The Global Doctors
October 1998
35 mins documentary
Reporter: Liz Jackson
Producer: Lisa McGregor
Script
10.00.02The inner workings of the International Monetary Fund are shrouded in mystery...
00.10 Barry Bosworth, Economics Consultant
Q. What is their culture ? A. Secretive
00.1400.28 Pause For Explosion
The role of the IMF, the world’s most powerful global institution, has never been more in doubt... Could it be that the IMF/ Global Doctor even helped to precipitate the world’s financial collapse?As global depression looms, we ask if the IMF is out of touch?
00.37 Professor Paul KrugmanMassachusetts Institute Of Technology
The IMF has to pretend to know exactly what it's doing...we know that that's not true.
Jeffrey SachsHarvard University
I think the biggest single error was misdiagnosis, and therefore mistreatment of the disease
00.47 Russian Miners Protest
First it was Asia, then Russia’s economy collapsed. Russian miners, haven’t been paid for months and the ruble has devalued by a third. That’s despite a 22 billion dollar IMF package agreed just months before.
01.02 There’s not any complaint from the IMF that we didn’t do something which was included in its program but the problem is that unfortunately the implementation of the program did not lead to the confidence of the markets.
01.18 Title"The Global Doctors"
With one quarter of the world’s economy now in recession, we examine The Global Doctors.
01.31 Pretty Washington G/V’s
Washington DC remains a glittering sanctuary of prosperity and individual wealth. But as Asia’s financial meltdown begins to affect manufacturing in the States, a sense of alarm is taking hold. After months of pointedly ignoring the growing crisis Washington is finally scrambling to protect its vaults from the global recession.
01.58 Christians
A small group of Christians is setting off from the US Congress ... they're heading down to the IMF and World Bank central offices on 19th St, Washington..
NATSOFKey policies of the IMF have increased, not decreased human suffering…
02.22 They're praying for a fairer distribution of wealth in the world, in the lead up to the Annual meetings of the World Bank and IMF.
02.34 IMF And Reps
This year’s meetings have drawn the worried finance ministers and central bank governors of the 182 member countries of the IMF and the World Bank. They’ve all come hoping to hear a solution which will stop the domino effect. The ferocity and spread of the financial turmoil has led to talk of another Great Depression.
03.00 Do you think the IMF policies are too austere and are impeding the process of crisis control?And you have any concerns about the ruble right now?
03.11 In the last 9 months, the IMF has mounted its largest ever rescue packages...nearly a 130 billion US dollars have been pledged to Korea, Thailand, Indonesia, Russia and South America.
03.20 James WolfensohnPresident World Bank what you had here was a crisis of enormous proportions, enormous proportions in which you have to first stabilise. an economic situation, so that the rest of the world recovers its sense of confidence in the economy.
03.35 What's so alarming about the Asian crisis is not just its severity, but that the fact that the IMF and the rest of the world completely misjudged its size.
03.46 In Indonesia, economic crisis was followed by political turmoil. 03.55 Indonesia’s IMF package has been reworked many times but still there are no signs of recovery. Critics say the IMF is prescribing the wrong medicine.
04.05 Stanley Fischer is the IMF’s second in command....
04.09 Stanley FischerIMF - 2nd In Charge
First of all it hit these countries that had a fantastic growth record over many years and it was quite unexpected, except in the case of Thailand . Secondly, the virulence with which it spread was extraordinary. After the Hong Kong dollar got attacked in October and then you saw Korea suddenly going down and Indonesia before that and there was one day on which Wall Street went down 200 ahh 500 points and then it went to Brazil and then it went to Russia, that was a lot.
04.43 Professor Paul KrugmanMassachusetts Institute Of Technology. It’s scary, and also since it sort of came at us completely out of the blue, it makes you wonder who else is vulnerable; Japan; the United States.... It's one of these things that certainly has shaken everybody in their confidence that we understood how this thing works.
05.02 Krugman And Fischer Together
Stanley Fischer and Paul Krugman go back a long way.Fischer was Krugman's professor at the Massachusetts Institute of Technology
05.17 Krugman Walks On Stage
Krugman has gone on to establish a reputation all of his own...in 1991 the American Economic Association declared him to be the best American economist under 40..
05.29 More recently he achieved the singular distinction of having predicted back in 1994, that the Asian economic miracle was about to end.
05.39 Prof Paul Krugman
I said Asia wasn't in a different universe from the rest of us, and that's been proven but I've had enough of being proved right. Now I'd like to see them recover please. Fischer In the Korean case it is true that we didn’t see how deep this crisis would be. That’s a cause of some embarrassment. Of course it’s shared by the fact that nobody saw how large this crisis would be.
Barry BosworthFinancial Consultant. What do you think the standing of the IMF is in the wake of the Asia crisis?A I think people view it as much more fallible than they thought it was before.
06.14 IMF History
The IMF was born in an earlier crisis....at the end of the second world war..The founding countries gathered at the Bretton Woods conference, their mission was lofty.. to foster financial stability, and indeed peace, in a world badly shaken by the depression of the 1930's..06.42 The IMF's functions then were narrow to oversee fixed exchange rates, and to provide countries with short term loans to cover balance of payments problems..06.5750 years later the IMF has taken on a vastly expanded job description. It now demands radical economic restructuring, as a condition of its loans. Critics say it has contributed to the developing world’s debt burden and so exacerbated today’s global crisis.
07.18 Jeffrey SachsHarvard University It's a very costly process because they really made some very serious mistakes at the start. I think they did some damage. I'd say the first three or four months of intervention was either ineffectual or actually relatively harmful.
07.37 "The days of the IMF are over - their time has come and gone... there must be a New Bretton Woods monetary agreement.. President Roosevelt created the IMF for financial stability…
07.51 Larouche Demo
IMF delegates in Washington are harangued by the extremist Larouche organisation...The IMF is used to being the whipping boy of both the right and the left wing of politics..The right would like the IMF disbanded because the loans it makes intervene in the operation of free market forces.
