Globalizing debate on IMF: Enter Indonesia

Max Lane, Visiting Fellow, Center for Asia Pacific Social Transformation Studies, University of Wollongong, New South Wales, Australia

The debate about extending Indonesia's relationship with the International Monetary Fund (IMF) between Minister Kwik Kian Gie, in charge of the National Economic Planning Board and the other ministers in President Megawati Soekarnoputri's Cabinet is an important development in Indonesian politics and the debate on development strategy. It is also a debate that brings Indonesia closer to world trends in discussing these issues.

The economic strategy proposed by the IMF along with the World Bank have been under attack from many quarters ever since these institutions were formed at the initiative of the United States government at the end of World War II. But they have come under particular attack in the last few years.

In the West, the criticisms of these institutions has also led to a substantial new political movement in the U.S., Western Europe and Australia: The anti-globalization movement, or, more accurately, the anti neoliberal globalization movement.

This movement burst onto the scene with the big demonstrations against the World Trade Organization (WTO) in Seattle two years ago and has continued to grow since then, with more large demonstrations in many European cities. There have also been several major conferences raising criticisms of the IMF, World Bank and WTO, the largest being the gatherings at the World Social Forum in Porte Allegre, Brazil. Last January more than 80,000 people gathered to discuss alternatives to the strategies proposed by the IMF and World Bank.

At the heart of these criticisms is an analysis that during the last 10 years, the western governments, particularly that of the U.S., have been using the IMF and the WB to push forward the centralization of capital accumulation in the West, and again particularly in the U.S. There has been no real globalization of productive investment.

That remains centered in the U.S., Western Europe and Japan. There is a globalization of roaming speculative capital which has often caused financial instability, but a centralization of productive investment.

The critique goes that the IMF is using its hold over indebted nations to force developing countries to do away with any protective measures they have against the predatory activities of the stronger Western countries. While the U.S. speaks free trade, it uses the IMF to open up the markets of weaker economies often at the expensive of the development of local national industry and agriculture.

An economy like the Indonesian economy is a smaller and weaker economy primarily because it was the victim of 300 years of marauding by Dutch and other western colonial rulers. All the "developing countries" are still underdeveloped because of colonialism. Conversely the western countries, such as Western Europe and the U.S., are powerful economies because they were able to enrich themselves and grow during their time as imperial powers.

A country like Indonesia has every right to protect itself against the ongoing predatory practices of the West. It is even outrageous that the West expects Indonesia to pay the so-called foreign debts of US$70 billion. The West still took much more than that during the previous 300 years.

Worse still, the West uses this indebtness to smash the economic sovereignty of countries like Argentina and Indonesia. The level of detail concerning economic management in the Letters of Intent signed by the Indonesian government and the IMF is such that it is the IMF that has taken over de facto control over economic management.

This control is then used to transform the Indonesian economy into an extension of the U.S. and other western nations' economies. This is why the IMF insists that government-managed banks and other assets are sold as quickly as possible, so that they might be bought cheaply by U.S. capital, as was the case with Bank Central Asia.

It is also the reason for the IMF insisting that tariff quotas on almost every item that the U.S. can export to Indonesia be dropped. This is being done with even sugar and, yes, for rice -- rice which employs tens of millions of people in Java!

There have already been scores of protests by rice and sugar farmers as their already miserable livelihoods are squeezed as a result of cheap imported rice and sugar. Their misery has been made worse still by the ending of subsidies on fertilizers, resulting in less incomes and also slowly declining harvests due to lesser use of fertilizer.

It is an expression of solidarity with the victims of these disastrous IMF policies that lies behind the growing movement in the West that is calling for the abolition of the IMF and the cancellation of all the Third World debt.

In Indonesia, the debate has just started. Economic minister Dorodjatun Kuntjoro-Jakti has already answered Minister Kwik by pointing out that ending the relationship with the IMF will result in Indonesia being denied important sources of capital, even if this capital comes with interest repayments and all sorts of delirious conditions. Minister Dorodjatun is right. His reply to Minister Kwik highlights the direction in which the debate needs to develop. If not from the IMF, then via whom can Indonesia obtain the capital it needs?

Of course, Indonesia does have sources of finance that are available for the long term. The world will still need its oil, gas and other minerals. And there will always be those individual western countries and companies that will do deals no matter what the IMF says. Even Cuba, under total boycott from the U.S, receives investment from countries like Spain and Sweden as well as has good trading relations with countries like China and Venezuela.

But if Indonesia wants to have a sovereign economy and be a sovereign country, it needs to look back, and at the same time modernize, an idea born out of the movement to build the Indonesian nation itself: Sukarno's idea of berdikari, to stand on one's own feet. This cannot mean isolation from the world's technology or from trade.

But it can mean having as a starting point for any economic strategy the mobilization of all the human and financial resources already in the society and economy rather than making foreign private investment the motor. In any case today there is no significant foreign or domestic private investment.

Mobilizing existing resources means, most of all, mobilizing and upgrading as quickly as possible the whole of the country's human resources.

This is the greatest crime of the policies being supported by the IMF and implemented by the ruling political elite here. Rather than being the central priority, education is relegated way down the list. With millions of children dropping out of school, Indonesia is being prepared to be mainly a coolie nation.

But mobilizing all the human and technical resources, independent of and in defiance of the IMF and the West, is more a political problem first, and an economic question second.

Government institutions alone cannot draw up a satisfactory inventory and organize 200 million people into collective effort. This requires tens of millions of people to be organized and to be conscious of the tasks of development.

Any discussion of alternatives to slavery to the West and the IMF cannot avoid this central question: Reawakening and rebuilding in modernized form mass popular organizations that can democratically mobilize the resources of society.