The International Monetary Fund and its policies came under sharp attack on 15 November from financier George Soros and economist Jeffrey Sachs. Both argued that the global lender's economic programs have failed to help Russia and the world's poorest countries. RFE/RL's Michael Lelyveld reports:
Boston, 17 November 2000 (RFE/RL) -- Financier George Soros and Harvard economist Jeffrey Sachs leveled strong criticisms at the International Monetary Fund on 15 November and predicted a downturn in the global economy.
Speaking to an audience at Harvard University's John F. Kennedy School of Government, Soros and Sachs voiced broad agreement in their views that the IMF has followed faulty economic formulas in countries around the world.
Both men are well-known in the CIS and Eastern Europe. Soros was an early investor in Russia and a philanthropist who has supported foundations to promote open societies in 31 countries. Sachs served as one of the first Western economic advisers to Poland in the late 1980s and later played the same role in Russian reforms.
Echoing frequent criticisms that have been made of the IMF since the monetary crises of 1997, Soros said that the fund responded by saving many emerging economies from default, but in the process, it effectively bailed out foreign investors who had speculated in their unsustainable growth. In the end, Soros said, the countries and their people were left to absorb the costs.
Soros said, "I think this charge is valid." He added that changes in IMF policies since the monetary crisis have now forced foreign investors to share more of the risks. But he said the result has been higher lending costs for developing nations.
Soros called for a new way of helping countries to make the transition from closed economies and societies to more open and modern systems, saying, "That is, of course, a task which the IMF as it is currently constituted is not suited to carry out."
Political rather than strictly financial decisions are needed to help countries that have enacted reforms but are still having trouble in attracting investment, said Soros. "Bulgaria has done all the right things, but there is no growth," he said, citing one example. "There ought to be some support available to get that going," he said. Speaking of Russia, Soros said the IMF had served as a substitute for direct lending by countries like the United States. He called the IMF's leading role in trying to transform Russia "one of the great tragedies of recent history." He said that the IMF's method of negotiating conditions for lending and then suspending loans when the terms were not met was "not applicable to a country like Russia, which did not have a functioning government."
Defenders of the IMF have often argued that loans cannot be made without conditions for economic reforms that give a reasonable assurance of repayment. They also point to many successful IMF-led efforts to save economies in crisis, such as the Mexican bailout at the start of the monetary crises three years ago.
But Jeffrey Sachs was even harsher in his assessment of the IMF and its responses to economic problems in developing countries, saying, "We have had case after case of failure."
Sachs, who has been a frequent IMF critic for most of the past decade, made his strongest plea for aid to the world's poorest countries and their citizens. Sachs said, "My estimates are that 10 to 15 million people in that group are dying needless deaths every year from diseases that are utterly preventable."
"Three million people die of diseases that are preventable by vaccines that often cost 10 cents a dose," Sachs said, citing common illnesses like measles and tetanus. He praised U.S. President Bill Clinton's recent action in signing legislation to cancel all debt claims against the world's least developed countries. But Sachs argued that it was only a first step, saying, "We have to do more for the billions of people that are falling off the edge and losing lives."
Both Sachs and Soros said that the world economy seems to be headed for a period of slower growth with the possibility of a "hard landing" in the United States after its unprecedented economic expansion. But Soros said that the series of crises that hit the global markets in the years from 1997 to 1999 "will not recur." Soros said those were caused by excessive international flows of capital, but now the problem is that capital flows are inadequate.