By William Palmer

      The purpose of this work is to explore the philosophical dimensions of the social justice implications that arise from the relationship between the International Monetary Fund (IMF) and Argentina in order to fully understand the ramifications of this relationship and provide, hopefully, some balance to the debate. The intent is to illuminate various arguments that emerge from a discussion of justice and this relationship, as it is ripe with ideological conflict, and provoke further debate, so that some reconciliation may produce benefit rather than tyranny. As the nature of justice and markets, especially on the international scene, is complicated, and since not all, nor nearly most of the considerations necessary to understand this dilemma are able to be addressed here, it is worth investigating a significant instrument of this process. While the IMF has been the target of incessant criticism and blame, much of the criticism emerges not only from one particular point of view, but rather from various camps who share quite different reasons for objection to IMF policies.

      The issue in question comes from the nature of conditionality itself and the subsequent conditions attached to loans given by the IMF to aid dependent countries like Argentina, whose recent collapse of political, financial and social foundations provides fertile ground for debate. When the IMF loans money to countries, conditions are applied which seek to change the structural foundations of the economies of these countries. These changes are known as "austerity measures" and their main objective requires a liberalization of the economies. They are "austere" because they require a drastic reduction of social spending which inflates the budget, the removal of trade barriers that have tended to favor local industry, the privatization of public industries, the pegging, or floating, of the exchange rate to the American dollar which facilitates international trade and a tax structure designed to increase revenue to pay off international debt. The primary cause for objection to these policies is clearly the reduction, if not elimination, of social expenditure and adjustments to promote trade, which are the result of conditionality, the integral instrument of the IMF.

      In the Articles of Agreement of the International Monetary Fund1, one will find the contractual, and therefore legal agreements that outline the Fund's purpose and guidelines for the employment of conditionality. Under Article I are the Fund's "Purposes," of which the most relevant are:

      (i) provide the machinery for consultation and collaboration, (ii) to facilitate the expansion and balanced growth of international trade, (iv) to give confidence to members by making general resources of the Fund temporarily available to them under adequate safeguard, (v) the elimination of foreign exchange restrictions which hamper the growth of world trade, (vi) [and to improve] the disequilibrium in the international balances of payments of members.

      It is clear that trade is important but also the phrase "under adequate safeguards" implies that the actions of the Fund and the member should not seriously hinder social and political stability. This is crucial in analyzing the behavior of the Fund and the repercussions of conditionality as it relates to justice. It should be stated also that the issue of balance of payments (vi) is problematic since the Fund loans money to facilitate debt problems yet reinforces the problem of debt by issuing more loans.

      Furthermore, regarding conditionality itself, Article V, section 3 states that "(a) The Fund shall adopt policies on the use of its general resources... and will establish adequate safeguards..." The phrase "adopt policies on the use of its general resources" refers to the specific policy changes that will occur. It is not exactly spelled out in the Articles, aside from exchange rate policy, those specific changes since they are determined individually. It is fascinating that the framers anticipated the need to include the phrase "adequate safeguards" again, seeking to give confidence that the "austere" measures do not harm society; but, nevertheless, they tend to be overlooked. Sidney Dell points out that "the magnitude of social costs and benefits is rarely quantifiable and there is therefore a tendency to ignore them."2

      In the Guidelines on Conditionality, the statement explicitly claims that members are to "adopt corrective measures" and "the Fund will pay due regard to the domestic, social and political objectives, the economic priorities and the circumstances of members." The term "corrective measures" translates to restructuring the economy. It is a serious point of contention that the IMF does not "pay due regard" to social issues and therefore is negligent on this account, yet it is commonplace to divert the blame to the member country, as is evidenced by, the IMF managing director, Horst Kohler's criticism of the recent disaster in Argentina: "the core problem, and thus the key to the solution, clearly lies within Argentina itself."3 The Fund reserves total immunity from any legal action. One may argue that because it is legal, then it is just, that justice itself has to do only with law; clearly, not all laws enacted by humans have necessarily always been just.

      The specific means and ends of conditionality have been briefly addressed, yet the focus, as mentioned, is the facilitation of international trade and a general liberalization of the economy. It is a fact, as stated in its "Purposes," a main goal of the IMF is to facilitate trade. Horst Kohler emphasizes this by saying, "Trade liberalization is the best form of self-help, because it offers an escape from aid dependency and because it is a win-win game."4 This paper does not attempt to explore the plethora of economic details, but rather to discuss the justice of conditionality and its consequences in a general or abstract manner.

      Again, the issue at hand is the nature of conditionality, the approach to this problem is philosophical and the objective is to understand the justice or injustice of this situation. Whether this relationship is just or unjust, the IMF is a structural element in the process of the globalization of the economy. Horst Kohler verifies this.

      "There is an urgent need to develop a political concept for one world, to guide and shape the process of globalization. Most of all, this requires cooperation, along with institutions to organize many of its forms. In my understanding, the Bretton Woods Institutions - IMF and World Bank - are part of the workforce to make a better globalization."5

      Yet, there is a crucial element of this process, which is the matter of who has control of the IMF, or rather, to what extent member countries are able to control the policies under which they are subject. It is argued that, because of the international profile of the Fund, there is no one country or group who has final say in policy. However, while this is true, is it important to look at the voting power of, for example, the US and that of Argentina. The US has 17.16% of voting power, while Argentina has .99%. As far as IMF directors and the corresponding voting power, the US maintains 17.16%, while the director of Argentina, who represents, in addition to his country, Bolivia, Chile, Paraguay, Peru, and Uruguay, has only 2.00%. Furthermore, the combined voting power of the representatives of the US, England, Japan, France and Germany amounts to 39.28%; although not a majority, that leaves the other 177 countries with the remainder.6 This clearly reflects a serious imbalance in voting power and one may quickly assume, as many do, that a country with more voting power will be able to determine policy that satisfies the interests of that country at the expense of a country with weaker voting power and different interests, simply because it can.

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