Money Is Power An Inside View of the IMF's Massive Global Influence

By and Ullrich Fichtner

Part 6: 'The End of Begging'


Hungary has a long history of borrowing from the IMF, but in July negotiations over future credit lines fell apart in Budapest. The country's new prime minister, Viktor Orbán, slammed the door in the IMF's face and was celebrated for his actions. There was talk of a "struggle for economic freedom" and of the "end of begging." To understand what happened in Budapest, it helps to know that local elections were set to take place in Hungary three months later. That was all part of the game. The IMF is rich, powerful and far away, which makes it the ideal scapegoat. But that wasn't the only reason for the falling out.

Hungary has been an IMF member since 1982. The country embarked on economic reforms early on, and to do so it needed IMF loans -- to the tune of $520 million in the first year of its accession to the Fund. Hungary, a model student when it came to developing a market economy, relaxed its import policies in 1984. Subsidies were cut and the Hungarian forint was devalued, all at the request, urging or instruction of the IMF.

The country received six more loans by 1996, one for $365 million, another for $480 million, and in 1991 the Fund approved a loan worth $1.6 billion. In all those years, Hungary was reinventing itself. The banking system was restructured to satisfy free-market requirements, and a value-added tax was introduced. In 1990, the government passed laws to allow foreign investment, removed customs barriers, reduced government bureaucracy and lifted controls on prices and wages.

A Decline in Wages and Cuts in Pensions

But there was a dark side to the policies, even though they pleased Washington, attracted investors and were rewarded by the financial markets. The real wages of Hungarians -- those who even had a job -- declined by 22 percent between 1989 and 1996. When the Berlin Wall fell and the country opened up to global markets, Hungarian industrial production declined by more than a third, unemployment rose and inflation reached 30 percent. In other words, workers, retirees and the overwhelming majority of Hungarians had less in their pockets from one year to the next, they had to work longer for a pension that was smaller than expected, and when they became welfare cases, the state no longer felt responsible for them -- because the very nature of the state had changed.

Hungary's accession to the EU in 2004 brought a new round of so-called adjustments. And then came the global economic crisis. By 2008 Hungary was on the verge of default. To avert a disaster, the IMF, the World Bank and the EU joined forces to provide Budapest with $25 billion. The IMF, which put up $15.7 billion of the total, dictated the conditions: pension cuts and a freeze on civil servants' salaries. It was back to square one for Hungary.

Anyone who traveled through Hungary in the early 1990s witnessed a blossoming country with its capital, Budapest, transformed into a colorful, vibrant metropolis that was on the way to becoming a global city. Today, less than 20 years later, Budapest is a tired city of cracked, garbage-lined streets. It has become a gray city once again, a construction site in which most people have seen their quality of life decline.

In Budapest, Strauss-Kahn's new IMF still resembles the old IMF: inflexible, schematic and cold. Prime Minister Viktor Orbán, a conservative, broke off negotiations with the IMF over the question of new budget goals. Perhaps he planned the coup, and if he did, he certainly had good reason to do so.

Oddly enough, the value of the forint rose after the July altercation.