08.13 NATSOTNatural injustice!We don’t want it!IMF!We don’t need it!World Bank!We will fight it!Corporate rule!We will beat it!
08.24 The left is equally hostile... because the Fund traditionally prescribes a strong dose of economic rationalism as a condition of its loans
08.33 And in the wake of the Asian crisis, the arrogance, the secrecy and indeed the competence of the IMF are under attack, even from those who believe in the mission of the Fund.
08.45 Barry Bosworth
Q. what is their culture?
A.Secretive. Ahh. Rather arrogant, or perceived to be as quite arrogant. These are mainly economists and most economists think we know what's best.
09.02 Camdessus
The man now increasingly in the media spotlight is the Managing Director of the IMF, Frenchman Michel Camdessus..Under his leadership the IMF has inched towards greater openness, and access to the media..
09.23 Q. Recently the term bureaucrat has been used in quite a derogatory way with respect to the IMF…
09.28 Camdessus is fiercely defensive of the culture of the organisation he heads...the 1,000 plus international economic bureaucrats who pay no tax on their average salaries of $95,000 US dollars...
09.44 Michel CamdessusChief of World Bank
Camdessus: "I will not apologise to be a bureaucrat - I will tell you my promise to be here at the head of the most magnificent bureaucracy in the world.
10.01 While Camdessus is the overall boss, Fischer is the IMF's leading economic technocrat.. this makes him an extremely powerful man...Stanley Fischer directed the way the IMF’s Asian rescue programmes were run....
10.20 Stanley Fischer2nd in charge at IMF
When a team goes out to a country they keep sending information back everyday on where they have been, what the bargaining situation is and what sort of agreement they'd like to make and we have to sign off on it, here in headquarters, so basically everyday I was in touch with each of our teams and then would discuss it with people here in headquarters and tell them whether it was okay or not.
10.49 Anoop SinghLeader of Thai IMF Mission
There came a point where Mr Stanley Fisher, our deputy and first deputy MD told me you should now leave for Bangkok. And I said: Yes, we've been waiting to go but today we still have no formal invitation that they would like us to come. And Mr Fisher said: You must leave, and leave today or tomorrow, and you have 24 hours to arrive. I will make sure in that period that you are invited.
11.22 Tracking Shot
The men from the IMF are used to being unwelcome visitors...their arrival is a public acknowledgment of a country's financial desperation ...and the remedies they prescribe are bitter.Anoop Singh and Bijan Aghevli were respectively the team leaders of the Thai and Indonesian missions...they're now back on the 4th floor of IMF headquarters...They've been at the IMF for over twenty years and have seen criticism of the IMF’s austerity packages rise.
11.54 Bijan AghevliLeader of Indonesian IMF Mission It used to be that if you had the IMF programme, you had the seal of approval, Markets would always react positively. That's not the case anymore.
12.07 Bijan And Stanley Fischer talk with Suharto:
This was driven home, hard, in Indonesia......Bijan Aghevli was involved in the marathon negotiations that resulted in former President Suharto’s agreeing in January to a surprisingly extensive package of economic reforms...reforms that attacked the special interests of his friends and familyThe announcement of the IMF package was expected to boost the disastrously devalued rupiah...
12.35 Bijan Aghevli
We had been working through for a couple of nights without any sleep, we were still really up ....the adrenaline was flowing ...we were feeling great, and we all went to have......to have a drink together, and then ....just as an afterthought, someone said......what is Rupiah doing? So I called the Bank of Indonesia on the cellphone, my jaws just dropped when we found out that Rupiah had in fact weakened, not a lot, but it had weakened. That really was quite disappointing.
13.15 Jeffrey SachsHarvard University
The markets tumbled. The markets looked at this program and said, as we would say in America: where's the beef? Er.. where.. where is the core of this program? What's gonna happen to corporate debt? No discussion. What's gonna happen to the exchange rate? No clarity. What's gonna happen to the banking sector? No real discussion besides some long term goals. What's gonna happen to working capital? No solution. The markets looked at it, and the thing crumbled.
13.44 The IMF had better results in Korea..Hubert Neiss headed up the Korean mission, he's been with the IMF for over 30 years ...The Korean loan was biggest in the IMF's history, and Hubert Neiss was under orders to complete the massive rescue package faster than the IMF had ever worked before,.it was feared that without the money, Korea would have been bankrupt in a week..
14.17 Hubert NeissLeader of South Korea IMF Mission Q: Was this the hardest job you've done in your 30 years at the IMFA: It was hard, because of the pressure of time. It was not hard in the sense that there was great resistance on the Korean side to come to terms with those measures. But it meant to negotiate literally day and night.
14.48 There's a charming frankness about these recollections but its also a worry..... when the IMF doctors admit that during the Asian crisis they were winging it or working by trial and error…
15.05 Anoop Singh
It's not easy to develop a program when you're in the middle of a crisis, because you don't know how that crisis will develop the next day. And therefore when I say winging it, we were having to develop measures to deal with a situation that was literally unfolding as we were discussing it.
15.26 Stanley FischerStanley Fisher2nd in charge at IMF
Q.Do you accept that errors were made in haste?
A.Oh of course, errors are made in haste and some of them, and some of these cases we revisit, always during the process and much more afterwards and we would do things a bit differently. But not on the major things.
15.42 Jeffrey Sachs
A. I think the biggest single error was misdiagnosis, and therefore mistreatment of the disease
15.48 Jeffrey Sachs goes onto stage
For over a decade Professor Jeffrey Sachs, on the left, has been the world's most prominent economic adviser to developing countries, and the so called countries in transition.
16.00 NATSOT Jeffrey SachsPaul Krugman’s message, if it’s right, is an alarming one actually. It really is a message that at a certain deep level the rich get richer, the advantages of….
16.14 He's been dubbed by the New York Times, "probably the most important economist in the world"he's worked as a consultant to the IMF, but he's also one of their most outspoken critics
16.28 Jeffrey Sachs
I know the IMF , I think intimately. I know it better than any outsider because I have been involved in the most excruciating ways for nearly fifteen years all over the world with them.
