Amendments Nos. 1, 2, 4 and 5 are related and may be discussed together.
Bretton Woods Agreements (Amendment) Bill, 1998: Report Stage.
I move amendment No. 1:
In page 3, to delete lines 34 to 37.
The amendments which have been grouped for the purposes of discussion propose to delete those sections of the Bill which contain references to ESAF. On every Stage of this Bill the members of my party and I have debated this issue and have explained to the Minister why we are dissatisfied with ESAF programmes. Two years ago the rainbow Government of which I was a member decided not to contribute to ESAF in response to widespread opposition throughout Ireland to such a contribution. The Debt and Development Coalition's opposition to ESAF was based on a number of factors including the negative social impact of ESAF because IMF aims to reduce deficits, not human misery or poverty in underdeveloped countries. There was also a feeling that ESAF strategies are imposed on democratic countries. They are designed by officials at IMF in Washington and frequently imposed on national states without due consultation with their elected leaders. The charge is made that they are anti-democratic. ESAF conditions are onerous and inappropriate and, according to the brief with which we have been supplied, about three quarters of ESAF programmes break down and do not reach fruition. ESAF was introduced as a response to the debt crisis but it has failed to tackle this problem. Having held out for a number of years against contributing to ESAF it is inappropriate to legislate to allow the Minister for Finance to contribute now, when ESAF programmes have demonstrably failed.
The HIPC initiatives were heralded with a certain amount of optimism when they were introduced some years ago but their implementation is progressing very slowly. Only two countries, Bolivia and Uganda, have received debt relief and only three others, Guiana, Mozambique and Mali, are likely to benefit by the year 2000. Serious questions hang over the HIPC initiative now because eligibility for HIPC is linked to a six year track record on ESAF programmes. Given the high breakdown rate of ESAF programmes, the IMF is effectively preventing the application of the HIPC initiatives because, although they met with general approval, their implementation and application has been inhibited. Debt relief for Tanzania, one of Irish aid's longest standing partners, has been held up because of problems with ESAF. Relief for Nicaragua, one of the lowest income and heaviest indebted countries in the world, was held up because of problems with ESAF before Hurricane Mitch.
I referred on Second and Committee Stages to the internal and external reviews of ESAF programmes. I have no information to suggest that since the reviews were carried out any real remedial action has been taken by the IMF in its application of ESAF programmes. The external review undertook case studies in Uganda, Zambia, Zimbabwe, Mali, Côte d'Ivoire, Bolivia, Vietnam and Bangladesh. The review criticises the IMF for failing to take the social impact of these programmes into account when designing them. It also criticises the IMF for mistakes in the design of these programmes.
As I mentioned on Committee Stage, in Malawi, huge price rises resulted in the halving of the real wages of agricultural workers, the most impoverished group in that country. In Côte d'Ivoire, urban informal sector workers faced huge losses as devaluation squeezed consumers' incomes. In Zambia, the wrong sequencing of reform led to a credit crunch in the private sector and delayed emergence of rural food markets when maize marketing was privatised. This destroyed the livelihood of maize producers in remote areas. In Zimbabwe, mistakes in the order in which policies were introduced led to reductions in per capita expenditure on health and education. Uganda is put forward by the IMF as the success story. Growth was restored and the economy stabilised, but the benefits of growth were found mainly in the urban areas, which contain only 10 per cent of the population. The lot of 90 per cent of the population, who live in rural areas, was not improved by the application of ESAF programmes.
To borrow a phrase from the Minister, I am not a fundamentalist on these issues. A strong case has been made against ESAF. The Minister will lose the moral authority we have enjoyed as a nation because of our tradition and record on overseas aid if he agrees to contribute to the IMF without the necessary reform taking place.
My fundamental objection to the ESAF programmes is that their application is removed and they tend to apply macro-economic prescriptions to economies without regard to the basic services which should be enjoyed by a population in any humane society. Where macro-policies and proposals on fiscal rectitude are so intense that they risk increases in infant mortality, the closure of schools which provide basic education facilities to young children, reduce the life expectancy of the elderly and leave no resources available for public health programmes, such as immunisation programmes which could do wonders for increasing life expectancy in those countries, ESAF programmes are being applied too severely and too rigidly.