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lakechamplainer 10/05/2010
1. Who elected Strauss-Kahn?
I found this to be a very informative article. Kudos to Klaus Brinkbaeumer and Ullrich Fichtner. I get the sense the that Strauss and the other IMFers were trying to be careful about what they said, but didn't realize how it would sound to an average person. For example, * Print * E-Mail * Feedback 10/04/2010 Money Is Power An Inside View of the IMF's Massive Global Influence By Klaus Brinkbäumer and Ullrich Fichtner Photo Gallery: 9 Photos Martin H. Simon / MHS Three years ago, the International Monetary Fund was irrelevant, an object of derision for all opponents of globalization. Under director Dominique Strauss-Kahn and as a result of the global economic crisis, the IMF has since become more influential -- governing like a global financial authority. It is also putting Europe under pressure to reform. The building that houses the headquarters of the global economy is a heavily guarded, 12-story beige structure in downtown Washington with a large glass atrium and water bubbling in fountains. The flags of the 187 member states are lined up in tight formation. Visitors walking into the office building find the cafeteria on the right, where many meetings are held. There, experts in their shirtsleeves, their jackets draped over the backs of chairs, drink lattes out of paper cups and talk countries into crises or upturns. A little farther down the hallway is the Terrace, the IMF building's upscale restaurant where the director receives official guests. On a Tuesday afternoon in late September, as the first leaves are falling from trees outside, the director, wearing a blue suit and a blue tie, is sitting on a blue couch high up in his office at the headquarters of the International Monetary Fund (IMF), outlining his idea of a new world. Some of it already exists, in the form of a new world order established in September 2008 to replace the one that was collapsing at the time. The result wasn't half bad -- but it is robust? 'The Money Is The Medicine' These are important times for humanity. The crisis has forced everyone to see many things from a new perspective. Now the IMF is preparing for its annual meeting on Oct. 8. Can it live up to expectations, and can it police the new global economic order and keep global banks in check? "You have to imagine the IMF as a doctor," says Dominique Strauss-Kahn, the 61-year-old director of the International Monetary Fund. "The money is the medicine. But the countries -- the patients -- have to change their habits if they want to recover. It doesn't work any other way." He smiles benevolently as he says these things, his eyes disappearing behind small cushions of wrinkled skin. Who elected him to anything? Who his he to say how human beings should order their societies? In Strauss-Kahn's view, the IMF should become an administrative unit of sorts for the G-20, an agency that "tries to find solutions for global and national problems," and comes up with plans and create values. "In the end we aim at much more than just the right financial and economic policies. The ultimate goal, of course, is world peace through economic stability." This is the way Strauss-Kahn views his organization, and the astonishing thing is that hardly anyone, with the exception of a lone professor in Boston, disagrees with him anymore. As an American, I don't recall a process being followed to give up sovereignty and assign it to the IMF, and to assign them control of a large chunk of my tax dollars. I certainly don't support it, and it is clearly against the US Constitution.
BTraven 10/07/2010
2.
Zitat von lakechamplainerI found this to be a very informative article. Kudos to Klaus Brinkbaeumer and Ullrich Fichtner. I get the sense the that Strauss and the other IMFers were trying to be careful about what they said, but didn't realize how it would sound to an average person. For example, * Print * E-Mail * Feedback 10/04/2010 Money Is Power An Inside View of the IMF's Massive Global Influence By Klaus Brinkbäumer and Ullrich Fichtner Photo Gallery: 9 Photos Martin H. Simon / MHS Three years ago, the International Monetary Fund was irrelevant, an object of derision for all opponents of globalization. Under director Dominique Strauss-Kahn and as a result of the global economic crisis, the IMF has since become more influential -- governing like a global financial authority. It is also putting Europe under pressure to reform. The building that houses the headquarters of the global economy is a heavily guarded, 12-story beige structure in downtown Washington with a large glass atrium and water bubbling in fountains. The flags of the 187 member states are lined up in tight formation. Visitors walking into the office building find the cafeteria on the right, where many meetings are held. There, experts in their shirtsleeves, their jackets draped over the backs of chairs, drink lattes out of paper cups and talk countries into crises or upturns. A little farther down the hallway is the Terrace, the IMF building's upscale restaurant where the director receives official guests. On a Tuesday afternoon in late September, as the first leaves are falling from trees outside, the director, wearing a blue suit and a blue tie, is sitting on a blue couch high up in his office at the headquarters of the International Monetary Fund (IMF), outlining his idea of a new world. Some of it already exists, in the form of a new world order established in September 2008 to replace the one that was collapsing at the time. The result wasn't half bad -- but it is robust? 'The Money Is The Medicine' These are important times for humanity. The crisis has forced everyone to see many things from a new perspective. Now the IMF is preparing for its annual meeting on Oct. 8. Can it live up to expectations, and can it police the new global economic order and keep global banks in check? "You have to imagine the IMF as a doctor," says Dominique Strauss-Kahn, the 61-year-old director of the International Monetary Fund. "The money is the medicine. But the countries -- the patients -- have to change their habits if they want to recover. It doesn't work any other way." He smiles benevolently as he says these things, his eyes disappearing behind small cushions of wrinkled skin. Who elected him to anything? Who his he to say how human beings should order their societies? In Strauss-Kahn's view, the IMF should become an administrative unit of sorts for the G-20, an agency that "tries to find solutions for global and national problems," and comes up with plans and create values. "In the end we aim at much more than just the right financial and economic policies. The ultimate goal, of course, is world peace through economic stability." This is the way Strauss-Kahn views his organization, and the astonishing thing is that hardly anyone, with the exception of a lone professor in Boston, disagrees with him anymore. As an American, I don't recall a process being followed to give up sovereignty and assign it to the IMF, and to assign them control of a large chunk of my tax dollars. I certainly don't support it, and it is clearly against the US Constitution.
Presumably the man who runs the IMF does not know that his organisation could became redundant given that most countries "helped out" by the IMF have learned its lesson, namely to stockpile as much money as possible. China does it, Brazil too, even Argentina piles lot of cash. From one extreme to another one.
esperonto 10/08/2010
3. a bee in the bonnet
Its plain to me that these old guys who want the New World Order have what is known as a "bee in their bonnets", meaning a little idea they hope to capitalize on, which is more grandiose in concept than in its true practice -- namely, that this New World Order will not pan out. It will fall apart, but perhaps before doing so, a few people will get rich, and that is all it is really about. Humanity will shirk off the stress the NWO is putting on them with all this military action, and they will relax back into normal humans and laugh at the diabolicalness of the western minds trying to push people over the edge.
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