Crisis or Opportunity? The International Financial Institutions and civil society in a new political

2 November 2001

In the aftermath of the tragic events in the United States on 11 September, civil society groups have been discussing their causes and likely impacts. This includes the consequences of the global retaliatory taken by the US and its allies and domestic preventive measures aimed at pre-empting another mass tragedy of this sort.

Links to trade and development have been drawn, both by governments and civil society groups. The international financial institutions (IFIs) themselves have also been vocal. The IMF predicted a crisis-induced global economic slump, the World Bank forecast increased worldwide poverty called for greater trade liberalisation, and the WTO meeting in November looks likely to go ahead.

In this short briefing, the Bretton Woods Project has pulled together some different strands of this debate and set out a rough and ready overview of various perspectives. They are gleaned from the media and civil society groups through Internet postings and emails and comment at a meeting held in London on 28 September. We examine the impact of the attacks on civil society and the functions of the international financial institutions, including the World Bank and the IMF.

Political space and avenues for conflict resolution: the role of multilateralism

The attacks on the US have renewed calls for greater international cooperation, for reviving the spirit of multilateralism and reforming rather than dismissing existing multilateral institutions, such as the UN, the World Bank and the IMF, and the WTO. For many commentators, a multilateral institutional framework is preferable to US unilateralism and gunboat diplomacy. There are signs that the US, in the wake of the attacks, may be reconsidering its approach to global cooperation.

According to writer Saskia Sassen: “[W]e cannot return to the old system of countries surrounding themselves with protective walls. It will take genuine multilateralism and internationalism; radical innovations and new forms of collaboration with civil society and supranational institutions.” [The Guardian, 12 September 2001]

Civil society groups are concerned, however, that existing political space around global issues and institutions may shrink. NGOs, for example, are afraid of losing their voice within multilateral institutions – a right which they had fought long and hard for – on the pretext of the need to increase security. “In the short-term, we will see the equation of anti-globalisers with terrorists and this will lead to the shutting-off of access to institutions, such as the UN and the World Bank and IMF,” a researcher commented at the 28 September meeting. “The question is ‘how much do we have to fight to reclaim this space? We must not lose access to the policymakers.” Access has already been denied to NGOs to preparatory committees of the UN Conference on Financing for Development and NGOs are worried of this becoming a permanent practice as opposed to a short-term precaution.

While there are many calls for the strengthening of multilateral institutions in the new geopolitical context, there are fears that these institutions may already have served the purposes of the countries which dominate their decision-making processes. Commentators have expressed concern that these institutions may be used to enlist the ‘cooperation of countries for the ‘war against terrorism’ by granting or withholding aid and financial privileges.

World Bank and IMF: new roles?

A briefing by think-tank Oxford Analytica on 25 September 2001 predicts that “Washington’s attempts to build a coalition of allies in the fight against terrorism will open the door to World Bank assistance for some, while denying it to those who are perceived to be uncooperative with Washington’s new agenda.” It warns that current shifts in US foreign policy may harken the return of “development assistance motivated by ideological and geopolitical considerations”. [Oxford Analytica Briefing, 25 September 2001]

Pakistan is seen as the primary recipient of western aid and concessions from international financial institutions. It has so far received US$50 million in aid assistance from the US who also lifted economic sanctions imposed (on Pakistan and India) in 1998 because of its nuclear tests. US also assented to a US$135 million loan to the country by the IMF. [AP report, 29 September 2001]

The seeds of the ‘if you are not with us, you are against us’ policy have been sown. New York mayor Rudoph Giuliani in his address to the UN on October 2 made it clear that the UN had a duty ‘as peacekeepers’ to take action against not only states who support terrorism but also isolate states who remain neutral in the fight against terrorism.

Aid agencies are worried that new western impetus to secure global geopolitical support through aid and financial assistance may result in an unfair hierarchy of countries with certain countries given aid-priority at the expense of others. “If the aid budget is expanded to include the new priorities, then it is fine,” observed an aid agency worker at the 28 September meeting, “but if this is going to take away portions of aid meant for other countries, then it is worrying.” As it stands, the World Bank itself notes that private capital flows to developing countries are declining sharply – the Bank estimates a fall from US$240 billion last year to US$160 billion this year.

Concerns over aid distribution are compounded by fears of a global recession which may push more countries into debt and more people into poverty. The geographical area at greatest risk is Africa, particularly if aid is diverted to other areas in pursuit of geopolitical agendas and financial assistance from G7 countries decreased as a result of increased military spending and domestic security expenditure in the north.

The World Bank has urged northern governments to boost aid spending to mitigate the effects of trade shocks in wake of the attacks and have indicated that it is reviewing its lending instruments and financial resources to see how they can best be deployed in the circumstances. How these measures will be deployed and where they will be deployed remains a question.

