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Why Should We Trust the IMF?
The IMF is shouting about the need for austerity today, but it was strangely quiet during the build-up of the bubble that got us here
These recommendations are being given in a context where the world economy is suffering from a massive shortfall of demand. In other words, tens of millions of people are unemployed right now because there is not enough spending to keep them employed. The IMF's programme is almost certain to reduce spending further leading to even larger shortfalls in demand and more unemployment.
But, the IMF says that we should trust them. The question we should all be asking is: "why?"
Where was the IMF when the housing bubble in the US and elsewhere was inflating to ever more dangerous levels? Was it frantically yelling at governments to rein in the bubbles before they burst with disastrous consequences? After all, what could possibly have been more important than warning of the dangers of these bubbles?
It was easy to both recognise the housing bubbles and that their collapse would have devastating consequences for the economy. Economies don't adjust easily to a loss of wealth that in some cases exceeded 50% of GDP.
Real economists know this, but apparently the folks at the IMF did not, or if they did, they didn't think it was worth saying anything. One will look in vain through IMF publications during the build-up of the housing bubble for serious warnings of the potential dangers. While the IMF can scream about the need for austerity today, it couldn't be bothered to say much about the bubbles that got us here.
The IMF's track record gives us reason not only to question the institution's competence but also its motivations. This question comes up most clearly in the case of Argentina. At the end of 2001 Argentina defaulted on its debt, enraging the IMF. Prior to the default, Argentina had been an IMF poster child eagerly embracing the IMF's programme.
The IMF's growth forecasts clearly reflected its change of attitude toward Argentina (pdf). Prior to the default the IMF was consistently overly optimistic about Argentina's growth prospects, projecting much higher growth than Argentina actually experienced. After the default, the IMF was hugely over-pessimistic, projecting much lower growth rates than it subsequently experienced. It is difficult to explain this pattern of errors except by a political motivation.
It is possible to see a similar pattern in the IMF's latest set of policy recommendations to deal with the economic crisis. The impact of most of its proposals will be to reduce the benefits received by ordinary workers. The proposed changes in labour market regulations will likely also weaken workers' bargaining power, leading to cuts in wages. Furthermore, the reduction in demand caused by the turn to austerity will leave millions more out of work, both depriving these workers of income and further weakening the bargaining power of those who still have jobs.
There are alternatives. Central banks like the European Central Bank, the Bank of England, and the Federal Reserve Board could just buy and hold large amounts of government debt. These central banks can both ensure that there are no questions of solvency by providing a ready market for government debt and that there is no build-up of interest burdens. The interest paid on the debt held by the banks is refunded to governments.
Large-scale central bank purchases of government debt will not create inflation in a context of massive unemployment and excess capacity. This is not a point we have to debate. Japan's central bank has bought an amount of government debt roughly equal to its GDP, yet it remains far more concerned about deflation than inflation. While we could hope to do better on the stimulus front than Japan, inflation is simply not a problem it faces now or even on the distant horizon.
It is especially painful to see these calls from austerity coming from the IMF. This organisation is distinguished not only by its dismal track record in pushing economic policies that don't work; it also is known for the exorbitant benefits that it gives its economists. Under the IMF's pension programme, many staffers can retire in their early 50s with six-figure pensions. Imagine the folks who completely missed the housing bubble or who got it totally wrong on Argentina lounging around the tropics at age 51 on their $100,000 a year IMF pension. When it comes to economic advice, I think I'd rather listen to that honest street drunk.
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29 Comments so far
Show AllIMF: "International Monetary F_ _ _ups!"
How about Incredibly Mean Fascists?
Insanely Masochistic F...ers
International Monetary Fungus
We've captured, tortured and killed thousands of people who have done us no harm. How many people work for the IMF? Are they that far out of the reach of our grasp? Bravery would be capturing these criminals, not droning innocents in Afghanistan. Look closely people, the real enemy is closer than we think. The IMF is far more dangerous to civil society than the Taliban. Should they not be stopped in their tracks?
