(a debate with some US-based political economists...
comments/corrections are welcome)
Has the International Monetary Fund Reformed?
TeleSUR
<http://www.telesurtv.net/english/opinion/Has-the-International-Monetary-Fund-Reformed-20141223-0001.html>
By: Patrick Bond <http://www.telesurtv.net/staff/pbond>
Has the International Monetary Fund Reformed?
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*Economically, the overall IMF objective is stabilising crisis-prone
world capitalism on behalf, mainly, of Western financiers.*
In a Washington Post
<http://www.washingtonpost.com/blogs/monkey-cage/wp/2014/12/17/the-imfs-perestroika-moment/> op-ed
last week, ‘The IMF's Perestroika Moment
<http://triplecrisis.com/the-imfs-perestroika-moment-2-2/>’, Boston
University political economists Cornel Ban and Kevin Gallagher suggested
‘conventional wisdom’ about the International Monetary Fund is
‘outdated’ because the IMF is no longer ‘a global agent of economic
orthodoxy.’ Hmmm.
Also last week, Counterpunch economic columnist Mike Whitney surmised
<http://www.counterpunch.org/2014/11/25/trotsky-at-the-imf/> that at a
critical moment in April 2011 at the Brookings Institute in Washington,
IMF managing director Dominique Strauss-Kahn (‘DSK’) ‘made his pitch for
“progressive taxation”, “collective bargaining rights”, “protecting
social safety nets”, “direct labour market policies” and “taxes on
financial activities”.’ Hmmm.
Given that no one has done more to challenge the IMF on capital controls
than Gallagher, and that few write about economic injustice more
forcefully than Whitney (I read them both religiously), it pains me to
again
<http://triplecrisis.com/south-africas-state-retreats-in-the-fight-against-transnational-corporate-power/> take
issue with such excellent allies.
To be sure, Whitney recognises the IMF did not implement the pitch;
apparently the financial oligarchy didn’t appreciate DSK’s bolshi
sentiments. Recall how DSK also apparently suffered periodic Viagra
overdoses – oh, and somehow in the process, attracted repeated charges
<http://inthesetimes.com/article/7326/the_sordid_sexual_history_of_dominique_strauss-kahn> of
sexual predation akin to a ‘rutting chimpanzee’. In May
2011 Strauss-Kahn was suddenly forced to stand down from the IMF and
also from what would soon have been a run at the French presidency. New
York’s finest whisked him off his first-class Air France seat at JFK
Airport for the perp walk and rape charges.
Looking beyond ‘that shite’ (sic), Whitney recounts, ‘Strauss-Kahn was
headed in a direction that wasn’t compatible with the interests of the
cutthroats who run the IMF. That much is clear. Now whether these same
guys concocted the goofy “honey trap” at the Sofitel Hotel, we may never
know. But what we do know is this: If you’re managing director of the
IMF, you’d better not use your power to champion “distribution” or
collective bargaining rights or you’re wind up like Strauss-Kahn,
dragged off to the hoosegow in manacles wondering where the hell you
went wrong.’
Sorry, it is hard to take seriously the argument that because the
oft-‘honey-trapped’ (sic) DSK momentarily adopted ‘a Keynesian approach’
(a matter not in dispute given how close the world financial system was
to melting down), he was suddenly ‘off the reservation and no longer
supported the policies that the establishment elites who run the IMF
wanted to see implemented. They felt threatened by DSK’s Keynesian
approach and wanted to get rid of him.’
Actually, from late 2008 through early 2011, the shakiest period for
world capitalism, Strauss-Kahn ran the reservation – and from a
hedonistic financier’s perspective, quite well indeed. The 2008-09
crisis and the IMF’s April 2009 $750 billion recapitalisation provided
an unprecedented power boost (recall that for many months until then,
the fast-contracting
<http://onlinelibrary.wiley.com/enhanced/doi/10.1111/gove.12098/> IMF
had been nicknamed <http://www.economist.com/node/8637836> the ‘Turkish
Monetary Fund’ because it had only one substantive client, lost 75% of
its interest income and as a result fired 15% of staff).