Reforming the multilateral institutions thus remains a priority for many civil society groups, both to prevent unilateral military and economic action by certain states or blocs of states and to ensure the accountability of these institutions to the constituencies they serve. For one campaigner, the parallels constantly drawn between the September 11 attacks and the attack on Pearl Harbour which precipitated the Second World War should be used to illustrate the need for a renewal of multilateral institutions as well. “Out of the war came the Bretton Woods institutions to redraft the rules of the game, to ensure stability and to solve the problems that created the war. Now, perhaps it is time to look at these institutions and work at reforming them to solve the problems of today.”

Other campaigners however wonder if hammering on the doors of the multilateral institutional framework is effective and question if groups, particularly advocacy and lobbyist NGOs, would be better off consolidating alliances with broader social movements. “We may want to take time to reflect on our ‘Everest mentality’,” suggests one campaigner. “Do we have to go to every World Bank summit or every WTO meeting?”

Ha-Joon Chang, lecturer at Cambridge University, thinks it is. He believes that the need to press on with pre-September 11 messages is necessary in the current climate before the debate is sealed-off. Chang is afraid that the recent tragedy may be used as “an excuse for the US to bulldoze through” agendas which may usually be met with resistance. With US Trade Representative Henry Zoellick, and the WTO and World Bank directors Mike Moore and James Wolfensohn calling for increased trade liberalisation in the new round of WTO negotiations, Chang maintains that civil society groups have a responsibility to continue articulating and advocating their resistance towards globalisation as forcefully as before.

Whither the anti-globalisation movement ?

The question of which messages to relay and which to place on the back burner is a real and immediate worry in the aftermath of the US attacks. Many civil society groups and globalisation watchdogs are wondering how to position themselves and their causes in the new political context. Some globalisation critics are wary that the general tone of global cooperation rhetoric employed by western alliance leaders may result in the cooption of civil society and the suspension of critical debate on international development.

Activists and NGOs are already cautious about taking a particularly strong approach to denouncing US trade policy for fear of seeming insensitive. As it is, some campaigners have decided to suspend or spike campaigns which appear to be ‘anti-American’ because they attack US-based corporate interests.

This has led to questions as to whether the space for progressive and positive debate has shrunk in the wake of the US attacks. “The question which needs to be explored is one of political space – has this shrunk or expanded ? This is not a question of whether our concerns are now revised in the light of the attacks, but of whether the space for articulating our concerns have shrunk. An indication of where this space has shrunk can be found in the types of campaigns which have been cancelled or shelved,” said one campaigner. Another suggested that this turnaround may be a result of concerns about how the public will react to campaign depictions of the US as a powerful bully. “We have to be more sensitive now. It is not our concerns which have changed, it is our approach,” he said.

The loss of political space and representation remains a serious concern of many civil society groups. With western countries on a heightened security alert, any form of dissent against the government may be construed as an act of terror. During the September 28 meeting, many activists and campaigners expressed fear that the globalisation-resistance movement built up since Seattle, Prague and Genoa may now start to lose momentum. Many felt that the movement which had been gaining a decent level of legitimacy may now be undermined. As it is, media commentators and politicians have begun linking anti-globalisers with the perpetrators of the US attacks.

Financial Times contributor Martin Wolf scathingly attacked the movement in his calls for increased trade liberalisation to counter the current geopolitical conflict. In arguing that free trade will strengthen global cooperation, Wolf denounced as “violent anarchists” those who blamed the suicide attacks on “US promotion of global capitalism”. He said: “The protesters were always wrong in their opposition to trade liberalisation. Now it is the time for policymakers worldwide to show they reject such dangerous obscurantism.” [Martin Wolf, Guarding the Home Front, Financial Times, 26 September 2001].

Meanwhile, Italian prime minister, who had faced intense criticism of the Italian riot police’s handling of the Genoa protests in July, has reiterated his attack on the anti-globalisation movement, bracketing it in the same category as the terrorists involved in the US attacks [Italian PM says sorry for attack on Islam].

Bangkok-based advocacy group, Focus on the Global South, alluded to this fear in their statement on the US attacks. “The terrorists have triggered a wave of reactionary and repressive politics,” it said, predicting “a climate of heightened xenophobia and militarisation” where “all forms of dissent will be subject to much greater security and repression”. To counter this and push a progressive agenda will be difficult, but the group suggests that the “global movement for justice” – including groups pressing for fairer trade and development practices – “link our existing and common demands to an agenda that includes a clear voice against militarisation and imperialism and proclaiming peace, cultural and religious freedom and self-determination.” [Statement from Focus on the Global South, 15 September 2001].

Some campaigners view the crisis as an opportunity to foster broader alliances among different civil society groups. The loosely-formed anti-war-anti-capitalism coalition formed in the US in the wake of the cancellation of World Bank and IMF Washington meetings is an example of how anti-globalisation campaigners have continued to push their messages in the sensitive political climate. The Anti-Capitalist Convergence, organisers of one of the peace marches on September 29, noted that while the enormity of the crisis had suspended the activities of many civil society groups in the immediate two weeks following the attacks, civil society movements should not be silenced on ill-founded grounds of national loyalty and patriotism.