IMF is but one organization within the corporate cartel shaping the new world order...20 million ultra-wealthy families served by billions of slaves.
The cartel includes global corporations, US Federal Reserve, World Bank, etc.
The cartel owns enough politicians around the globe to assure that governments serve their every need at the expense of the rest of us.
The global "austerity" mandate signals that the cartel's power has reached its zenith.
The IMF is not giving recommendations for growth, that's unadulterated bullpuckey.
The IMF is announcing their declaration of (CLASS) WAR.
Austerity is the IMF's weapon of choice to destroy their enemy, you and me.
Sun Tzu said all warfare is based on DECEPTION.
Americans, so poorly informed and heavily propagandized, won't even see the attack coming.
It seems we mostly have a battle between fiscal austerity and government stimulative consumption. Fiscal austerity is currently 'winning.' Fiscal austerity does give us the benefit of a lowered pressure on non-sustainable consumption. Of course we could have stimulative consumption aimed at strategies of conservation and sustainability, but sadly that would require a modicum of logic and common sense.
Fiscal austerity and government stimulative consumption have two different meanings each, one when applied to corporate welfare, the other when applied to social safety nets and worker rights.
"Fiscal austerity does give us the benefit of a lowered pressure on non-sustainable consumption."
Last I checked, all this "fiscal austerity" doesn't seem to apply to corporate welfare queens or the warfare kings. When leaders like Hugo Chavez kick those two to the curb, Washington raises hell against him. Logic and common sense already exist and is being used in other nations while there is still a chance. It is a pity that most of the electorate in this nation refuses to use it and invents very lame excuses such as "it's too communist" or "it isn't practical". It appears that this nation is taking great pride in losing it, not using it. :(
Read the Shock Doctrine -- if you haven't already -- Naomi Klein's look at world finance, and the Chicago Boys.
Trust the IMF? I don't!
Here, here! The book is a must read for anyone to understand what is happening. The failure of our political and economic systems to stop the horrible abuse rendered by the IMF and World Bank is beyond sick and scandalous: it is genocide on the vast majority of the world's population.
The IMF, the BIS, the FED and central banks the world over are machinations of the elites in order to feed their lust for wealth, power and control. Their 'policies and recommendations' ALWAYS benefit the "haves" to the detriment of the "have nots".
I love the opening line of this article.
The IMF came into being after WWII and it's purpose was to make a killing on the rebuilding of Europe. Unfortunately for them, the Europeans were too smart to go for their BS. So they went directly after the third world ever since, driving their people to desperation and early death. Their polices are now and always have been to reward the rich and screw the rest of everyone to death.
Trust the IMF? Not to do anything but be white collar crooks. Not to do anything but make themselves even wealthier while those under their policies starve. If anything, I trust them to be the scum they have ALWAYS been.
This is a group that needs to be abolished, dismantled, destroyed, demolished and disintegrated. They need to be stripped of every precious dollar they have stolen from every country they have screwed, and sent to jail for the destruction of human lives for the sole purpose of satisfying their own greed.
To HELL with the IMF.
"The IMF came into being after WWII and it's purpose was to make a killing on the rebuilding of Europe."
Kind of. The IMF, World Bank and the ITO were going to be the pillars of a Western dominated world. The US had too much gold and power shortly after WWII. There was no purchasing power to buy the goods we were making. So, it made sense to fund development in Europe, so people could buy our products, and also to try and stop the radical, socialist movements there. They were strong, especially in places like Greece, France, Italy and Germany. The US wanted Europe to build up its industrial base, they knew that Europe would need to export to re-develop their industries (and to have export earnings available to buy our exports), but the US wasn't willing to allow European imports to undercut domestic producers. So, they forced open the developing countries. The West went from Colonialism to Imperialism, and here we are.
I would argue that the IMF and World Bank was set up to protect creditors and to fight against radical and nationalist elements in the developing countries. They succeeded, and the golden age of capitalism (basically the 25 years after WWII) was basically on the backs of developing countries. We live in a world of finite resources, for us to have a high standard of living we need to consume much more per capita than people in developing countries. So their development, their increased living standards and consumption needs to be lessened as much as possible. If not, we must consume less and allow for the development of industry in developing countries, and that is not something in our best interests, is it?