Ultimately, we all appreciate that balance must be restored to economies that have gone out of kilter, but balance cannot be restored if there is a total disregard for the well-being of the indigenous population. An economy is not inanimate. Any nation is only the sum of its people. If the medicine is so severe that it kills the patient, then the programmes are not working. That is the fundamental problem with ESAF. When the Minister asked if there was a via media, I referred him to work that had been done which proposes that before ESAF applies its battery of economic and fiscal prescriptions, which consist of policies to deregulate, privatise, liberalise and retrench, that a certain amount of the national budget should be set aside for basic health and education schemes.
I am not proposing that debt in a league table of countries should be cancelled, but when the World Bank and the IMF intervene to improve the basic economic structure of countries and the World Bank, in particular, applies development funds to a country, the basic human needs of the population should be taken into account in the first instance. If the wherewithal cannot be found to service outstanding debt after domestic resources are applied to basic health and education services, then there is no money to service the debt and at that point it should be waived. That is the via media which the Minister has been looking for. This is not an original proposal. I can refer the Minister to the documentation setting out how this has been carefully worked out.
The Minister knows my party's position on this legislation, but because of the importance we attach to it and the strength of our opposition to ESAF programmes, I am tabling the amendments on this Stage that I tabled on Committee Stage. Amendments Nos. 1 to 5, inclusive, in the names of Deputy McDowell and myself, provide for the deletion of any reference to ESAF from the Bill. This will allow the Bill to go through without our contribution to the IMF going towards funding ESAF programmes contained in it.
As Deputy Noonan pointed out, the effect of amendments Nos. 1 to 5, inclusive, is to delete reference to ESAF. We have ranged over the debate at some length on Second and Committee Stages. The Minister's response requires reflection and demands comment from us. It seems his response does not stand up. The Minister, in conjunction with his colleague, the Minister for Foreign Affairs, Deputy Andrews, and the Minister of State at the Department of Foreign Affairs, Deputy O'Donnell, published a lengthy and worthy statement last September highlighting principles which would guide our foreign policy on the debt initiative. They highlighted many of the deficiencies of ESAF programmes, which Deputy Noonan mentioned and which we dealt with earlier.
They talked about difficulties of transparency, accountability and the effect of the programmes on the countries they were intended to assist. They also mentioned that these programmes are imposed on those countries which have no sense of ownership of the programmes they are obliged to implement. They stated that they often have a detrimental effect on civil society. They also stated that they took little or no account of the social effects of the economic criteria and measures which were being imposed on those countries.
The Minister and his colleague, the Minister for Foreign Affairs, have accepted this and the Minister accepted this in the statement he published last September at the time of his annual visit to the IMF in Washington. The logic of this is that at the very least we should wait to see if there is progress in dealing with those principles the Minister set out last September. We are not unique in this.
The IMF identified and accepted there are problems with ESAF programmes. They have not worked and most countries on whom they have been imposed – that is the right language to use – have been unable or unwilling to complete compliance with the programmes.
The IMF undertook an external review on the manner in which the programmes are implemented and we dealt with this on Second Stage. The external review was damning in the prescription and recommendations it made. Following it, the staff of the IMF, who operate the programmes, carried out an internal audit on the recommendations and published a commentary on it, some of which they accepted and some of which they did not.
The bottom line is simple, as of today very little progress has been made in implementing the recommendations of the external review and in giving real meaning to the principles set out by the Minister and the Minister for Foreign Affairs last September. As the Minister knows, in 1994 the previous Government decided it would not subscribe to ESAF programmes until such time as we were in a position to show progress. The Minister's own party, Fianna Fáil, prior to the last general election specifically undertook in its manifesto not to make any contribution to the ESAF programmes until there was reform.
Reform has been promised and is there on paper but, as of now, it has not happened in any substantive way. Therefore, there is no argument for a contribution to ESAF programmes at this stage.
The Minister is fond of telling us to stop preaching and that we must get in there and argue our case. That suggests there is no alternative, but of course there is. We do not even have to look for a via media– we need to look at the actions of the Government itself.