“We strongly see the need to come together and act on our visions of the world we want to create and not on our fears. Though we came together against the Bank and Fund what we came together for is even more important now. We want to continue to mobilize, though we are all uncomfortable carrying forth in the way we planned,” said the group in their statement [Anti-Capitalist Convergence issues new call to action, September 20, 2001].

The causes of terrorism

Linked to the issue of messaging and the anti-globalisation movement is the need to address the causes of the September 11 attacks. A substantial number of commentators have moved beyond the popular political rhetoric of assaults on ‘democratic freedoms and liberties’.

Many commentators have identified US foreign policy and its hegemony in international affairs, including dominance over global trade relations, as a key factor in fanning anti-American sentiments which could have precipitated the attacks. Political writer John Pilger observes that efforts by the US to secure and maintain its economic and geopolitical interests have resulted in injustices – human rights abuses, support of illicit arms trade, disregard for environmental protection and “assault[s] on fragile economies by [US-dominated] institutions such as the WTO … World Bank and the IMF” [John Pilger, Inevitable Ring to the Unimaginable, 13 September 2001].

These injustices, argue commentators, breed resentment and frustration for people marginalised from the decision-making processes. “We may think that the debt and growing poverty in the south have nothing to do with the violence in New York and Washington. But they do,” says Saskia Sassen [Saskia Sassen, A Message from the Global South, The Guardian, 12 September 2001]. “The attacks are a language of a last resort: the oppressed and persecuted have used many languages to each us so far, but seem unable to translate the meaning. So a few have taken the personal responsibility to speak in a language that needs no translation.”

However, there are many voices within civil society who do not share the views of these commentators and are wary of constant connections made between terrorism and poverty. A number of NGO observers at the September 28 meeting felt that linking impoverishment with terrorism may be counterproductive to any civil society advocacy initiatives. “There are many causes for terrorism and poverty is not necessarily one of them,” pointed out a consultant with an aid organisation. “There are many poor people who do not resort to violence as a means of getting their message across.” An activist who works with peoples’ movements pointed out further that terrorism often acts on a local scale as well where violence is used to terrorise the local population: “Let’s not forget that the Taliban itself is a terrorist organisation and it has not helped the poor people of Afghanistan.”

There is nonetheless a general consensus that the events of September 11 may help open an avenue for addressing the causes of poverty and its implications. Many people around the world are asking the question ‘why’ ? While by no means the only causes of terrorism, the inequity fuelled by the foreign policies of the US and its allies need to be addressed in any debate on measures to combat terrorism.

Some writers have, prior to the attacks, predicted the terrorist consequences of world poverty and wealth disparity. Economist Mahbub ul Haq, in 1995, wrote: “Can rich nations convince their people that while their security may no longer be threatened today by the prospect of a nuclear holocaust, it is certainly threatened today by the travel of global poverty across international frontiers without even a passport in the form of drugs, AIDS, pollution, illegal migration and terrorism ?” [Mahbub ul Haq, A New Framework for Development Cooperation, The UN and Bretton Woods Institutions].

Meanwhile, politicians and global financiers have tried to forestall such discussion by arguing that the show must go on. The bravado demonstrated by global financiers in the wake of the attacks raises questions on how aware the proponents of the current system are of their day-to-day activities on the lives of the global population. G7 leaders, such as German chancellor, Gerhard Schroder, have publicly maintained that “terrorists cannot win against the world economy” [Gerhard Schroder, The Guardian, 27 September 2001].

The renewed calls for greater trade liberalisation in the face of the terrorist attacks by multilateral institutions has worried civil society groups. Chang notes that given the current political climate, US political interests may chose to argue that countries who are against new trade rounds in the upcoming WTO meeting are siding with the terrorists. He suggests that campaigners continue to argue against the tide rather than to be subdued by it, maintaining that “the terrorist attacks [are] indirectly a product of a world where the identities and the livelihood of the weak are destroyed and threatened by an uncontrolled process of pro-business globalisation”. Such suggestions come in useful in light of the World Bank’s position on free trade and its role in stemming the onslaught of a global economic downturn.

Recommended links

Article on New War, New Justice by David Held and Mary Kaldor for Open Democracy

Statements and articles on the US attacks from Focus on the Global South, Bangkok

Statements and analysis on the Foreign Policy in Focus website

New US anti-war coalition, International Answer (Act Now to Stop War and End Racism)

Common Dreams News Centre with news and features from worldwide media sources

Oxford Analytica (free login required for articles relating to the US attacks

What now for the anti-globalisers?, article by Paul Kingsnorth reporting from a meeting in Bolivia.