16.47 Sachs watches Fischer
Sachs has been watching the IMF's performance as it’s rushed from country to country beating unsuccessfully at the flames of global recession. In his view the early IMF remedies of tightening government spending , and hiking up interest rates were just plain wrong... but even worse, in Indonesia, he says the sudden closure of 16 banks at the end of last year was like shouting fire in a crowded theatre..
17.16 Jeffrey Sachs They really did, like the cliché says: take the packages off the shelf. They deny it vigorously, but they did a standard kind of austerity program for countries that were not suffering from the normal IMF-type disease of government overspending. Asia faced a financial crisis made in the private sector. Too much private money had come in. Suddenly huge amounts of private money were stampeding out of Asia and causing a catastrophe. The IMF stepped into this, and I think actually made the stampede out of Asia even worse by giving grounds for more panic, I would say.
17.59 Stanley Fischer2nd in charge at IMF
There really is no way in a crisis of suddenly having a government go out and announce it's going to be spending a lot more money and cut interest rates. People don't lend to you because you have high interest rates and thatís why you had to do that to restore confidence. We don't like it. You have to do it to get people to keep the money at home or to get foreigners to send money into the country.
18.24 Professor Paul KrugmanMassachusetts Institute Of Technology
Mistakes were made, as they say. It's clear that the IMF understated - underestimated, the risk of panic and if they had handled some of their policies differently the initial shock would have been less, but you have to avoid thinking about these things too much with perfect hindsight.
18.45 As the world’s financial leaders met together this year their agenda was ambitious - to reshape the global architecture of the world’s finance system. 18.59In many of the countries which the IMF tries to treat, economic prosperity does not necessarily go hand in hand with political openness. The IMF has political leverage. It can advocate political reform as a condition of the loans it allocates. But its main task is to scrutinise its further rescue packages worth billions. It needs to find safe and secure avenues where its loans cannot be siphoned off into propping up the corrupt and ailing businesses, which have until now benefited so much from crony capitalism.The scale of the financial crisis was such that Indonesia’s President Suharto, in power for 32 years, was finally forced to stand down.
19.51 Suharto rally
But for many years the markets were quite happy with the fact that the President’s family was enriched by Indonesia’s economic structure. Some commentators argued that you don't need to attack Crony Capitalism to attract investors back into Indonesia.
20.12 Fisher
Those are very difficult arguments to deal with and I may not have this right but it is striking that models run out of a string at some point. Communism worked very well for 30/40 years and then it started collapsing. Crony Capitalism delivered for a long time in Asia, but that interlocking nexus of banks, governments, corporations became quite rotten. And is rotten in the, in the countries in crisis and they have to be reformed.
20.45 Jeffrey SachsHarvard University
A.Well, I think it's true that there is corruption. It's very regrettable that there's corruption in a lot of places. Trying to do something about it through the international community in broad terms makes sense. It's a complicated question though, whether in the middle of a financial crisis of this magnitude, one accomplishes anything by putting a country near to the kind of social disaster and social instability that Indonesia is now facing for the sake of some 19th Street Washington image of what's right when and by what standard.
21.31 Demo's in Indonesia.
As the impact of the IMF's measures began to bite in Indonesia the country erupted into violence...and while the old President was ousted, giving way to some political reform, the economy is still in trouble.
21.45 Jeffrey Sachs
And of course the IMF being the incredibly powerful institution it is, and the voice for world capitalism after all, gets to say whenever a program fails: Well, the Indonesians blew it again.
22.02 Camdessus
At a meeting in Melbourne Australia, IMF Managing Director Michel Camdessus defended the IMF's increasingly intrusive role in the governments of the countries they help.The long list of conditions they attach to these loans include dismantling tariffs, labour market reforms, opening the doors to foreign investment, privatising State enterprises and much more. Once a country agrees to assistance from the IMF they virtually hand over the reins of government to the financial body.
22.34 Camdessus NAT SOT
Is this too much of a change? Is there a kind of intolerable intrusion into countries domestic affairs?
22.50 Jeffrey Sachs Harvard University
Right or wrong, in terms of the advice it's an incredibly undemocratic process, a non-transparent process, a process dictated from Washington.
23.05 Executive Board Room
The politics are played out, here in the Executive Boardroom of the IMFAll the 182 member countries are represented, but their voting power depends on how much each country pays into the Fund. That's determined by the relative size of their economies.By far the largest is America’s which has 18% of the vote. It’s lead to accusations from the developing world that the IMF is just another American tool for further global domination.
23.40 Stan Fischer2nd in charge at IMF
We always have to take into account what our shareholders want. We work for the 182 Governments that own us. If the US was passionately opposed to something we probably couldn't do it. If they merely oppose it without taking a strong stand we can do it.
23.56 Paul Krugman
I mean, in practice, these decisions ... this particular rescue effort has been dictated sort of jointly by top brass at the IMF, and top brass at the U.S. Treasury.
24.09 Jeffrey Sachs Does it matter that the US Treasury has that much say over the IMF ? There's a certain kind of logic. They put in the money, but it's also a certain serious weakness. What kind of world are we going to live in? Are these institutions really going to reflect, in a serious way, the best collective aspirations of humanity? And that’s including the 84% of the humanity which lives in the developing countries.
24.42 Fires in Indonesia
The danger is that the IMF loans create more debt and thus drive development in countries where it is already unchecked and often reckless. Like in Indonesia, where furious logging continued throughout its environmentally disastrous forest fires.
25.05 Congress
The dependency of the IMF on the United States couldn't be more apparent, than it is right now.The IMF’s capacity to mount future operations to bail out financially stricken countries hangs on the US Congress. It’s being called upon to stump up another $15 to 18 billion of IMF funding.Never before has the fund come under such pressure. In America there are growing calls from Republicans to reform the fund or for America to simply withdraw from it.The US Treasury and most Democrats favour increased funding to help the IMF and the World Bank through the crisis, but conservatives and those on the far left are making themselves heard as never before.
