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Bretton Woods Agreements (Amendment) (No. 2) Bill 2011: Report and Final Stages

Tuesday, 7 February 2012

Dáil Éireann Debate
Vol. 754 No. 3

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An Leas-Cheann Comhairle: Information on Michael Kitt Zoom on Michael Kitt As no amendments have been tabled we will proceed to Fifth Stage——

Deputy Richard Boyd Barrett: Information on Richard Boyd Barrett Zoom on Richard Boyd Barrett There is an amendment.

An Leas-Cheann Comhairle: Information on Michael Kitt Zoom on Michael Kitt The Deputy’s amendment is out of order on two grounds.

Deputy Richard Boyd Barrett: Information on Richard Boyd Barrett Zoom on Richard Boyd Barrett What? Since when? Will somebody explain this?

An Leas-Cheann Comhairle: Information on Michael Kitt Zoom on Michael Kitt Yes, Deputy. Briefly, the first reason is that in accordance with the ruling of the Chair No. 138 from the third edition of 2006, an international agreement [324]scheduled to a Bill is open to rejection by the House but because there is at least one other party to the agreement it is not subject to amendment. The second reason is the amendment seeks to negate the object of the Bill and therefore must be ruled out of order as being in conflict with the principle of the Bill as read a Second Time.

Deputy Richard Boyd Barrett: Information on Richard Boyd Barrett Zoom on Richard Boyd Barrett May I——

An Leas-Cheann Comhairle: Information on Michael Kitt Zoom on Michael Kitt No, it is out of order.

Deputy Richard Boyd Barrett: Information on Richard Boyd Barrett Zoom on Richard Boyd Barrett On a point of order——

An Leas-Cheann Comhairle: Information on Michael Kitt Zoom on Michael Kitt The Deputy asked me a question and I gave him the two reasons for ruling the amendment out of order.

Deputy Richard Boyd Barrett: Information on Richard Boyd Barrett Zoom on Richard Boyd Barrett I just want clarification on what the Leas-Cheann Comhairle said. It is a regular occurrence in the Chamber that the Government deletes the entirety of a Private Members’ motion and replaces it with something that completely negates the motion as tabled by the Opposition and this is allowed consistently. However, in this case we are being told one is not allowed do this. I ask for clarification on where the consistency is in the application of this rule.

An Leas-Cheann Comhairle: Information on Michael Kitt Zoom on Michael Kitt The Deputy is referring to Private Members’ business but this is legislation.

Deputy Richard Boyd Barrett: Information on Richard Boyd Barrett Zoom on Richard Boyd Barrett But——

An Leas-Cheann Comhairle: Information on Michael Kitt Zoom on Michael Kitt That is the position. I will now proceed——

Deputy Richard Boyd Barrett: Information on Richard Boyd Barrett Zoom on Richard Boyd Barrett On a point of order, I also wish to point out the thrust of the Bill purports to be some level of democratic reform of the institution of the IMF. My amendment proposes to achieve exactly the same end, namely, democratic reform of the IMF, through different means. It replaces the various measures proposed in the draft Bill with another measure designed precisely to achieve democratic reform of the IMF. Why, therefore, is it out of order?

An Leas-Cheann Comhairle: Information on Michael Kitt Zoom on Michael Kitt The Deputy can make this point on Fifth Stage. We will now proceed to Fifth Stage.

Deputy Richard Boyd Barrett: Information on Richard Boyd Barrett Zoom on Richard Boyd Barrett I just want an explanation as to why it is out of order.

An Leas-Cheann Comhairle: Information on Michael Kitt Zoom on Michael Kitt I have already explained it.

Bill received for final consideration.

Question proposed: “That the Bill do now pass.”

An Leas-Cheann Comhairle: Information on Michael Kitt Zoom on Michael Kitt Does Deputy Boyd Barrett wish to make a point on Fifth Stage?