Critically, IMF exploitation of the world’s poor did not change
substantively on Strauss-Kahn’s watch. As Rebecca Solnit recalled
<http://www.tomdispatch.com/blog/175395/>, the IMF very nearly
re-wrecked Haiti in the immediate wake of its 2010 earthquake by
refusing to forgive debt and instead pushing more
<http://www.theguardian.com/politics/2010/jan/31/haiti-debt-relief-imf-unctad> loans;
only activists like Camille Chalmers
<http://www.grassrootsonline.org/news/blog/letter-camille-chalmers-papda> stopped
that.
The most transformative intra-capitalist strategy would have been a
return to Keynes’ idea of penalising trade surpluses, which Greek
political economist Yanis Varoufakis believes
<https://billtotten.wordpress.com/2011/05/19/on-the-political-economics-of-dominique-strauss-kahns-political-death/> Strauss-Kahn
once hinted at – but China, Germany and the Middle East would quickly
veto that idea.
In contrast, the fiscal and monetary laxity Strauss-Kahn facilitated was
merely system preservation. Alongside World Bank president Robert
Zoellick
<http://www.counterpunch.org/2010/03/19/what-will-robert-zoellick-break-next/>,
he bandaged the crisis by shifting and stalling it across space and time
using his new Special Drawing Rights and associated credit binges. In
the process, bankers were bailed out, inequality soared and most
countries were left with a higher foreign debt.
*North Africa tests the IMF*
In what would be his last IMF press conference, Strauss-Kahn was asked
<https://www.imf.org/external/np/tr/2011/tr040611.htm> about North
African activists carrying Che Guevara flags: “Do you have any fears
that there is perhaps a far left movement coming through these
revolutions that want more, perhaps, closed economies?” His answer:
“We’re in a globalized world, so there is no domestic solution.”
Two and a half years earlier, Strauss-Kahn was awarded the Order of the
Tunisian Republic (the country’s top honour) by pro-Western dictator
Zine El Abidine Ben Ali. Strauss-Kahn returned
<http://euobserver.com/political/31663> the compliment: ‘Economic policy
adopted here is a sound policy and is the best model for many emerging
countries.’
In September 2010, in its ‘Article IV Consultation’ (each country’s
marching orders), the IMF advised
<https://books.google.com/books?isbn=1455259659> how that ‘best model’
should continue, given ‘that the tax burden on businesses is relatively
high in Tunisia, and that there is scope to increase the yield from
taxes on consumption.’
IMF economists cherish the Value Added Tax (VAT), which hits poor people
far harder than it does the wealthy, as a percentage of income. In
Tunis, they brazenly called for ‘a reduction in profit tax rates offset
by an increase in the standard VAT rate.’ But while enthusiastically
calculating the revenue benefits, they neglected the social costs,
especially increased pressure on poor people including ordinary fruit
sellers (e.g. Mohammed Bouazizi). (Philip Rizk observed
<http://www.aljazeera.com/indepth/opinion/2012/04/20124129515475812.html> the
same problem in Egypt: VAT as the IMF’s ‘poor tax’.)
Still, thanks to Strauss-Kahn’s leadership, the IMF quickly adapted on
the difficult new terrain of class struggle, prior to the 2011-14
counter-revolutions that swept away North Africa’s democratic hopes.
Some new phraseology
<http://triplecrisis.com/the-imfs-social-justice-ruse-in-cairo/> would
come in handy, e.g.
<http://onlinelibrary.wiley.com/enhanced/doi/10.1111/gove.12098/> ‘country
ownership’, ‘poverty reduction’, and ‘social protection’. In June 2011,
Strauss-Kahn’s temporary replacement, John Lipsky, was even heard
pronouncing
<https://www.imf.org/external/np/sec/pr/2011/pr11217.htm> the words
‘social justice’ as his top priority objective, when seducing Egypt to
borrow more so as to repay $33 billion of the dictator Hosni Mubarak’s
old loans.
The South African name of this game is ‘talk left, walk right.’ If such
incidents teach us anything, it is that IMF orthodoxy forever represents
regime maintenance for financial imperialism, even if that requires
innovative semantics.
*The IMF was already becoming flexible 17 years ago*
In contrast, Ban and Gallagher insist the IMF has undergone ‘deep
transformations that often point in a more Keynesian direction’ and now
has an awareness of ‘the systemic risks posed by the interconnectedness
of global banks
<http://onlinelibrary.wiley.com/doi/10.1111/gove.12107/abstract>.’