When you are given other peoples money to play with and its insured, trust is not a needed factor in managing the money.
Why progressives might want to support (reforming) the IMF:
Please don't attack me for this, I realize it's an over-simplification and I probably cannot explain more clearly with details, as I'm going off memory, but....
According to a respectable and wise economic advisor I talked to (who is currently a speech writer/advisor to a sitting national leader, and well aware of the injustices and problems with aid transfer) he suggested I and my group tell activists at the 2005 World Social Forum to NOT call for the abolition of the IMF. Why? It needs major restructuring, to be sure. An overhaul and re-organization to better meet the urgent needs of poor countries. But if you abolish it, then where would loans come from then? Private corporate banks? Do you really think that's a safer place?
The point here is: jumping to an attitude of "let's abolish [insert your agency]!" is not always the most intelligent and globally sustainable reaction.
I'm curious what you all think.
"Why? It needs major restructuring, to be sure. An overhaul and re-organization to better meet the urgent needs of poor countries."
Reforming the IMF in the ways it needs reforming would take just as much effort, if not more, than simply replacing it with something more equitable. There was supposed to be something called the International Trade Organization, something Keynes thought of. Look up what it would have done. The US didn't want to lose autonomy, they wanted the power to force policies on others not the power of others to force policies on the US. It was replaced by GATT (where countries like the US could preach "free trade" while massively protecting and subsidizing domestic industry), which was supposed to be short lived. In time it basically turned into the WTO. The IMF has never been anything other than a loan shark for creditor countries and banks. It's policies always please financial creditors and have nothing to do with economic development, economic autonomy or democracy. The World Bank at least has had people like Herman Daly and Stiglitz, and has things like the National Solidarity Program in Afghanistan. What does the IMF have, other than decades of failure? Do you think these economists, with years of training, can't see what a failure their policies have been? Do you think they're not aware of alternatives, and critiques of the economic orthodoxy that puke out? I have a degree in economics, I was taught this nonsense. They're aware, abstract theory that always by chance benefits the creditors and capital is their main concern and shield.
There ARE organizations who are attempting to take the place of the IMF, like the Banco del Sur, or Bank of the South in South America. Makes more sense for ideas like that to spread, from outside the ivory tower of junk economics, than trying to talk well paid economists into doing what's right and what has historically worked.
Ever read Ha Joon Chang? If not, give him a try. It's impossible for economists to read economic history and come up with the conclusions they do. Read Robin Hahnel's critiques of capitalism and markets. Baker, the economist who wrote this piece, has a book you can read free online called "The Conservative Nanny State". Michael Hudson has written an amazing book on these issues too, called "Superimperialism". There are other ideas in the economics field out there, the IMF has known this since its inception. Its policy proposals have barely changed, even allowing for a little more inflation has caused a stir in the IMF. It is as broken beyond repair as our government.
It should go the way of the ITO.
Yeah, love that opening line!
I was thinking about this today. When the IMF (and other fiscal hawks) rail against Keynesian deficit spending, exactly what is their reasoning? Is it just the belief that a government "needs to be run like a business/household", or is there something deeper going on? After all, it seems obvious (at least to me) that austere budgets mean less money in the hands of the people, which means less demand, which means a longer recession/depression. Are the fiscal hawks unable to understand that, or do they actually want a longer recession for some reason? To further weaken labor? To make military conquest of valuable resources more feasible? I don't know, but it seems that tired old "deficit bad" position is pretty much unsupported with any real theoretical analysis.
~ Is advice from the IMF better than advice from a drunk in the street? ~
not if the drunk is advising you to take back the land from those holding hostage...
drunk doesn't necessarily mean stupid...
neither sobriety, nor a suit and tie, mean smart, either...or honest...