25.48 Cliff StearnsRepublican Congressman
I think the average American feels why is my money going to those folks when I could use it at home to help my schools, to help my infrastructure, my roads, my transportation? Is it necessary to send this money to... Thailand or Indonesia?
26.04 Stanley Fischer
If we don't get the congressional support we're practically unable to lend in a major crisis. We've got $45 billion dollars un-lent resources left. It would be comfortable to have a...we need about $35 billion because we're a bank, people might want to take their money out, so we'd only have about $10 billion left.
Q if there was another crisis?A If there was another crisis on this scale we would have great difficulty in dealing with it.
Russian gvs and music PAUSE
26.45 World Bank
Over the road from the IMF is its sister organisation, the World Bank..The World Bank was also founded at the Bretton Woods conference in 1944, but while the IMF’s brief is crisis assistance, the World Bank lends money for long term development to alleviates poverty. It tries to close the gap between the rich and the poor nations on earth, and stresses knowledge as the key to long term development.
27.18 Demo Sting.. "bail out the people, not the bankers, bail out the people not the bankers…"
27.26 Wolfensohn Press Conference
James Wolfensohn is the Australian born President of the World BankHe’s a good friend of Bill Clinton.When global economies went into meltdown, the scale of the loans being organised by the IMF was so huge, that unusually the World Bank stepped in with cash for the crisis.It contributed $US16 billion dollars to the IMF rescue packages...As the World Bank’s charter is to help the poor, they're touchy about the charge, that the IMF packages are being used to bail out rich foreign banks and prop up investment houses who made bad loans.
28.07 Wolfensohn
A lot of people are concerned with the way the Asian crisis has been handled, that there's been too much of a focus on making sure that.. the losses to the banks are minimised, when it's the... poor principally in those countries who'll be paying back those loans for years and years. Do you share those concerns?A. No. Q. No?A. [CHUCKLES]..... I don't think they have saved the bank, losses to the banks. In fact on anything that I have seen that has been done by the fund and by the bank, the intent of everything that we're doing is in fact to let the market place have the results of whatever it's done.
28.46 Paul KrugmanMassachusetts Institute Of Technology
What would you expect them to say? Institutionally they can't just say...oh yes we think that we're being obliged to bail out private lenders who made bad loans. Of course they are in practice.
29.02 Wolfensohn
If the private sector takes a risk, either in investment or in lending, it should bear the consequences of that risk. 29.10 Krugman Whether
It's direct or a little bit indirect of course these packages end up, to some extent, rescuing private lenders from the consequences of their own actions. That's happened repeatedly.
29.24 Wall Street
The question of whether the banks on Wall Street suffered enough is a complex one.29.32In the middle of a currency crisis the IMF has to perform a difficult balancing act....
29.38On the one hand it needs to restore market confidence in the currency, so that debts can be repaid. On the other hand it has to avoid giving the message, that it will bail out reckless lenders.
29.52Some say that the IMF needs to work with other financial regulators to police the global economy more closely. But there's a school of thought which says just leave it to the markets, let the banks and the countries go broke....otherwise they'll all just do it again knowing the IMF will bail them out...
30.15 Ian VasquezCato Institute
A. It's time to close down the IMF. It's time to shut down the IMF and let investors become more prudent about where they invest and let policy makers in the various countries around the world introduce the types of policies that encourage stability.
Q.So if you leave it to the market it will all be better?A If you leave it to the market it will be far better than leaving it to the IMF, because people will be weighing their own money and be, will be behaving much more prudently than under an IMF programme.
30.53 Stan Fischer2nd in charge at IMF A There is no evidence in support of the view that if only we left this problem to the markets it would solve it. They would solve, that's just, there, there's no basis for thinking that. What I think you would see if there was no IMF, is that countries would go into default...it would take years and years to sort it out. They'd be getting no money in the meantime and they would suffer much more than they are now, and that means the poor people in particular.
31.19 Professor Paul KrugmanMassachusetts Institute Of Technology All kinds of terrible things can happen. Economic collapse can have terrible effects, and you can't prove that the IMF has been a buffer against economic collapse, but I think it has.
31.30 Trading Room
No-one can claim to be really sure how the global financial system works in the new electronic age.What we do know is that every day, in foreign exchange rooms like this, a staggering $2000 billion dollars worth of trade is conducted in transactions that happen at the speed of the click of a computer mouse.... What we also know from Asia and Russia is that when a panic is on, the stampede of capital out of a country can suddenly devastate its economy. It’s the best argument now for the continued existence of the IMF.
32.12 Prof. Paul Krugman
Financial markets are subject to panic to self-fulfilling crisis - to debt deflation. You need some kind of an institution in there to supply ..to rush....to basically have somebody to send the armoured cars full of cash when there's a bank run. The IMF is a rather weak version of that internationally, but it's the only thing we've got.
32.35 IMF Meeting
NATSOTOur purpose really is not to reach conclusions but rather to exchange views…
32.41 Since markets began to crash there has been an endless round of consultations, but still no lasting remedies have been discovered for the world’s financial ill-health.The fault line between rich and poor has left the financial world divided. The rich want the poor to pay off their debts before they get further handouts. The poor say that that until they’re released from earlier IMF loans they stand no chance of recovery.33.07Throughout the crisis there has been no calling to account of the IMF, despite its fallibility being glaringly exposed by the Asian crisis. After all it's a rich man's club.
33.21 IMF board room & music
Yet there is a consensus emerging from the IMF’s latest meetings. There should be global burden sharing. The IMF should be more transparent and yes, it would be better if they could devise a system to predict the unpredictable financial crises of this modern day world.
33.45 Jeffrey Sachs Harvard University
I think the IMF can do vastly better. So what are sometimes rather heated complaints from me or challenges really are meant entirely in a constructive way.. not to close down the institution by any means, but to make it do what we need it to do, which is to be a very effective operation in support of a global system that really can help the development process. That remains the greatest challenge that we face on this planet.
34.16 African Statue In The World Bank
Eighty Four percent of the world's population are in poor developing countries right now, and unless this system works for them as well as for the rich countries, we are not going to have the kind of world that we want and.. and very much need.
ends
October 1998
35 mins documentary
Reporter: Liz Jackson
Producer: Lisa McGregor
Script
10.00.02The inner workings of the International Monetary Fund are shrouded in mystery...