Deputy Richard Boyd Barrett: Information on Richard Boyd Barrett Zoom on Richard Boyd Barrett The Government, in my opinion, has been extremely dishonest in how it has presented the Bill. On Second and Committee Stages and whenever it has commented on the Bill, it has suggested it is purely a technical Bill. It is not a technical Bill. Its measures arise out of an intensely political response by the IMF to a crisis of legitimacy it has suffered since its disastrous policies in the Asian crisis at the end of the 1990s produced a huge reaction against the IMF by many of the Asian countries. As it had done in many Third World countries previously, the IMF slavishly enforced neoliberal dogma as a response to the [325]Asian crisis, propelling Asia into a very serious recession by imposing its economic shock therapy on Asian countries, specifically lifting capital controls leading to a massive flight of money out of Asia which turned a crisis into a deep recession. The result was that many of those Asian countries boycotted the IMF, and the IMF was on the brink of falling apart. That produced a political rather than a technical debate within the IMF on the need to rebuild its legitimacy and credibility on the international stage or face extinction. There was a long period of debate, and gatherings took place in which the way they intended to address the deeply undemocratic nature of the IMF and its failing legitimacy was discussed. The thrust of the criticisms of the IMF at that time was that it was dominated entirely by the United States, the big European powers and the big industrial powers in the world such that the United States, for example, with 17% of the votes within the IMF, could block any proposal even if it was supported by all the remaining states because 85% of votes is needed to get a proposal through in the IMF. That has not changed.

  7 o’clock

This Bill, and these so-called reforms, purport to be recalibrating the IMF in a reformist or more democratic direction but it leaves the US veto intact and a situation where the 27 industrialised nations still have more than 60% of the votes in the IMF and completely dominate it. That contrasts with the poorest countries that far out number the industrialised countries and have far bigger populations. In many cases their resources fuel the economy of the industrialised nations but are plundered in many cases by those industrial nations with the assistance of the IMF enforcing its structural adjustment programmes and its dogma about gearing up economies for export in the global markets that have devastated those countries. Their dominance, which is due to the undemocratic governance structures of the IMF, has meant they have been able to ram that stuff down the throats of African, Latin American and Asian countries. There was a huge reaction against that because of the Asian crisis. That was most dramatically seen through the 1990s and the early 2000s in the big demonstrations in Seattle and the anti-globalisation movement, which caused a major crisis of legitimacy for the IMF, and this is what they come up with — nothing.

Our Government is rubber stamping what is a con job, and it is not just left wingers or activists who are saying that. The Brookings Institution, a right-wing think tank in the United States, described these so-called reforms as follows:

a decades-old building that is in need of major repairs and renovation. The plumbing is ancient and needs updating. The roof is leaking in places. Termites have been found in the joists in the basement. Yet the building owners recommend, as a first step in renovation, merely a fresh coat of paint in the entrance hallway and the fixing of some broken glass panes in the windows facing the street.

In other words, it is a purely cosmetic exercise with no attempt to address the substantial and deep democratic deficit within the IMF that allows it to be dominated by the United States and the major powers.

It is also worth putting on record again what Joseph Stiglitz, the Nobel prize winning economist, said about the IMF. He stated:

When the IMF arrives in a country, they are interested in only one thing. How do we make sure the banks and financial institutions are paid? ? It is the IMF that keeps the [financial] speculators in business. They’re not interested in development, or what helps a country to get out of poverty.

That is what Stiglitz said and that is the reality. Our Government is giving succour to this institution and is trying to give it the stamp of renewed legitimacy precisely at a time when its entire structures and modus operandi should be challenged in the most fundamental way.

[326]In terms of the IMF’s policies and the undemocratic nature of that institution, which remains unchanged, it is now trying to apply its witchcraft in this country and in Greece, with devastating consequences. This is a time when we should have a serious debate about the nature of the IMF. Of course we need a global financial institution that is genuinely acting in the interests of all states and the global economy but that is not what the IMF is; it is a creature of the United States and the big industrial powers which are trying to gain advantage from the misery of others. That is the reason it is vitally important to oppose this Bill and call for real democratic reform of the IMF and the other global financial institutions.

Deputy Pearse Doherty: Information on Pearse Doherty Zoom on Pearse Doherty I outlined my concerns and those of my party regarding the reform, theoretically, of the IMF that is supposed to be happening but is not happening. What we have before us is legislation that will not make any major changes. It removes the fact that five of the larger countries in the IMF can appoint members to the executive board, and they will all be directly elected. On that point Sinn Féin will not stand in the way of this legislation but we should not pretend, and the previous speaker hit the nail on the head in this respect, that this will lead to any real change or governance reform within the IMF. The wealthiest countries in the IMF represent 15% of the membership but it has 60% of the voting rights within the IMF. That is the issue that must be addressed if we are to have credibility for that organisation and real democratisation of the IMF.

