House of Commons Issue No. 16 Minutes of Proceedings and Evidence of the Standing Committee on Foreign and International Trade
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House of Commons Issue No. 16

Minutes of Proceedings and Evidence of the Standing Committee on Foreign and International Trade

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[Texte originale en français]
We also have links with many other development organizations similar to our own in Europe, North America and Asia. This circle includes 23 national agencies in Asia and in Northern countries.

It is in this context that I will address you this morning, and perhaps mention in passing something that has a direct link with the purpose of this discussion and part of the mandate of our organization, namely that genuine development will only occur if we eliminate obstacles and change structures, institutions and attitudes that maintain what I would qualify as ``harmful development'', exploitation and oppression and replace them with new structures and relations that are more likely to lead to development.

Our mandate fits in very well with the context of the reform of the World Bank and the International Monetary Fund. Perhaps because we are a Church organization, we are mainly concerned with people who are the poorest. Professor Kirton mentioned them earlier. In today's world, the poor are particularly affected.

I will discuss Latin America for a few minutes. Latin America has had good economic performance in the past few years. Overall economic growth of the order of 3% was forecast last year and there have been regulations, economic reforms and liberalization of trade. Capital, mutual funds and the bond market have replaced the financing of private banks which have in fact started to return in Latin America, but the event that took place in December served to demonstrate how this recovery can be volatile.

The IMF and the World Bank have played particularly dominant roles in the Latin American situation, and their policies have emphasized economic growth, which accentuated exclusion and harmed a more equitable redistribution of income.

For example, in 1990, there were 140 million poor people in Latin America, that is, nearly 33% of the total population, whereas in 1980, before the period of structural adjustments, the percentage was 27%. There are 10 million children who suffer from malnutrition and 130 million people who lack adequate health care. According to the United Nations, in the year 2000, the number of poor will rise from 140 million to 192 million.

We hear much talk about Chile, where poverty has started to abate in the past two or three years. But up until now, this has been accomplished at the cost of considerable under-employment, as well as wage, health care and education cuts. There has been social disintegration and widespread insecurity. In Latin America, the poorest people, that is 20% of the population, earn only 4% of all income.

What we've noted virtually everywhere, and this has also been noted by the UNDP, the United Nations Development Program, is that the gap between the incomes of the rich and the poor is widening. These inequalities are particularly striking in Latin America but they also exist to a lesser degree in Asia and are growing.

We often hear that the debt crisis in Latin America is over. It is over with regard to private banks, but the debt burden remains very significant. In 1990, the figure was $432 billion. In 1993, it had risen to $500 billion. It has doubled since the 1980s.


The International Monetary Fund and the World Bank maintain that structural adjustment policies will lead to higher growth and an increase in employment, which in turn will reduce poverty. Their policies are marked by devaluation, an emphasis on trade and the liberalization of investment. Of course, these are not bad things in and of themselves. The aim is greater exports, less subsidy to business and a smaller public service. This should bring about more employment.

The International Monetary Fund emphasizes the fight against inflation, often to the detriment of employment policies and social measures. The liberalization of imports often eliminates companies that employ people in those countries.

The result of all this is a cycle of devaluation, wage cuts and poor working conditions, and fewer obligations placed on multinational corporations that open plants in those countries.

I was in Indonesia just two weeks ago. Among other things, I visited a plant that does subcontracting for the Nike Company. There were 9,000 employees in that plant. Nike decided to open a plant in Indonesia because salaries had become too high in Korea and Taiwan. The plant manager told me that he was not absolutely sure there would still be 9,000 employees in five years because salaries in Vietnam and China are much lower. This means that the phenomenon of corporations moving often will probably become more common and continue in a country where wages are about $2 a day in that industry.

I also went to Hong Kong at the end of the week. There's a great deal of manufacturing in Hong Kong and people are extremely worried because in China, which is right close by, there is a huge labour force that is prepared to do the same work for wages that are 10 times lower. Working conditions and wages are being cut. This is a world-wide phenomenon that does not only involve the North versus the South.