00.10 Barry Bosworth, Economics Consultant
Q. What is their culture ? A. Secretive
00.1400.28 Pause For Explosion
The role of the IMF, the world’s most powerful global institution, has never been more in doubt... Could it be that the IMF/ Global Doctor even helped to precipitate the world’s financial collapse?As global depression looms, we ask if the IMF is out of touch?
00.37 Professor Paul KrugmanMassachusetts Institute Of Technology
The IMF has to pretend to know exactly what it's doing...we know that that's not true.
Jeffrey SachsHarvard University
I think the biggest single error was misdiagnosis, and therefore mistreatment of the disease
00.47 Russian Miners Protest
First it was Asia, then Russia’s economy collapsed. Russian miners, haven’t been paid for months and the ruble has devalued by a third. That’s despite a 22 billion dollar IMF package agreed just months before.
01.02 There’s not any complaint from the IMF that we didn’t do something which was included in its program but the problem is that unfortunately the implementation of the program did not lead to the confidence of the markets.
01.18 Title"The Global Doctors"
With one quarter of the world’s economy now in recession, we examine The Global Doctors.
01.31 Pretty Washington G/V’s
Washington DC remains a glittering sanctuary of prosperity and individual wealth. But as Asia’s financial meltdown begins to affect manufacturing in the States, a sense of alarm is taking hold. After months of pointedly ignoring the growing crisis Washington is finally scrambling to protect its vaults from the global recession.
01.58 Christians
A small group of Christians is setting off from the US Congress ... they're heading down to the IMF and World Bank central offices on 19th St, Washington..
NATSOFKey policies of the IMF have increased, not decreased human suffering…
02.22 They're praying for a fairer distribution of wealth in the world, in the lead up to the Annual meetings of the World Bank and IMF.
02.34 IMF And Reps
This year’s meetings have drawn the worried finance ministers and central bank governors of the 182 member countries of the IMF and the World Bank. They’ve all come hoping to hear a solution which will stop the domino effect. The ferocity and spread of the financial turmoil has led to talk of another Great Depression.
03.00 Do you think the IMF policies are too austere and are impeding the process of crisis control?And you have any concerns about the ruble right now?
03.11 In the last 9 months, the IMF has mounted its largest ever rescue packages...nearly a 130 billion US dollars have been pledged to Korea, Thailand, Indonesia, Russia and South America.
03.20 James WolfensohnPresident World Bank what you had here was a crisis of enormous proportions, enormous proportions in which you have to first stabilise. an economic situation, so that the rest of the world recovers its sense of confidence in the economy.
03.35 What's so alarming about the Asian crisis is not just its severity, but that the fact that the IMF and the rest of the world completely misjudged its size.
03.46 In Indonesia, economic crisis was followed by political turmoil. 03.55 Indonesia’s IMF package has been reworked many times but still there are no signs of recovery. Critics say the IMF is prescribing the wrong medicine.
04.05 Stanley Fischer is the IMF’s second in command....
04.09 Stanley FischerIMF - 2nd In Charge
First of all it hit these countries that had a fantastic growth record over many years and it was quite unexpected, except in the case of Thailand . Secondly, the virulence with which it spread was extraordinary. After the Hong Kong dollar got attacked in October and then you saw Korea suddenly going down and Indonesia before that and there was one day on which Wall Street went down 200 ahh 500 points and then it went to Brazil and then it went to Russia, that was a lot.
04.43 Professor Paul KrugmanMassachusetts Institute Of Technology. It’s scary, and also since it sort of came at us completely out of the blue, it makes you wonder who else is vulnerable; Japan; the United States.... It's one of these things that certainly has shaken everybody in their confidence that we understood how this thing works.
05.02 Krugman And Fischer Together
Stanley Fischer and Paul Krugman go back a long way.Fischer was Krugman's professor at the Massachusetts Institute of Technology
05.17 Krugman Walks On Stage
Krugman has gone on to establish a reputation all of his own...in 1991 the American Economic Association declared him to be the best American economist under 40..
05.29 More recently he achieved the singular distinction of having predicted back in 1994, that the Asian economic miracle was about to end.
05.39 Prof Paul Krugman
I said Asia wasn't in a different universe from the rest of us, and that's been proven but I've had enough of being proved right. Now I'd like to see them recover please. Fischer In the Korean case it is true that we didn’t see how deep this crisis would be. That’s a cause of some embarrassment. Of course it’s shared by the fact that nobody saw how large this crisis would be.
Barry BosworthFinancial Consultant. What do you think the standing of the IMF is in the wake of the Asia crisis?A I think people view it as much more fallible than they thought it was before.
06.14 IMF History
The IMF was born in an earlier crisis....at the end of the second world war..The founding countries gathered at the Bretton Woods conference, their mission was lofty.. to foster financial stability, and indeed peace, in a world badly shaken by the depression of the 1930's..06.42 The IMF's functions then were narrow to oversee fixed exchange rates, and to provide countries with short term loans to cover balance of payments problems..06.5750 years later the IMF has taken on a vastly expanded job description. It now demands radical economic restructuring, as a condition of its loans. Critics say it has contributed to the developing world’s debt burden and so exacerbated today’s global crisis.
07.18 Jeffrey SachsHarvard University It's a very costly process because they really made some very serious mistakes at the start. I think they did some damage. I'd say the first three or four months of intervention was either ineffectual or actually relatively harmful.
07.37 "The days of the IMF are over - their time has come and gone... there must be a New Bretton Woods monetary agreement.. President Roosevelt created the IMF for financial stability…
07.51 Larouche Demo
IMF delegates in Washington are harangued by the extremist Larouche organisation...The IMF is used to being the whipping boy of both the right and the left wing of politics..The right would like the IMF disbanded because the loans it makes intervene in the operation of free market forces.