If any of you really want to know whether or not to trust the IMF, just ask Hugo Chavez.
http://www.independent.co.uk/news/world/americas
/chavez-pulls-out-of-imf-and-world-bank-447087.html
He was being persecuting for not caving into such criminals and the same has been the case for other Latin American nations breaking away from the IMF. Thankfully, their pulling away has helped them prosper and has put Washington into embarrassment and jealousy.
In contrast, take a look at the nations that have been tied to the IMF. It is no coincidence that in those same nations, Wall $treet jumped right in and ruined their economies what with the help of the crooked IMF not to mention the World Bank as well. For recent proof that IMF should not be taken seriously by any nation, all you have to do is look at what the IMF did to ruin Greece's economy to shambles. :(
The author is wrong to suggest that the European Central Bank is a good idea. It is nothing more than a European version of the Fed Reserve and like other centralized banks, they subscribe to the "too big to fall" mantra. The best suggestion that the author ignores is to abolish the Euro dollar and allow people to return to their national currencies which in essence would be a return to economic sovereignty for each nation in the Eurozone. Even in European nations not involved with the Euro, the disastrous consequences of the Euro dollar are being felt. The Euro dollar may not be as bad as the US dollar but too much centralizing often leads to bigger economies crushing smaller economies along with outside invasions such as Wall $treet to cash in on the mess.
Austerity is a declaration of WAR on the wealth, health, security and future of all working people made by the privileged elite.
Until this is understood and opposed by the majority of citizens we will continue to lose.
--------------
The only real war is the undeclared war, CLASS WAR.
If you can believe one-half of Perkins in CONFESSIONS OF AN ECONOMIC HIT-MAN the answer is self-evident, without name calling. Trust them with nothing.
"Is advice from the IMF better than advice from a drunk in the street?"
Not even Common Dreams would have published an article like this two years ago. Today we read stuff like this in the Boston Globe.
"These recommendations are being given"
You know that the elitist boot on the people's neck comes camouflaged as "recommendations".
We know that half the people support the elites anticipating their own rise into elitehood. It's unfortunately an element of human nature that we have to deal with - and that is the role of government - to suppress the greed impulse.
"While the IMF can scream about the need for austerity today, it couldn't be bothered to say much about the bubbles that got us here."
That's a combination of incompetence and greed. It's not easy for the people to identify. The only way seems to be for the people themselves to attend to public policies. In this case the people would ask themselves if the IMF is taking past experience into consideration in current policies. The people have to do this, and in doing do, they arrive at the answer, which indicates that the IMF and most elite institutions are failing the people. Then the people apply the pressure, with the lever, the crowbar, on the elite institutions. This is the required process.
THEY ARE TRYING TO ENSLAVE THE PEOPLE AS PART OF THEIR GRAND PLAN TO IMPOSE ONE WORLD GOVERNMENT WITH BANKS RUNNING THE COUNTRY. WE DON'T HAVE GOVERNMENT REPRESENTING THE PEOPLE. THE ADMINISTRATION AND CONGRESS ARE RUN BY AN INVISIBLE STATE WITHIN A STATE. THE RUMOR IS THE NAZIS NEVER STOPPED FIGHTING THE U.S. AND HAVE BEEN SILENTLY RUNNING GOVERNMENTS THRU THE EU, WORLD BANK, IMF. COUNCIL ON FOREIGN RELATIONS, TRILATERAL, ETC. THE 4TH REICH RUNS THE COUNTRY THRU PAST PRESIDENTS WITH A HISTORY OF WORKING WITH THEM IN WW2.
DON'T BELIEVE ME, DO THE RESEARCH. DON'T TRUST THE IMF. THEY HAVE NO RITE TO CALL FOR LOOSENING LABOR LAWS! THE IMF IS TRYING TO DESTROY THE UNITED STATES AND ITS PEOPLE. IT IS A PLAN FOR DESTROYING THE FEW DEMOCRATIC RITES WORKERS HAVE. OUR REAL WAGES WERE HIGHER IN 1972. ARE THEY CALLING FOR THIS AUSTERITY FOR THE CEOs AND SENIOR MANAGEMENT TOO?