(To be clear, again, I do credit Gallagher as much as any applied
scholar for creating this awareness. But we must always exercise caution
<https://www.marxists.org/subject/africa/cabral/1965/tnlcnev.htm>,
explained African revolutionary Amilcar Cabral: ‘tell no lies, claim no
easy victories.’)
Really, how deep does this ‘transformation’ go? The answer: ‘Since the
1970s, the IMF has been heavily criticized for being insensitive to the
diversity of domestic conditions.’ Surely though, that’s the ‘heavy
criticism’ of reformist Keynesians? A broader political economic
critique does not stop at ‘diversity’. It considers the IMF’s role in
the reproduction of world capitalism, especially when stressed.
Geopolitically, for example, isn’t it still true that ‘The IMF is a toy
of the United States to pursue its economic policy offshore,’ as even an
establishment economist, Rudiger Dornbusch, once frankly confessed
<http://www.leftbusinessobserver.com/MillMarx.doc>?
Economically, the overall IMF objective is stabilising crisis-prone
world capitalism on behalf, mainly, of Western financiers. The best
rebuttal from Ban and Gallagher: ‘Surprising its critics, the IMF has
endorsed capital controls.’
Yet these are not usually controls on outflows and capital flight,
instead on hot-money inflows. (Only when Iceland and Cyprus were about
to default were outflow bans allowed.
Anyhow, we’ve heard all this before. In the wake of Mexico’s 1995 crisis
and the 1998 East Asian meltdowns, ‘capital controls could be acceptable
to the IMF, for a transitional phase,’ conceded
<http://www.nytimes.com/1998/02/03/business/international-business-imf-may-be-closer-to-lending-curb-idea.html> IMF
second-in-command (now deputy Fed chair) Stanley Fischer.
‘The IMF recognizes the problem of surges of short-term capital across
borders and the need to find ways to deal with that,’ said Fischer,
including Chile’s so-called ‘speed-bump’ against hot-money inflows, a
strategy ‘that needs to be considered.’
Such language was not uncommon, legal scholar Timothy Canova reminds
<http://works.bepress.com/timothy_canova/6/>, due to ‘a very real and
growing split within the world of finance’ regarding ‘the use of
temporary controls and prudential restrictions on the flow of short-term
hot money.’
Malaysia’s exchange controls were much stronger: they also halted
outflows and speculative currency trading. Yet during a November 2012
Kuala Lumpur speech
<http://www.bloomberg.com/news/2012-12-03/imf-officially-endorses-capital-controls-in-reversal.html>,
Strauss-Kahn’s replacement Christine Lagarde was still only willing to
concede that in some cases, ‘temporary capital controls might prove
useful.’
A dozen years before, an IMF report had already approvingly acknowledged
<http://news.bbc.co.uk/2/hi/business/600227.stm>, ‘The controls gave the
Malaysian authorities some breathing space to deal with the crisis.’
*BRICS pull the IMF left?*
Aside from overestimating internal ideological change at the IMF, Ban
and Gallagher misidentify a catalyst: the
Brazil-Russia-India-China-South Africa (BRICS) bloc. According to
Gallagher, the BRICS
<http://onlinelibrary.wiley.com/enhanced/doi/10.1111/gove.12100/> ‘defend “cooperative
decentralization” to regulate capital flows’ and so ‘the establishment
of the BRICS bank might bring competition to the IMF.’
That’s not how it appears
<http://ccs.ukzn.ac.za/default.asp?11,65,3,3034> from South Africa,
reviewing
<http://cadtm.org/IMG/docx/Bond_BRICS_banking_and_territorial_alliances_for_Wallerstein_et_al.docx> the
recent evidence. To illustrate, the BRICS spent $75 billion helping
recapitalize the IMF in 2012, providing a sole mandate I could identify
in the public domain
<http://www.moneyweb.co.za/moneyweb-boardroom-talk/special-report-podcast-pravin-gordhan--minister-of?sn=2009+Detail>:
more ‘nasty’ (sic) policies for southern Europe, as South Africa’s
finance minister insisted while preparing the funding transfer.
(Disclosure: my political heart aches, because thirty years ago this
week, the same man – Pravin Gordhan
<http://mg.co.za/article/2009-10-27-gordhan-im-a-pragmatist-not-communist> –
taught me revolutionary guerrilla theory at Mahatma Gandhi’s former
Durban ashram, I kid you not
<http://www.cca.ukzn.ac.za/index.php/tow2014-participant-bios/509-patrick-bond-ireland>.)