The Government has, quite properly, engaged in a direct bilateral initiative to assist the Government of Mozambique to cancel £7 million of debt, which is clearly the way to go. Why engage in funding an international institution that is deploying strategies of which we do not approve to do something when we can do it in a very direct bilateral way? We have a well established bilateral aid programme and we have established good relations with six or eight countries, including Tanzania and Mozambique, which have huge debt problems. There is nothing to prevent Ireland making what little contribution we choose to make on a direct bilateral basis rather than through the IMF.
We also debated the case of Brazil. The Minister has very kindly circulated a note today on Brazil. The note is very comprehensive but it is faulty on one important point in regard to what the IMF fund for Brazil is intended for. It is intended to prevent the collapse of the international financial firmament, in which we all have an interest.
How is this money actually to be used? It will be used to impose quite considerable public expenditure cuts in services in Brazil and to sustain the value of a currency which everyone accepted was overvalued. This is a classic IMF template. Without claiming any particular expertise on Brazil, I am deeply sceptical about this. We are all entitled to say, because it is glaringly obvious, that the international community can find billions of pounds for the eighth or ninth biggest economy in the world but we find it very difficult to persuade the international community to contribute a fraction of that – millions of pounds – to the cancellation of Third World debt.
I suspect the Minister's mind is made up on this. I did not find his argumentation on Committee Stage persuasive. I would be surprised if he were prepared to consider it further now. This is not a good day's work. There are many better ways in which we could have contributed towards the cancellation of Third World debt.
I contributed to this debate on Second Stage. I thought that, arising from that debate, the Minister might have had second thoughts on proceeding with the section of the Bill relating to ESAF. I thought that the backbenchers from his own party who spoke so passionately against this Bill could have persuaded him that this was the wrong policy to pursue. I thought that the aid organisations, which are very active in Ireland and in developing countries, which know the situation on the ground and have been campaigning vigorously against this proposal to contribute to ESAF and to participate with the IMF in relation to it, might have persuaded the Minister to drop it.
It appears all these pleas have fallen on deaf ears. The Minister will not listen to the cogent arguments about the damage the IMF has done through this programme to countries which Ireland has traditionally sought to assist. He will not listen to the case that the direct aid which Ireland has been giving to these countries is far more effective in alleviating poverty than the ESAF programme, which has made the problem of poverty in many countries even deeper than before it was applied.
Why is that the case? There is no demand among the Irish public or his own backbenchers for this legislation. Why is the Minister pursuing it so vigorously and ignoring all the advice and pleadings he is hearing from all the Opposition parties in the House, some of his own backbenchers and the aid organisations, which do us so proud in developing countries?
The only conclusion I can come to is that the Minister has a blind ideological commitment to the type of policy the IMF pursues. That seems to be the only credible answer.
The IMF has not, despite the external review and the internal audit, committed itself to shifting dramatically its policy in relation to these countries. The IMF traditionally takes into account a country's debt, but it also takes into account its balance of payments and the degree to which it is fitting into the IMF view of how an economy ought to operate, which is based entirely on a view of how a developed country ought to operate. It does not take into account the degree of illiteracy, the degree of unemployment, the absence of clean and healthy water or the absence of a health service in a country, issues which have a bearing on the quality of life of the ordinary individual. The direct aid which we have traditionally given does so.
It would have been far better had the Government not taken money from the direct aid budget and slotted it into this ESAF proposal. The net effect of what the Minister is proposing is not just the provision of this money to ESAF in order to participate in this scheme – he has actually robbed Peter to pay Paul. In doing so he is undermining the work of aid organisations which are delivering aid directly to people on the ground, in order to put it into a scheme which has been shown by an external examination and an internal audit to be counterproductive.
I would like the Minister to tell us something other than that we should not preach. I look somewhat askew at that, bearing in mind the statement issued on 16 September 1998 on the Government's debt relief package, including Irish contributions to joint IMF/World Bank debt initiatives and ESAF, in which the Minister preached about the principles on which he feels the IMF and ESAF ought to be based. However, there is no evidence that the IMF is responding seriously to our appeals – I am not talking here about a nice report and a nice proposal that it will do X or Y. We have not yet seen any desire on its part to implement any reforms in this scheme.
