Russia has gone from a recipient to a donor of IMF aid. Moral satisfaction will have to suffice, because Russian leaders are unable to influence IMF policy.
Twenty years ago, on June 1, 1992, Russia joined the International Monetary Fund (IMF). The author of this article, Mikhail Delyagin, participated in the talks between the Russian government and the IMF between October 1998 and April 1999.
In the 1990s, Russia received help from the IMF and was actually under its external administration; Russia’s entire macroeconomic policy was dictated by the IMF and, to some extent, the World Bank. In the 1990s, I worked in the executive offices of the chairman of the RSFSR Supreme Council, then Russian President Boris Yeltsin, and finally the government (beginning in 1997), and I remember well how the IMF faxed the government its macroeconomic programs in awkward Russian.
However, this was by no means rule by diktat, but a more sophisticated arrangement. When IMF or World Bank representatives came to Moscow, they would ask the Russian reformers about their plans and then incorporate part of these plans into IMF requirements. So, to some degree, there were Russian reformers standing behind the IMF, imposing their will on the entire country, including their political and ideological opponents. It goes without saying they did not propose anything that strayed from the IMF’s own ideology.
The main idea behind the IMF is that a reliable currency and financial stabilization are preconditions for socio-economic development (organized and funded by the World Bank). This is correct in theory, but in practice the IMF achieved this stabilization by barbarous methods that ruled out the possibility of any kind of development. The IMF demanded that inflation be reduced with tougher fiscal policy. This suppressed production and encouraged profiteering. It also reduced budget expenditures, primarily in the social sphere, thereby destroying the country’s labor resources. In fact, the IMF is still pursuing the same course – it has earned the reputation of a doctor who writes a prescription without bothering with the diagnosis.
This is why the IMF’s interference has been counterproductive in the last 20 years. Russia is one example of this. It was not only low oil prices, rampant looting and the failures of liberal reformers (as well as many other Russian figures) that brought Russia to default in 1998. Unreasonable IMF requirements made no small contribution to this disaster. In fact, the IMF formed a ruling tandem with Russian liberal reformers but as the senior partner.
When Russia paid back its debts thanks to rising oil prices, its relations with the IMF changed slightly. The IMF can no longer dictate anything to Moscow, but it continues to give its recommendations. Russian leaders can now brush aside the unacceptable ones but many are still put into practice because of the ideological affinity of the IMF and Russia’s liberal reformers. Thus, the activities of Mr. Kudrin and other liberal reformers, who refuse pointblank to invest in national development, are in harmony with the IMF’s strategy. The fact that this strategy is now being carried out not so much because of the IMF than the preferences of the Russian liberal reformers is another matter. However, we shouldn’t forget that these preferences were largely developed by the IMF in the 1990s.
Russia has gone from a recipient to a donor of IMF aid. Moral satisfaction will have to suffice, because Russian leaders are unable to influence IMF policy. The United States is the undisputed leader in the IMF both in terms of the share of capital and informal influence on its top management. Attempts by the BRICS countries to consolidate their position in the IMF in order to influence policy are important symbolically but will hardly produce tangible results in the next few years.
The IMF will remain a tool to destroy national economies in the interests of multinational corporations. Despite its respectable image, the IMF remains a mortal enemy of not only economic and political sovereignty but even the standard of living in the less developed part of the world.
Some countries that are considered advanced – up to and including Italy – will gradually return to the IMF’s “zone of responsibility” as the global crisis deepens. They will also feel the destructive impact of the IMF’s ultra-liberal ideology and practices.
