Discontent of the IMF

The only firm commitment from the G20 summit, not the voluntary commitment (fudge), was the IMF would have a $750billion increase in funding. There couldn’t be a worse arbiter than the IMF. Joseph Stiglitz wrote a landmark book in 2001 called Globalisation and its Discontents a critique of the IMF’s role in worsening and causing economic crises. His critique was made all the more potent by the fact that Stiglitz had been the chief economist of the World Bank. Stiglitz was the bad boy of economics, exposing from the inside the self interested, destructive neo liberal programmes. Forcing developing countries to adopt the very polices which lead to the crisis we are now in.

Joseph Stiglitz writes of the IMF’s role in the East Asian Crisis: “Not since Herbert Hoover have responsible economists argued that one should focus on the actual deficit rather than the structural deficit, that is, the deficit that have been there had the economy been operating at full employment. Yet this is precisely what the IMF advocated.”

The creditor nations of the IMF are the ones who control the totally undemocratic organisation, particularly the United States which has ‘veto power’ over its policies. When it came to an economic crisis at the core of the global economy, concentrated in those creditor nations themselves, the Hooverite IMF style policies were a pill far too bitter to swallow, and policies not advocated by the right or the left in most of Europe and the USA.

IMF Economist Kenneth Rogoff in his 2002 open letter, a sneering retort to Stiglitz’s book, wrote, “The Stiglitzian prescription is to raise the profile of fiscal deficits, that is, to issue more debt and to print more money.” Well that’s precisely what happens when there is a crisis in the rich world.

Looking at this again, this is a moment in history, in the midst of this global recession when all of the veneer of the IMF’s ideology is ripped away exposing the naked self interest of the financial community in rich countries. Those who now expect the state to bail them out rather than the capitalist bankruptcy. Increasing interest rates and cutting spending doesn’t help the population it helps foreign creditors, special interests well represented at the IMF. Bailing out industries and banks? Why do that when you can let them fall and be taken over and be bought by western multinationals? Who cares how you privatise, it could be a killing for Wall Street. This moment exposes the true nature of the global economic system: of free markets for the poor and socialism for the rich.

Can the rich creditor nations force poor countries to use the opposite policies to the rich ones in the downturn? Yes they can! The IMF has demanded forty percent spending cuts in Latvia, demanded that Ukraine cap social spending. The third world network did a study of nine countries which have received loans since September 2008. Of that of nine countries pro – cyclical fiscal and monetary austerity has remained a condition. East Asian and Latin American countries have worked hard to “rid themselves of the IMF” but a crisis born, not of poor domestic economic management, but out of the very neo liberal policies implemented at the core developed world that the IMF prescribes to poor countries. This crisis may seem like a bolt out of the blue for us in the West but crisis caused by financial deregulation and forced loss of capital controls is just what led to the East Asian Crisis and the Argentine Economic Crisis. In bitter irony this crisis may lead to developing countries being forced into their arms once more.

Using an organisation which has demanded financial deregulation as a condition for loans in the past as the arbiter to funding developing countries in this downturn is a bad joke. The IMF says it has changed policies, but actions in the downturn speak louder than words. In the words of an Oxfam spokesmen on the IMF, “It’s big, it’s bad and it’s back.”