I have referred previously to a RTE programme on Mozambique, in which an IMF spokesperson was asked directly why debt could not be written off in the developing countries. He replied that that would be a very nice idea and said he would talk to his bank manager about the possibility of writing off his mortgage. Two things arise out of that response. One is the total lack of understanding it displayed of the difference between the man's mortgage and capacity to pay it from his very large salary and the economic capacity of the ordinary people of Mozambique. Those people do not even have clean water to drink and 57 children under five years of age die every minute. For the man to have compared their situation with his ability to pay his mortgage was insulting to the people of the developing world. It is the kind of attitude which permeates the IMF and its approach to developing countries.
The response also highlights the underlying ideology which drives the IMF, namely that if one takes out a loan to buy a car or a house or to build a bridge or a road, one is obliged to repay it. That may be acceptable in a democratic country in which there are fully developed resources, infrastructure and taxation systems but to seek to apply that ideology to debt in developing countries is to condemn the poor and newborn babies to death.
Since this debate commenced at 6.15 p.m., something in the region of 4,000 children have died in the Third World. In the light of the above statistic, it is cruel and inhuman for the IMF to apply its criteria and not allow people to escape from the debt of their country. It is not a good thing for Ireland to align itself with that kind of approach to the developing world. I appeal to the Minister to accept the arguments which have been made by his own backbenchers, by all of the Opposition parties and by all of the aid organisations and to accept their appeal to drop this proposal to give money to the IMF which will have the effect of deepening the poverty of people in the Third World. Those people did not, in the first instance, have a say in how that money would be spent. In many cases, the money was not used for the purpose for which it was borrowed but went into private accounts in Switzerland. Yet, we are going to participate within the IMF in penalising the men, women and children of the developing world for some reason which the Minister has not yet explained, other than to say that we must stop preaching, get in and make our case. We can make our case through the European Union, at the United Nations or anywhere we choose but it is not necessary for us to provide money to the IMF which will only add to the misery of people in the developing world.
(Dublin West): It is shameful that the Minister and Government are persisting with the provisions of the Bretton Woods Bill, 1998 in view of the debate which took place in this House and the compelling evidence placed before them by Members of the Dáil and through the many well researched submissions they received in recent weeks. It is shameful that the Minister will sit unmoved by the type of evidence which has been outlined in regard to the role of the IMF and the enhanced structural adjustment facility.
It is clear that the IMF's role in poor countries is not as their champion or saviour but as a huge contributor to their oppression and suffering. The manner of its intervention reveals that the IMF represents, first and foremost, the interests of the western banks and industrial concerns. It exacts from the poor a huge price for any loans it provides. The IMF is insisting on the most savage cuts in public expenditure, namely in social, health and education spending, in a range of African countries. How can the Minister justify his continued approach to tie this State in with that heartless agency, therefore becoming part of the machinery of oppression of this part of the world?
The Minister may be aware that the external debt of sub-Saharan Africa stands at approximately US $235 billion. More money is going out of Africa through debt servicing than is available to meet the basic needs of health, education, food, water, sanitation and so on. In the case of Zambia, the 1998 budget allocated more money to servicing the immense debt of US $7.1 billion than to all education and health programmes combined. The World Bank – the IMF's twin in regard to keeping the poor of the Third World in financial chains – published a report in 1996 which showed that debt service payments as a ratio of GDP stood at approximately 5 per cent in sub-Saharan Africa. Against that, spending on health and education totalled only 2.5 per cent of GDP. The evidence is absolutely crushing.
Loans were provided quite recklessly and immorally to dictatorships which mishandled them; they were not, by and large, given to democratic regimes or to organisations working towards the betterment of the poor. It is the poor who carry the burden of repayments and anyone in Ireland who wishes to take a stand against what is, at this stage, outright robbery of the poor of the Third World for the purposes of fattening the profits of banks in the western world through the agency of the IMF, must resist becoming part of the IMF and the ESAF. I join with the other Deputies in calling on the Minister to provide a rational explanation of his position, rather than one or two glib put-downs.
I support the other Deputies who have spoken on these amendments.
I have no intention of repeating points I made more generally on Second Stage. The net effect of the deletion suggested by the five amendments is that—
We are discussing amendments Nos. 1, 2, 4 and 5.
