Toward a new foreign policy.

Key Recommendations

* Congress should condition U.S. appropriations to the IFIs on open board meetings and administration compliance with congressional mandates to oppose harmful IFI policies.

* Congress should pass legislation directing the administration to seek open board meetings at the regional development banks.

* Congressional efforts to reform U.S. policy at the IFIs should focus on requiring the U.S. to oppose specific harmful IFI policies.

Effective democracy requires information. This is why we have a Freedom of Information Act in the United States and why many states have "open meetings" laws that require public notice and open meetings whenever a majority of officials on a government body meet to discuss policy at that body. If the IMF and the World Bank were subject to the Illinois Open Meetings Act, for example, G7 meetings would also have to be open to the public and the news media, since IMF and World Bank policies are often determined in G7 meetings, and Americans would be able to find out what our government is doing at these institutions.

Conversely, if the IFI boards of directors were open to the public and to the news media, if there were recorded votes, if the minutes and transcripts of board meetings were immediately published on the institutions' web sites, if draft policy and project documents and agreements between the IFIs and borrower countries were released prior to their approval to give civil society groups the opportunity to lobby their governments against odious provisions, this would of course not immediately or automatically eliminate the harmful policies of the IFIs. But it would greatly level the playing field on which battles over IFI policies are fought out, and would dramatically improve the chances of achieving the reforms of IFI policies that civil society groups are seeking.

Ultimately, the ability of people in the U.S. to affect the policies of the international financial institutions depends on Congress. Few Americans can get a meeting with the Treasury officials who conduct U.S. policy at the IFIs, but most Americans can get a meeting with, if not their congressional representative, then at least that congressional member's staff person who covers U.S. policy at the international financial institutions. The leverage of Congress, in turn, ultimately depends on the power of the purse. Congress can refuse to appropriate more money for these institutions if they refuse to abandon harmful policies, and can attach conditions to funding, such as requirements to oppose particular policies.

Representative Doug Bereuter (R-NE), chair of the subcommittee of the House Financial Services Committee that oversees U.S. policy at the international financial institutions, has introduced legislation that requires the U.S. to seek open board meetings at the regional development banks (H.R. 2604). Rep. Bereuter's bill would also strengthen the existing requirement that the U.S. oppose user fees on primary health care and education at the regional development banks. Representative Jan Schakowsky (D-IL) is offering an amendment to the bill that would require the U.S. to oppose policy conditions that increase fees on poor people to access clean drinking water, while Representative Barbara Lee (D-CA) is offering an amendment that would require the U.S. to oppose regional development bank financing of dams that violate the recommendations of the World Commission on Dams, such as those involving forced relocation.

While these mandates would not directly apply to the International Monetary Fund and the World Bank, by passing this legislation Congress would clearly indicate to the administration, to the management of the IMF and the World Bank, and to member countries of these institutions what Congress' expectations of these institutions are likely to be in the future. Congress would indicate that it expects the international financial institutions to be open to news media and public scrutiny, that it expects them to stop promoting user fees on primary health care and education, that it expects them to stop promoting policies that undermine access to dean drinking water, and that it expects them to stop supporting large dams.

The donor countries are currently negotiating the terms of an increase in funding to the International Development Authority (IDA), the World Bank's lending arm in the poorest countries. It is anticipated that an increase in funding for IDA will be before Congress next year. If critics of the international financial institutions succeed in placing effective reform conditions on the regional development banks in this year's appropriations cycle, they will be in a good position to impose these reforms on the World Bank next year in the context of the IDA authorization.

If a precedent were established this year with respect to removing harmful policies of the regional development banks, Congress and civil society organization would not be limited to the above-mentioned reforms as conditions for appropriations to IDA. Congress could also require that the World Bank cancel 100% of its debt claims against poor countries, that the World Bank convert 50% of its future lending in poor countries to performance-based grants linked to increased access to education, health care, clean drinking water, and sanitation and delinked from policy conditionalities like privatization. It could also require that the World Bank cease policy conditions such as freezing the minimum wage and imposing labor flexibility conditions that make it easier to fire workers and harder for workers to organize into effective trade unions.

In years past, when Congress expressed its desire for reform of the international financial institutions, it often contented itself with vague and unenforceable exhortations. If the principle is established that Congress can effectively compel the abolition of harmful IFI policies as the price of U.S. contribution to these institutions, there is no limit to what policies might be removed. The removal of harmful IFI conditionalities with respect to education, health care, and water alone would significantly advance the internationally agreed upon goals of providing universal access to these basic human needs.

Robert Naiman <[e-mail]>, a senior policy analyst with the Center for Economic and Policy Research in Washington (CEPR), has authored numerous articles on globalization and U.S. foreign economic policy, including "The Emperor Has No Growth: Declining Economic Growth Rates in the Era of Globalization" (co-authored with Mark Weisbrot), "Is U.S. Treasury Above the Law?," and "World Bank Grants Would Reduce Poor Country Debt Without Cost to the United States" (CEPR, 2001).