Let me tell a bit about my perception of IMF, WB, Developmental loans, SAP's etc etc.
In the 1970's the price of oil floated in the global market. The countries in the Arabian Gulf became rich suddenly. We now know from the British intelligence reports that there was secret American plan to attack Iran. This was easy for America then, as she was the only nation post WW2 to remain as economic and military superpower. Threatened by the possibility of war, Iranians and other oil producing countries promised to deposit their bonds with Americans and Europeans. In the 80's when dollar started floating, these rich countries found it hard to give the mature money back to the Gulf countries. They came up with the idea of re-engineering the IBRD to become the developmental bank. This is to lend money to the poor African and Asian countries for the purpose of development. The rationale is that a Government is the best agency you can lend to. They cannot go missing, they are not privately owned and for many other reasons. The reality is that the African and Asian countries will never be able to pay back these loans. This also enabled the rich countries to impose sanctions over these poor countries. Then came the Structural Adjustment Policies (SAP). The economic theory is that, if your economy is export led, devaluing your currency will propagate economic growth, as we have seen in the case of Japan. But if your country has external debts, and import led economy, you will do more harm to your economy by SAP. And since the debts are in USD, it will always increase as you devalue the currency. WB and IMF has been forcing all the indebted countries to adopt SAP. I believe, the affluence we see in the west is due to crooked policies targeted to the poor countries and poor people of the world. I see it as injustice, not as success of free market economy.
In the case of India, I believe devaluing might do some good at this stage since there is a small growth in manufacturing sector. But to invest external money in infrastructure development might be a bad idea when we need to devalue the currency for economic growth.
RE:WB, IMF Developmental Loans and SAP
by ASHOK on Apr 17, 2007 12:38 AM Permalink
I believe, the affluence we see in the west is >>>due to crooked policies targeted to the poor countries and poor people of the world. I see it as injustice, not as success of free market economy. >>>
And you propose India should further subsidise its export by devaluation.
Have you seen Crowded in indian roads with cars moving at 10 kmts per hour in city like Mumbai.
RE:WB, IMF Developmental Loans and SAP
by Sudeep M on Apr 17, 2007 08:54 PM Permalink
I might be wrong in saying that.
But I would like to highlight my main point.
Devaluation can be good or bad depending on political and economical stuation of your country. Hence there is a huge difference when the decision of devaulation is done by the economists in a home country versus when it is done by "experts" flying in from WB to "help" and "strengthen" the economy. As you know, in most cases it is imposed on the country. And it has never worked. (If interested, you can read 'Globalization and its Discontents by Joseph Stiglitz)
I agree India need some serious infrastructue input. But it feels like it is a combination of lack of political knowledge and will. And what we need is some young committed leadership.