Last July, the BRICS devised a ‘Contingent Reserve Arrangement’ (CRA),
that actually empowers
<http://www.telesurtv.net/english/opinion/In-Fortaleza-BRICS-Became-Co-Dependent-Upon-Eco-Financial-Imperialism-20140801-0033.html> the
IMF, as even the eloquent pro-BRICS economist Mark Weisbrot admits
<http://www.brettonwoodsproject.org/2014/10/impact-brics-contingent-reserve-arrangement-cra-new-development-bank-ndb/>:
‘Note that CRA currently has a 30% provision limit requiring an IMF
programme, which is disturbing – and reveals the problem of politics
within those five states and whether to adopt a neoliberal or
alternative path.’
That choice was already explicitly made in China, India and South
Africa. True, there may still be pressure from the crony-capitalist
Russian right and Brazilian social democrats, providing Weisbrot
‘whether to’ weasel words.
But as a unit, BRICS is actually a subimperial
<http://www.pambazuka.net/en/category/features/91303> (not
anti-imperial) project. It reinforces not only prevailing world
financial policies, but also do-nothing-until-it’s-too-late climate
change mitigation
<http://www.telesurtv.net/english/opinion/The-BRICS-Remix-Climate-Damage-and-Corporate-Collusion-20140830-0003.html>.
The BRICS represent not ‘competition,’ but collusion in financial
imperialism.
*Article IV-ed again*
In Pretoria, Nelson Mandela’s African National Congress chose to move
from apartheid to neoliberalism
<http://www.counterpunch.org/2013/12/06/the-mandela-years-in-power/> after
1994, instead of to the party’s 1955 Freedom Charter. In this spirit,
finance minister Nhlanhla Nene announced that when his next budget is
revealed in February, we should expect ‘tough times
<http://www.theafricareport.com/Southern-Africa/tough-times-need-tough-solutions-nhlanhla-nene.html>’,
‘a new age of pain
<http://mg.co.za/article/2014-10-22-nene-warns-of-a-new-age-of-pain-for-sa>.’
As if egging him on
<http://m.mg.co.za/article/2014-12-03-world-banks-flawed-inequality-report-kicks-sas-poor-in-the-teeth>,
the World Bank’s Pretoria office soon claimed that South Africa’s
world-leading Gini Coefficient measure of inequality falls dramatically,
from 0.771 to 0.596, once welfare spending is calculated. But though
‘fiscal tools’ are supposedly counted ‘comprehensively’, Bank staff
entirely ignore
<http://www.counterpunch.org/2014/11/18/the-world-bank-blinks/> Pretoria’s
vast state subsidies to corporations, which means their inequality
conclusion is merely a biased thumb-suck.
Likewise, consider the IMF’s Article IV Consultation here
<http://www.imf.org/external/np/sec/pr/2014/pr14561.htm> last week: ‘the
current account deficit remains high (5.8% of GDP in 2013), reflecting
persistent competitiveness problems, soft terms of trade, supply
bottlenecks, and subdued external demand.’
In reality, there is another far more important reason, one that
right-wing Harvard economist Ricardo Hausmann also completely neglected
<http://triplecrisis.com/ricardo-hausmanns-tall-tales/> during his
recent visit: the unjustifiable outflow of corporate profits, including
massive illicit capital flight.
As for macroeconomic policy advice, the IMF ‘called for decisive
structural reforms to unblock supply-side constraints, lift growth, and
rebalance the economy towards exports and investments… and highlighted
that containing the wage bill and raising taxes will be essential.’
In sum, renewed commitment to economic orthodoxy.
To their credit, Ban and Gallagher do concede, ‘a schizophrenic division
has come to characterize the IMF’s approach to policy research on the
one hand and policy practice on the other’ because ‘not much has changed
in terms of how the IMF acts regarding relations between states and
their creditors
<http://onlinelibrary.wiley.com/doi/10.1111/gove.12105/abstract>.’
Exactly! So if the IMF talks left, we need to ask: /is it doing so in
order to walk right?
/
//**
(Bond – [email protected] <mailto:[email protected]> – directs the
University of KwaZulu-Natal Centre for Civil Society
<http://ccs.ukzn.ac.za/>.)
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