The net effect of amendments Nos. 1, 2, 4 and 5 would be the acceptance that the wrong institution is being assisted on the basis of the wrong analysis by the wrong method. That is the best way of summarising why using ESAF is wrong. There is a conflict between the IMF and other institutions involved in development. In the context of taking the north and south as broad thrusters of economy the IMF admitted, in publication No. 72 of 1997, that "on average there has been no convergence of per capita income levels between the two groups of countries. In fact the number of low income countries and the lowest quintile in terms of global income distribution has actually risen from 52 in 1965 to 102 in 1995”. The IMF publication describes these results as “surprising”. On the other hand the United Nations Conference on Trade and Development in its second publication of 1997 stated: “Capital has gained in comparison with labour and profit shares have risen everywhere”.
The Minister used the word "preaching" in a previous stage of the debate. I have been in many of the countries that must take decisions about adjusting their economies and I can tell the Minister that I heard much preaching, for example, in the case of Chile. The recipe was delivered to the Chilean economy by the Chicago School of Economics, locally called "los mochachos Chicago". The Chicago School of Economics arrived and imposed on the Chilean economy a prescription with immense social consequences for the Chilean people. It concentrated on increasing a form of export earnings on a narrow range of products at the cost of huge reductions in the Chilean public services, including health care and education.
A number of other countries when I visited were at a crisis in relation to the international institutions. For example, Peru bravely and briefly sought to put an upper limit on the proportion of gross domestic product that could be and should be morally paid by any country out of a year's earnings. Peru was not successful in this and, following a change of Government, was, as the institutions would put it, brought to heel. This tells us the recipe being advanced through ESAF is born out of an analysis which comes from a very narrow neo-liberal strain of economics which has a very different set of results in different parts of the world, whether one is looking at the recent crises in what were previously regarded as the tiger economies of south east Asia or economies with long histories of economic growth, such as Singapore. However one looks at it one can see cracks appearing in the analysis. Why has the Minister taken this instrument, which is acknowledged as flawed by its own analysis in its own institution, and why has he chosen this institution which is already in crisis in terms of its prescriptions for different economies? There are other institutions with which we may not agree but which exist. I mentioned the trade organisation which is reaching conclusions regarding what happens when there are adjustments which are not tested in terms of their social impact. For example, is it right to have an instrument from this very dubious base applied without considering the consequences for health care, education and sustainable development?
People say the ESAF instrument was not acceptable before an internal analysis took place, but that the internal analysis has now taken place. This is like saying we have opened the windows but have not made any change. Where are the changes to which the Minister can point? Where are the points of correspondence between the critique of this instrument, conducted within the IMF, and the critiques conducted by the other international agencies? When we look at our relationship with development through our bilateral programme, emergency disaster relief, overseas development aid and payment to institutions, we must ask the Minister by what reasoning he arrived at a conclusion that things have changed so much in the past two years that he can recommend to the Houses of the Oireachtas that we change policy and agree to make a contribution towards ESAF? The Minister owes us an explanation.
It is somewhat cynical, as from the mid 1970s to the 1990s the terms of trade of the least developed countries who would use the facility fell by just over 50 per cent. Is there no obligation to take account of factors such as this? Deputy De Rossa also mentioned that the social context is being ignored by ESAF as a blunt instrument. There are 15 million children working in bondage in India alone. There is police and prison violence in Brazil and Venezuela. If the Minister tells us that addressing issues such as this is preaching, I would prefer him to openly say that things like degrading conditions of employment, child slavery and bondage and the export of huge amounts of GDP when there are great needs in countries has nothing to do with economics. I suspect this mindset, namely, that real economics is about the neo-liberal agenda and the kind of Chicago recipe which has driven the IMF, is brought to bare in relation to this matter. Saying so may be compared to a tiny elite of yobos going to a football match and defining the game.
Far from preaching, those of us who have been to the countries where the work of Irish agencies is being carried out are giving witness to the consequences of IMF policies. We are simply saying we are unimpressed by the window dressing of the internal review and are absolutely unimpressed by the logic which is driving this revision in policy which is in favour of making a contribution to ESAF. There is nothing wrong with our analysis as we are linking an economic prescription to social policy. What kind of impoverished intellectual thinking suggests that financial measures, including relieving bank debt, can be taken out of an economic or social context?
The time has come for the Minister to say there is need for a greater development debate, for a review, through a debate, of our relationship to the different international institutions and our obligations and that he will examine ESAF in this context. Nothing will be lost by doing this.
Debate adjourned.