08.13 NATSOTNatural injustice!We don’t want it!IMF!We don’t need it!World Bank!We will fight it!Corporate rule!We will beat it!
08.24 The left is equally hostile... because the Fund traditionally prescribes a strong dose of economic rationalism as a condition of its loans
08.33 And in the wake of the Asian crisis, the arrogance, the secrecy and indeed the competence of the IMF are under attack, even from those who believe in the mission of the Fund.
08.45 Barry Bosworth
Q. what is their culture?
A.Secretive. Ahh. Rather arrogant, or perceived to be as quite arrogant. These are mainly economists and most economists think we know what's best.
09.02 Camdessus
The man now increasingly in the media spotlight is the Managing Director of the IMF, Frenchman Michel Camdessus..Under his leadership the IMF has inched towards greater openness, and access to the media..
09.23 Q. Recently the term bureaucrat has been used in quite a derogatory way with respect to the IMF…
09.28 Camdessus is fiercely defensive of the culture of the organisation he heads...the 1,000 plus international economic bureaucrats who pay no tax on their average salaries of $95,000 US dollars...
09.44 Michel CamdessusChief of World Bank
Camdessus: "I will not apologise to be a bureaucrat - I will tell you my promise to be here at the head of the most magnificent bureaucracy in the world.
10.01 While Camdessus is the overall boss, Fischer is the IMF's leading economic technocrat.. this makes him an extremely powerful man...Stanley Fischer directed the way the IMF’s Asian rescue programmes were run....
10.20 Stanley Fischer2nd in charge at IMF
When a team goes out to a country they keep sending information back everyday on where they have been, what the bargaining situation is and what sort of agreement they'd like to make and we have to sign off on it, here in headquarters, so basically everyday I was in touch with each of our teams and then would discuss it with people here in headquarters and tell them whether it was okay or not.
10.49 Anoop SinghLeader of Thai IMF Mission
There came a point where Mr Stanley Fisher, our deputy and first deputy MD told me you should now leave for Bangkok. And I said: Yes, we've been waiting to go but today we still have no formal invitation that they would like us to come. And Mr Fisher said: You must leave, and leave today or tomorrow, and you have 24 hours to arrive. I will make sure in that period that you are invited.
11.22 Tracking Shot
The men from the IMF are used to being unwelcome visitors...their arrival is a public acknowledgment of a country's financial desperation ...and the remedies they prescribe are bitter.Anoop Singh and Bijan Aghevli were respectively the team leaders of the Thai and Indonesian missions...they're now back on the 4th floor of IMF headquarters...They've been at the IMF for over twenty years and have seen criticism of the IMF’s austerity packages rise.
11.54 Bijan AghevliLeader of Indonesian IMF Mission It used to be that if you had the IMF programme, you had the seal of approval, Markets would always react positively. That's not the case anymore.
12.07 Bijan And Stanley Fischer talk with Suharto:
This was driven home, hard, in Indonesia......Bijan Aghevli was involved in the marathon negotiations that resulted in former President Suharto’s agreeing in January to a surprisingly extensive package of economic reforms...reforms that attacked the special interests of his friends and familyThe announcement of the IMF package was expected to boost the disastrously devalued rupiah...
12.35 Bijan Aghevli
We had been working through for a couple of nights without any sleep, we were still really up ....the adrenaline was flowing ...we were feeling great, and we all went to have......to have a drink together, and then ....just as an afterthought, someone said......what is Rupiah doing? So I called the Bank of Indonesia on the cellphone, my jaws just dropped when we found out that Rupiah had in fact weakened, not a lot, but it had weakened. That really was quite disappointing.
13.15 Jeffrey SachsHarvard University
The markets tumbled. The markets looked at this program and said, as we would say in America: where's the beef? Er.. where.. where is the core of this program? What's gonna happen to corporate debt? No discussion. What's gonna happen to the exchange rate? No clarity. What's gonna happen to the banking sector? No real discussion besides some long term goals. What's gonna happen to working capital? No solution. The markets looked at it, and the thing crumbled.
13.44 The IMF had better results in Korea..Hubert Neiss headed up the Korean mission, he's been with the IMF for over 30 years ...The Korean loan was biggest in the IMF's history, and Hubert Neiss was under orders to complete the massive rescue package faster than the IMF had ever worked before,.it was feared that without the money, Korea would have been bankrupt in a week..
14.17 Hubert NeissLeader of South Korea IMF Mission Q: Was this the hardest job you've done in your 30 years at the IMFA: It was hard, because of the pressure of time. It was not hard in the sense that there was great resistance on the Korean side to come to terms with those measures. But it meant to negotiate literally day and night.
14.48 There's a charming frankness about these recollections but its also a worry..... when the IMF doctors admit that during the Asian crisis they were winging it or working by trial and error…
15.05 Anoop Singh
It's not easy to develop a program when you're in the middle of a crisis, because you don't know how that crisis will develop the next day. And therefore when I say winging it, we were having to develop measures to deal with a situation that was literally unfolding as we were discussing it.
15.26 Stanley FischerStanley Fisher2nd in charge at IMF
Q.Do you accept that errors were made in haste?
A.Oh of course, errors are made in haste and some of them, and some of these cases we revisit, always during the process and much more afterwards and we would do things a bit differently. But not on the major things.
15.42 Jeffrey Sachs
A. I think the biggest single error was misdiagnosis, and therefore mistreatment of the disease
15.48 Jeffrey Sachs goes onto stage
For over a decade Professor Jeffrey Sachs, on the left, has been the world's most prominent economic adviser to developing countries, and the so called countries in transition.
16.00 NATSOT Jeffrey SachsPaul Krugman’s message, if it’s right, is an alarming one actually. It really is a message that at a certain deep level the rich get richer, the advantages of….
16.14 He's been dubbed by the New York Times, "probably the most important economist in the world"he's worked as a consultant to the IMF, but he's also one of their most outspoken critics
16.28 Jeffrey Sachs
I know the IMF , I think intimately. I know it better than any outsider because I have been involved in the most excruciating ways for nearly fifteen years all over the world with them.
