), concerned with the spread of nuclear weapons and nuclear proliferation, but controlled by the very nuclear club (and their allies) that controls the security Council; World Health Organization (WHO) and its annual data on the worsening global health conditions and what it assumes to be the causes; General Agreement on Tariffs and Trade (GATT) that promotes a world sans borders when it comes to trade through lower tariffs and quotas and standardization  in the same manner  that the most reviled and recently created World Trade Organization (WTO), and a few lesser know agencies. For the most part these agencies are assigned the tasks of alleviating the symptoms of the structural damage caused by the most powerful agencies such as the IMF and the World Bank. No one ought to assume that all of the contemporary problems experienced by the developing World are caused by these multilateral agencies. But what one can say with certainty is the fact that the policies of the IMF and the World Bank along with the dictatorial power of the United Nations Security Council are responsible for a great number of these problems and as long as the contemporary hegemonic structure is in place, the illness will persist and more agencies will be needed to treat some of the symptoms.   

CONCLUSION:

The world is desperately in need of a solution to the crises of socio-economic and political violence, lack of direction, and utter disregard for the declining moral and ethical standards. The reality points to a very frightening prospect and to a world that is not governed by any moral codes, ethical values, international law and the absence of credible enforcing institutions. As the behavior of certain permanent members even in the formative years of the United Nations reveals, the current dysfunctionality of the UN is neither a recent problem nor it is a matter of bureaucratic inefficiency.

Rather it is built into the hegemonic structure itself and the need for an alternative system with a philosophy and mission statement suitable for a sustainable global social, political and economic system is becoming increasingly urgent. As long as the world is managed by those very few so called "fit" who pursue their own selfish interest at the expense of the great majority, they are given the right to codify rules, regulations, morality and ethics and to write history. Are we to assume that the world is ruled by the fittest of the human species? If so then the results suggest that there is a cancer on the body of humanity and unless the world reverses its course and changes the culture of violence, the cancer will destroy it. Recently at Davos we heard calls for more deregulation, more free market, more capital inflow/outflow, more speculations, more free trade and much more free this and free that. Angela Merkel of Germany and Gordon Brown of Britain suggested the creation of a Security Council Economic Commission for more policing of the World economy. This however is not in opposition to the neoliberalism that Davos has been promoting. It simply means for control of the World economy by a few—a few that control Security Council itself. There is a hopeful sign that there is a growing awareness regarding the very oligarchic structure of global institutions and the various mechanisms of transfer of wealth from the poorest to richest. The developing world is displaying an advanced degree of awareness that often dwarfs that of their counterparts in the advanced industrial and capitalist countries. As their awareness advances inexorably, the hope for a better world must be sustained. It is not the hoarding and the wasteful consumption of resources --the foundation of uni-polar and bi-polar hegemonic system that has ruled the world. It is a world free of hegemonic tendencies, respect for the rules that everyone can live by. As long as hegemonic powers control the structure and set policies, the structure will remain detrimental to the health of the "real" international community. No one should believe that United Nations ought to solve the World's pressing problems, but no one expects the United Nations to be one of the causes of the problems. It is time for the United Nations and all of its agencies to renounce past practices on the part of some of its agencies, adopt a new paradigm, and join the voices speaking on behalf of the under-privilege at the World Social forum rather than as a cheer leader on the sideline for the voices of greed and failure at the World Economic Forum at Davos.

ENDNOTES:

1.    In the nineteenth century, the quest for peace began with the "Concert of Europe," the "Geneva Convention," and the "Hague Convention,"  "Inter-parliamentary Union and culminated in the "league of Nations."

2.    The Administration made sure that the existing and future treaties and organizations (United Nations Charters in particular) were structured and restructured in a manner which reflected the economic, political and military security considerations of the United States and its allies. The critical issue for the Truman Administration was the prohibition of regional treaties by the existing united Nations Charter agreed upon at Yalta. To Truman, the Yalta Agreement was a give away and a diplomatic tragedy. Despite his reverence for President Roosevelt, Truman thought Yalta was a mistake. The San Francisco Conference was an attempt to correct what had gone wrong at Yalta.

The participants at this Conference attempted a reorganization of the United Nations Charter and a reduction in Soviet Veto power.

3.    As a member of Security Council, the Soviet agreement to the charter was a must. It had to be obtained regardless of the tactics. To do so, the United States delegates thought it was necessary "to proceed rather drastically and to depart from what might be called the best diplomatic manners." To Dulles (1950), in order to "force" the soviet hand, United States threatened to cut off financial aid to the soviets should they refuse to go along with its request. These maneuvers followed by a press statement which publically committed the United States to the equivalent of Article 51. As the first step toward the formulation of a permanent regional military the Conference Succeeded in neutralizing the Soviet's impact and thus paved the way for the formation of a regional security system. John Foster Dulles as a delegate to the Conference joined Truman, Vandenberg and Harriman in denouncing the Soviet Union by stating that the Communists must never be trusted.

Dulles and Senator Vandenberg argued on behalf of the administration that there was a need for provisions allowing regional treaties and organizations which could foster peace. Dulles recognized that under the United Nations charter it was very difficult to prevent the communist domination of various countries in the region. Republican Senator Arthur Vandenberg the influential supporter of Truman's foreign policy in the Senate, along with other delegation members convened the Conference by declaring that "FDR's appeasement of Russia is over..."(Vandenberg, 1953:176).

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 (2005), "Programmed to Fail: The World Bank Cling to a Bankrupt Development Model," Multinational Monitor. July/August, Volume. 26, Nos 7&8.     
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Dulles, Foster John (1950) "War and Peace", New York: MacMillan.
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Source: http://www.payvand.com/

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