Would any party in this House support the concept, for example, of France and Germany, with 15% of the population of the European Union, having 60% of the votes? No party in this House would tolerate such a system so why should we ask the less well off countries to accept that? The IMF is undemocratic in its nature and is fundamentally flawed in terms of its governance. This legislation is about window dressing but at the same time the legislation is before us. Does it make it fairer in terms of the appointment of the executive board? Of course it does. It removes some of the power of the five major countries in the IMF but that is not where the game should be. There must be proper fundamental reform in regard to the IMF and the best way of doing that is for Ireland to start batting on behalf of other countries that are being penalised as a result of the lack of democracy within the IMF. We should make that clear. During this debate on the Bretton Woods agreement we have not had a Government spokesperson taking a principled stand on this issue. Traditionally, the Irish people and previous Irish Governments have stood up for less well off countries. Unfortunately, that was a missed opportunity on the part of this Government. I accept the legislation addresses some small issues in terms of appointment of board members and so on but this debate could have been used as an opportunity to signal Ireland’s intent that there must be proper, serious structural reform in terms of democracy within the IMF instead of the type of window dressing we have here, which is marginally better but misses the picture.

Minister for Finance (Deputy Michael Noonan): Information on Michael Noonan Zoom on Michael Noonan I thank all Deputies who contributed to this debate. I would like to reply in the first instance to Deputy Boyd Barrett on the points he has just made.

The context for this Bill is the decision by the IMF governors in 2010 to propose wide-ranging governance reforms including increased representation for emerging markets and developing countries. The reforms are also designed to protect the position of smaller, poorer countries.

The Bill provides for acceptance of the amendment to the IMF Articles on the reform of the executive board. The amendment is designed to make the board more representative by making it an all elected body. This will also facilitate better representation of emerging markets. Taken [327]together with the earlier reforms agreed in 2008, the voting shares of the emerging market and developing countries as a group will increase by well over 5%.

The change in voting power is undoubtedly an important step in the right direction. It is the outcome of lengthy discussions with the full IMF membership and is worthy of support. The quota adjustments and the reform of the board are parts of an overall package agreed by the board of governors in December 2010.

Other elements of the 2010 reforms include a review of the quota formula, which is due to be completed by January 2013, and a further review of quotas by January 2014. The 2010 reforms also include a commitment to reduce by two the number of executive directors representing advanced European countries. These measures will continue the process of adjusting quota shares to reflect shifts in the global economy and are likely to result in further increases in the share of emerging market and developing countries as a whole.

The increase in Ireland’s quota at the IMF will result in a reduction in the cost of our borrowings from the fund. The Central Bank has estimated that the overall impact of the 2008 and 2010 quota changes, when effective, will be a reduction of the order of 100 basis points in the weighted average interest rate margin on the borrowings. This is a very welcome development and the Bill supports this process.

When the amendment has been accepted by the requisite majority of IMF members, the related quota increases will come into effect. This will be a very welcome development for Ireland and will result in a reduction in the cost of our borrowings from the fund. The quota increase will also assist in strengthening our representation and influence in the IMF.

Some Deputies opposing the Bill questioned the legitimacy of the IMF. I do not share these views. The Bill will assist the ongoing process of making the IMF more representative of the world as it stands today and will help strengthen the position of emerging markets in developing countries within the institution.

I thank Deputies for their co-operation in advancing the Bill.

Question put.

Deputies: Vótáil.

An Leas-Cheann Comhairle: Information on Michael Kitt Zoom on Michael Kitt Will the Deputies claiming a division please rise?

Deputies Richard Boyd Barrett, Clare Daly, Luke ‘Ming’ Flanagan, Finian McGrath, Mattie McGrath, Maureen O’Sullivan, Thomas Pringle and Mick Wallace rose.

An Leas-Cheann Comhairle: Information on Michael Kitt Zoom on Michael Kitt As fewer than ten Members have risen I declare the question carried.

Question declared carried.

(Interruptions).

An Leas-Cheann Comhairle: Information on Michael Kitt Zoom on Michael Kitt Order, please. The Bill will now be sent to Seanad Éireann.

Deputy Richard Boyd Barrett: Information on Richard Boyd Barrett Zoom on Richard Boyd Barrett On a point of order, will the names of those Members who opposed the Bill be recorded?

An Leas-Cheann Comhairle: Information on Michael Kitt Zoom on Michael Kitt Yes.


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