By MAGGIE JARUZEL POTTER
[Editors Note: Project Censored: Media Democracy in Action recently released “Censored 2011: The Top Censored Stories of 2009- 2011.” The book includes information taken from a Mott.org article about the global financial crisis. In that article, leaders from two Mott grantee organizations – Bretton Woods Project and Halifax Initiative – discussed how the World Bank and the International Monetary Fund (IMF) were structurally flawed and in need of dramatic reforms. The information in the article below, and the accompanying audio clips, is taken from a recently recorded phone conversation with a grantee in London, as an update to Mott’s first 2009 article.]
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Jesse Griffiths says if he were writing a headline to describe the reforms that have taken place at international financial institutions (IFIs) since the global financial crisis began, it would have to be: “Not a great deal has changed.”
As coordinator of the London-based Bretton Woods Project, he has closely followed responses to the global economic downturn from international funding sources, such as the World Bank and the International Monetary Fund (IMF).
Jesse Griffiths |
Extensive changes needed at IFIs
Although there was consensus from the public, private and nonprofit sectors that things needed to change, Griffiths says, the improvements to date have not been wide or deep enough.
“Obviously, we need an institution that all the people in the world can have faith in and that also is accountable,” he said. “There have been some improvements in the transparency of the IMF, but there is still a fairly long way to go.”
An area in need of serious change includes the ways in which decisions are made at the IMF and the World Bank because the current system – providing high-income countries with the largest percentage of votes – skews the decisionmaking power away from the low-income countries that are often most affected by decisions made by the two public funding institutions, Griffiths says.
Financial crisis not over yet, despite what some say
The financial crisis is still working its way through the global system, Griffiths says, pointing to Europe’s sovereign debt problem as one example, while acknowledging it is not the only region with a fragile financial future.
 Listen as Griffiths discusses the key areas where change is needed. [1:05]
Read an edited transcript of the interview. |
“Globally, the level of uncertainty is still very high and I think we could have a double dip recession or another banking crisis around the corner,” he said.
When the IMF promised loans to Greece to help avert a potential financial collapse, the institution made its largest promises ever. Yet, when a country like Greece – one that is small but considered relatively wealthy – gets into trouble, Griffiths says, it’s clear the current system simply is not set up to cope, primarily because of the way it is structured.
“It is essentially an unaccountable, unelected institution that comes in and tells your government how to run its economy.”
The future of IFIs, such as the IMF and World BankIMF reform is on the agenda for the
G-20 Seoul Summit 2010 in November, Griffiths says, but he doesn’t expect to see any major advances in systemic financial reform. The small improvements made at the IMF in the past year have not resulted in the scale of change that is needed, he says. Griffiths added that economists cannot say with conviction that the world has a credible international lending system that can either prevent another global financial crisis from happening or lessen the negative impacts if one does occur.
Again, he points to Greece’s recent financial crisis to illustrate flaws with the IMF’s policies and practices, noting concern about the large sums of money promised but also the strings attached to the money loaned.
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“It [the IMF] is essentially an unaccountable, unelected institution that comes in and tells your government how to run its economy.”
- Jesse Griffiths |
“It is the same old austerity measures – cut public spending, cut services, cut wages,”
Griffiths said. “Economists can argue about that at different levels but one thing is for sure – [this solution] hits the poor the hardest.”
Looking ahead, he says, there still will be a need for some kind of institution to lend to
countries in crisis. But if the IMF and World Bank are to be a part of the solution, they need to gain a better understanding of who will be impacted by their policies and they need to become more democratic in the ways in which they operate.
“Either we reform the IMF, which is what we [Bretton Woods Project and other NGOs] are pushing for, or we create alternatives, which is also what we have been pushing for,” Griffiths said. “There are different ways of thinking about the solutions, but we are glad this issue is at the top of the agenda in a way that it was not before.”