I would like to get back to structural adjustments and remind you about what some have said about it, notably UNICEF. It must be said that the debt of developing countries, both the way it was created and the way that it is being adjusted, are very simply an outrage against a large part of humanity.

We must also remember that by and large, structural adjustment programs do not work. Even the IMF has acknowledged. I quote:

It cannot be stated with certainty whether adjustment programs have worked or not based on existing studies. It is impossible to tell whether programs maintained by the Fund have led to performance improvements in the areas of inflation and economic growth. In reality, it often seems that the implementation of adjustment programs is accompanied by an increase in inflation and a reduction in growth rates in certain cases.

According to the North-South Institute, an independent research organization based in Ottawa: The International Monetary Fund manages to ensure extended improvements in the balance of payments. However, it is unable to achieve its secondary objectives in the areas of growth and inflation, or exert any decisive influence over financial results and the expansion of credit. A significant proportion of these programs disintegrate before they expire given the high rate of failure and the very rare cases of success. There remain specific questions about the ability of the Fund to take effective action in low-income countries.

I have another quote in closing, this one by Michel Camdessus, the director general of the International Monetary Fund:

Too often in the past few years, the poorest segments of society have borne most of the burden of adjustment.

I would also like to point out that I could provide members of the Committee with documentation in French and English, since our organization works across Canada. You will find in this documentation the sources and quotes that I've just presented, as well as many others.

I would also like to mention as an example what structural adjustment has done in Somalia. Somalia is an interesting example, since we've heard a great deal about it as a result of the multinational intervention that took place there two or three years ago.


Structural adjustment was applied in Somalia. Among other things, the devaluation of the local currency, the shilling, which was ordered by the IMF, led to large price increases for all agricultural inputs, fuel, fertilizer and drugs for cattle. The results were disastrous for cattle rearers and peasants.

Along with government cuts, another structural adjustment measure was implemented in Somalia under IMF monitoring. Healthcare expenditures dropped by 78% between 1975 and 1989.

According to the World Bank, the education was $4 a year per student in elementary school in 1989, compared to $82 in 1982. Between 1981 and 1989, school enrolment dropped by 41%.

With regard to the elimination of international trade barriers, in Somalia, this occurred with international aid provided as food, which competed with traditional crops.

Let us now go on to the privatization of State-owned enterprises. In Somalia veterinary services provided to nomads, for instance, animal vaccination, were privatized, and there were no emergency food programs for periods of drought. This contributed to the decimation of the livestock. Yet, up until 1983, livestock accounted for 80% of export revenue in that country.

With regard to support for exports, I'm speaking of Somalia, but this applies in many other countries. In Somalia, rather than promoting food production for the local market, a large proportion of the best land was reserved for growing fruit, vegetables, oil seeds and cotton for export. As we know, this led to a horrible famine in a country that was virtually self-sufficient in food products in the 60s and 70s.

Indeed, the problem we often observe when we examine the issue from the standpoint of the interests of the poorest, is that development is subject to the economy to such an extent that it eliminates whatever is produced for people.

In the case of the World Bank, for example, one can look at just about any document, and yet find no definition of development that takes into account anything other than economic development or statistics.

When we look at the International Monetary Fund, the situation is even sadder, because the IMF is essentially made of economists--there are 2,000 of them--whereas the World Bank does have some experts in development who have other concerns.

There are solutions, but first and foremost, we must remember that development cannot be imposed from on high. Even the World Bank acknowledges this in its official statements. The PNUD also emphasizes this a great deal. There cannot be genuine development, human development, that is dictated from above. If there is no participation by the local population, if there is no transparency in the mechanisms for decision-making and project implementation, virtually any project or program is doomed to failure.

This brings organizations like mine and the ones we work with to propose changes within the World Bank and the IMF. There are organizations that simply advocate the abolition of the IMF and the World Bank. Others advocate reform. Development and Peace and the majority of other organizations are asking for the democratization of the International Monetary Fund and of the World Bank, as well as greater transparency.

It would be in Canada's interest to take a leadership position that it has not really taken on yet in the area of transparency and openness in the World Bank and International Monetary Fund.

I thank you.

The Chairman: Thank you very much, Mr. Bertrand.

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