16.47 Sachs watches Fischer
Sachs has been watching the IMF's performance as it’s rushed from country to country beating unsuccessfully at the flames of global recession. In his view the early IMF remedies of tightening government spending , and hiking up interest rates were just plain wrong... but even worse, in Indonesia, he says the sudden closure of 16 banks at the end of last year was like shouting fire in a crowded theatre..
17.16 Jeffrey Sachs They really did, like the cliché says: take the packages off the shelf. They deny it vigorously, but they did a standard kind of austerity program for countries that were not suffering from the normal IMF-type disease of government overspending. Asia faced a financial crisis made in the private sector. Too much private money had come in. Suddenly huge amounts of private money were stampeding out of Asia and causing a catastrophe. The IMF stepped into this, and I think actually made the stampede out of Asia even worse by giving grounds for more panic, I would say.
17.59 Stanley Fischer2nd in charge at IMF
There really is no way in a crisis of suddenly having a government go out and announce it's going to be spending a lot more money and cut interest rates. People don't lend to you because you have high interest rates and thatís why you had to do that to restore confidence. We don't like it. You have to do it to get people to keep the money at home or to get foreigners to send money into the country.
18.24 Professor Paul KrugmanMassachusetts Institute Of Technology
Mistakes were made, as they say. It's clear that the IMF understated - underestimated, the risk of panic and if they had handled some of their policies differently the initial shock would have been less, but you have to avoid thinking about these things too much with perfect hindsight.
18.45 As the world’s financial leaders met together this year their agenda was ambitious - to reshape the global architecture of the world’s finance system. 18.59In many of the countries which the IMF tries to treat, economic prosperity does not necessarily go hand in hand with political openness. The IMF has political leverage. It can advocate political reform as a condition of the loans it allocates. But its main task is to scrutinise its further rescue packages worth billions. It needs to find safe and secure avenues where its loans cannot be siphoned off into propping up the corrupt and ailing businesses, which have until now benefited so much from crony capitalism.The scale of the financial crisis was such that Indonesia’s President Suharto, in power for 32 years, was finally forced to stand down.
19.51 Suharto rally
But for many years the markets were quite happy with the fact that the President’s family was enriched by Indonesia’s economic structure. Some commentators argued that you don't need to attack Crony Capitalism to attract investors back into Indonesia.
20.12 Fisher
Those are very difficult arguments to deal with and I may not have this right but it is striking that models run out of a string at some point. Communism worked very well for 30/40 years and then it started collapsing. Crony Capitalism delivered for a long time in Asia, but that interlocking nexus of banks, governments, corporations became quite rotten. And is rotten in the, in the countries in crisis and they have to be reformed.
20.45 Jeffrey SachsHarvard University
A.Well, I think it's true that there is corruption. It's very regrettable that there's corruption in a lot of places. Trying to do something about it through the international community in broad terms makes sense. It's a complicated question though, whether in the middle of a financial crisis of this magnitude, one accomplishes anything by putting a country near to the kind of social disaster and social instability that Indonesia is now facing for the sake of some 19th Street Washington image of what's right when and by what standard.
21.31 Demo's in Indonesia.
As the impact of the IMF's measures began to bite in Indonesia the country erupted into violence...and while the old President was ousted, giving way to some political reform, the economy is still in trouble.
21.45 Jeffrey Sachs
And of course the IMF being the incredibly powerful institution it is, and the voice for world capitalism after all, gets to say whenever a program fails: Well, the Indonesians blew it again.
22.02 Camdessus
At a meeting in Melbourne Australia, IMF Managing Director Michel Camdessus defended the IMF's increasingly intrusive role in the governments of the countries they help.The long list of conditions they attach to these loans include dismantling tariffs, labour market reforms, opening the doors to foreign investment, privatising State enterprises and much more. Once a country agrees to assistance from the IMF they virtually hand over the reins of government to the financial body.
22.34 Camdessus NAT SOT
Is this too much of a change? Is there a kind of intolerable intrusion into countries domestic affairs?
22.50 Jeffrey Sachs Harvard University
Right or wrong, in terms of the advice it's an incredibly undemocratic process, a non-transparent process, a process dictated from Washington.
23.05 Executive Board Room
The politics are played out, here in the Executive Boardroom of the IMFAll the 182 member countries are represented, but their voting power depends on how much each country pays into the Fund. That's determined by the relative size of their economies.By far the largest is America’s which has 18% of the vote. It’s lead to accusations from the developing world that the IMF is just another American tool for further global domination.
23.40 Stan Fischer2nd in charge at IMF
We always have to take into account what our shareholders want. We work for the 182 Governments that own us. If the US was passionately opposed to something we probably couldn't do it. If they merely oppose it without taking a strong stand we can do it.
23.56 Paul Krugman
I mean, in practice, these decisions ... this particular rescue effort has been dictated sort of jointly by top brass at the IMF, and top brass at the U.S. Treasury.
24.09 Jeffrey Sachs Does it matter that the US Treasury has that much say over the IMF ? There's a certain kind of logic. They put in the money, but it's also a certain serious weakness. What kind of world are we going to live in? Are these institutions really going to reflect, in a serious way, the best collective aspirations of humanity? And that’s including the 84% of the humanity which lives in the developing countries.
24.42 Fires in Indonesia
The danger is that the IMF loans create more debt and thus drive development in countries where it is already unchecked and often reckless. Like in Indonesia, where furious logging continued throughout its environmentally disastrous forest fires.
25.05 Congress
The dependency of the IMF on the United States couldn't be more apparent, than it is right now.The IMF’s capacity to mount future operations to bail out financially stricken countries hangs on the US Congress. It’s being called upon to stump up another $15 to 18 billion of IMF funding.Never before has the fund come under such pressure. In America there are growing calls from Republicans to reform the fund or for America to simply withdraw from it.The US Treasury and most Democrats favour increased funding to help the IMF and the World Bank through the crisis, but conservatives and those on the far left are making themselves heard as never before.
