The IMF is wrong about the best path to growth, say charities

Click to follow
The Independent Online
Leading charities have called for a new approach to the reduction of poverty in developing countries, and criticised the international community for dragging its heels on writing off the debts of the world's poorest nations.

Two separate reports issued today call into question the policies of the International Monetary Fund and World Bank as they prepare for the start of their annual meetings. The aid agencies, Oxfam International and Christian Aid, accuse the IMF in particular of being unwilling to take effective action to help the poor.

Oxfam says the East Asian experience during the past three decades shows that reducing inequality and tackling poverty is the most effective path to economic growth. "Economic success has been accompanied by a silent revolution of poverty reduction. More people have moved out of poverty more quickly than at any time in history," it says.

The report says that, contrary to received wisdom in the IMF and World Bank that growth will "trickle down" to relieve poverty, the link actually runs the other way. Policies that raise the incomes of the rural poor, and limit inequality by offering health, education and other services to the very poor, lead to economic success.

It emphasises the contrast between the relatively equal East Asian economies and the lack of economic success enjoyed by very unequal countries such as Brazil, Mexico and Zimbabwe. For example, growth in Mexico's national income has had to be four times as great as South Korea's to increase the incomes of the poorest tenth of the population by an equivalent amount.

"Equity is good for growth," the report concludes. It criticises the IMF for ignoring the increased poverty and inequality that resulted from its 1995 financial "rescue package" for the Mexican economy.

Christian Aid criticised the IMF for its lack of progress on the package of debt relief agreed at last year's annual meeting. "From governments to campaigners, no one has been impressed with the effort shown by the IMF."

Comments