THE PEOPLE NEED TO VOTE FOR THIS--WE DID NOT VOTE FOR THE IMF. NO WONDER 2 MILLION PEOPLE IN FRANCE PROTESTED THIS WEEKEND! GOD HELP US.
Dafoe
This is the only country that worships mammon, where money is all that matters, the high blown words of the Declaration of Independence and theCconstitootion are just that , words that evoke emotion and little else unless they serve the business and banking worlds. We have ruined Africa, who was in favour of the Afrikaaner government's policy of apartheid, good old Ronnie, who deregulated everything , good old Ronnie who created the world bank and the imf good ol' United States.
The trouble is the ignorant citizenry voted and cheered them on, too dense with patriotic fervor to realize that it was gong to happen to them too as it has been playing out here.
Me, Vermont with its group who are promoting seceding sounds like a good place to move to. Me I think we need another revolution, what we need is a stalwart citizenry and guess what they aren't there.
Better the drunk than the man who rolls one.
The intentions of the IMF should be evident in the brutal and fraudulent security for the G20. Direct and circumstantial evidence strongly indicates a deliberate program of violent and illegal intimidation;
Police targeted and deliberately beat press standing in previously authorized "free-speech" zones, and did so without any provocation, yet they stood by with water cannons while property burned. Later, on camera, Toronto Chief of Police claimed to have infiltrated both the so-called "Black Bloc" and "the protesters." The former claim is of interest, since the police did nothing to impede the "Black Bloc." Either this is a simple lie, or the police avoided confronting the Bloc, or both.
In either case, the Chief is guilty of fraud.
Furthermore, the "Bloc" looked, moved, and acted like G-men, not like any protest or revolutionary group. One much make a judgement, of course, but in this case the judgement should be fairly simple:
---- All were male.
---- All were of similar size, shape, and physical condition
---- All were in uniform, right down to wearing the same boots
---- All were armed so identically that their equipment surely came from a single source.
---- All moved in a coordinated pattern indicating a pre-existing plan; they arrived at once and departed at once
---- All uniformly abandoned all equipment on arrival at an agreed point
---- As nearly as can be judged by stopping the video clips, their footwear was identical to that of the people in police uniform who assaulted protesters and press shortly after the "Black Bloc" left their uniforms.
Having a corps of very similar young males shows that their sponsors could filter recruits.
Coordinated movements indicate a centrally formulated plan and joint training.
Similar physical conditioning suggests a shared regime of conditioning, again suggestive of professionals with adequate funding to train together over a long period.
Identical gear would be both useless and dangerous to a revolutionary cell. They would prefer to know each other and to remain anonymous. They would also prefer to resemble the people they riot around, in hopes of touching off a wider action. They would shout and summon support rather than move in silence.
The complete regularity of the gear, down to the way it is worn, is a typical, even trademark military gesture.
Making a single purchase of such gear would become highly suspicious. Any of several retailers and wholesalers could be in a position to turn them in.
Having footwear that matches with the specific police committing violence on the same day in the same place minutes afterwards is at the very least extraordinarily suspicious.
Now,
leaving aside for the moment that the IMF has done similar things in the past, what might be the motive for such things?
It certainly does not appear convenient for anyone with respect to security for the G20 meeting in June of 2010. Taken in the context of the recent escalation in violence and violent new technologies in crowd control in recent years in the United States, a pattern emerges.
The IMF expects increasing mass opposition to its policies, wants to brutally suppress public outrage, and is moving early to test new crowd control and pr gambits and lay a basis for propaganda.
Sadly, the only rational reason I can see for their prediction is that they intend to enact policies that will damage an awful lot of people, more than they are hurting now, and so much more that they expect a mass response from people who previously had at least outward prosperity.
Meanwhile, the gross, almost total failure of almost all radio, TV, and printed news to come to the defence of their fellow journalists, while no longer surprising, shows that there is no low to which most of the press will not stoop to comply with the perceived will of their masters.
Accordingly, to trust the IMF can only lead to betrayal, poverty, and the increased slaughter that would or will accompany the loss of most or all vestiges of democratic institutions in the English-speaking Americas.