25.48 Cliff StearnsRepublican Congressman
I think the average American feels why is my money going to those folks when I could use it at home to help my schools, to help my infrastructure, my roads, my transportation? Is it necessary to send this money to... Thailand or Indonesia?
26.04 Stanley Fischer
If we don't get the congressional support we're practically unable to lend in a major crisis. We've got $45 billion dollars un-lent resources left. It would be comfortable to have a...we need about $35 billion because we're a bank, people might want to take their money out, so we'd only have about $10 billion left.
Q if there was another crisis?A If there was another crisis on this scale we would have great difficulty in dealing with it.
Russian gvs and music PAUSE
26.45 World Bank
Over the road from the IMF is its sister organisation, the World Bank..The World Bank was also founded at the Bretton Woods conference in 1944, but while the IMF’s brief is crisis assistance, the World Bank lends money for long term development to alleviates poverty. It tries to close the gap between the rich and the poor nations on earth, and stresses knowledge as the key to long term development.
27.18 Demo Sting.. "bail out the people, not the bankers, bail out the people not the bankers…"
27.26 Wolfensohn Press Conference
James Wolfensohn is the Australian born President of the World BankHe’s a good friend of Bill Clinton.When global economies went into meltdown, the scale of the loans being organised by the IMF was so huge, that unusually the World Bank stepped in with cash for the crisis.It contributed $US16 billion dollars to the IMF rescue packages...As the World Bank’s charter is to help the poor, they're touchy about the charge, that the IMF packages are being used to bail out rich foreign banks and prop up investment houses who made bad loans.
28.07 Wolfensohn
A lot of people are concerned with the way the Asian crisis has been handled, that there's been too much of a focus on making sure that.. the losses to the banks are minimised, when it's the... poor principally in those countries who'll be paying back those loans for years and years. Do you share those concerns?A. No. Q. No?A. [CHUCKLES]..... I don't think they have saved the bank, losses to the banks. In fact on anything that I have seen that has been done by the fund and by the bank, the intent of everything that we're doing is in fact to let the market place have the results of whatever it's done.
28.46 Paul KrugmanMassachusetts Institute Of Technology
What would you expect them to say? Institutionally they can't just say...oh yes we think that we're being obliged to bail out private lenders who made bad loans. Of course they are in practice.
29.02 Wolfensohn
If the private sector takes a risk, either in investment or in lending, it should bear the consequences of that risk. 29.10 Krugman Whether
It's direct or a little bit indirect of course these packages end up, to some extent, rescuing private lenders from the consequences of their own actions. That's happened repeatedly.
29.24 Wall Street
The question of whether the banks on Wall Street suffered enough is a complex one.29.32In the middle of a currency crisis the IMF has to perform a difficult balancing act....
29.38On the one hand it needs to restore market confidence in the currency, so that debts can be repaid. On the other hand it has to avoid giving the message, that it will bail out reckless lenders.
29.52Some say that the IMF needs to work with other financial regulators to police the global economy more closely. But there's a school of thought which says just leave it to the markets, let the banks and the countries go broke....otherwise they'll all just do it again knowing the IMF will bail them out...
30.15 Ian VasquezCato Institute
A. It's time to close down the IMF. It's time to shut down the IMF and let investors become more prudent about where they invest and let policy makers in the various countries around the world introduce the types of policies that encourage stability.
Q.So if you leave it to the market it will all be better?A If you leave it to the market it will be far better than leaving it to the IMF, because people will be weighing their own money and be, will be behaving much more prudently than under an IMF programme.
30.53 Stan Fischer2nd in charge at IMF A There is no evidence in support of the view that if only we left this problem to the markets it would solve it. They would solve, that's just, there, there's no basis for thinking that. What I think you would see if there was no IMF, is that countries would go into default...it would take years and years to sort it out. They'd be getting no money in the meantime and they would suffer much more than they are now, and that means the poor people in particular.
31.19 Professor Paul KrugmanMassachusetts Institute Of Technology All kinds of terrible things can happen. Economic collapse can have terrible effects, and you can't prove that the IMF has been a buffer against economic collapse, but I think it has.
31.30 Trading Room
No-one can claim to be really sure how the global financial system works in the new electronic age.What we do know is that every day, in foreign exchange rooms like this, a staggering $2000 billion dollars worth of trade is conducted in transactions that happen at the speed of the click of a computer mouse.... What we also know from Asia and Russia is that when a panic is on, the stampede of capital out of a country can suddenly devastate its economy. It’s the best argument now for the continued existence of the IMF.
32.12 Prof. Paul Krugman
Financial markets are subject to panic to self-fulfilling crisis - to debt deflation. You need some kind of an institution in there to supply ..to rush....to basically have somebody to send the armoured cars full of cash when there's a bank run. The IMF is a rather weak version of that internationally, but it's the only thing we've got.
32.35 IMF Meeting
NATSOTOur purpose really is not to reach conclusions but rather to exchange views…
32.41 Since markets began to crash there has been an endless round of consultations, but still no lasting remedies have been discovered for the world’s financial ill-health.The fault line between rich and poor has left the financial world divided. The rich want the poor to pay off their debts before they get further handouts. The poor say that that until they’re released from earlier IMF loans they stand no chance of recovery.33.07Throughout the crisis there has been no calling to account of the IMF, despite its fallibility being glaringly exposed by the Asian crisis. After all it's a rich man's club.
33.21 IMF board room & music
Yet there is a consensus emerging from the IMF’s latest meetings. There should be global burden sharing. The IMF should be more transparent and yes, it would be better if they could devise a system to predict the unpredictable financial crises of this modern day world.
33.45 Jeffrey Sachs Harvard University
I think the IMF can do vastly better. So what are sometimes rather heated complaints from me or challenges really are meant entirely in a constructive way.. not to close down the institution by any means, but to make it do what we need it to do, which is to be a very effective operation in support of a global system that really can help the development process. That remains the greatest challenge that we face on this planet.
34.16 African Statue In The World Bank
Eighty Four percent of the world's population are in poor developing countries right now, and unless this system works for them as well as for the rich countries, we are not going to have the kind of world that we want and.. and very much need.
ends