The following comes from the SturdyBlog by Alex Andreou. Alex is not a professional economist any more. He's now an actor, so no doubt the Tories will seek to dimiss his opinion as "unqualified". But the simple fact is he can outwit the IMF any day. That's the reality of the economic opposition now, of which he's a part. It's reposted with his permission.
"Before Tory commentators are enraptured with hysterical joy at the ringing endorsement of their fiscal policies as “appropriate” and “adequate” by the IMF, a few things should be borne in mind.
A credit to the IMF
1. The IMF is a body with a very specific agenda. It was best described by former head of the World Bank, Joseph Stiglitz, to Johann Hari: “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.” I would urge you to read Hari's article in full: It's not just Dominique Strauss-Kahn. The IMF itself should be on trial. It is also worth noting that the IMF is bound underthe rules of Article IV consultations to “respect the domestic social and political policies of members” when consulting (Section3b).
2. Argentina, which had been the busty centrefold of IMF policies throughout the 1990′s by sticking religiously to all IMF advice — privatising everything but their anthem, liberalising industries, lowering corporation taxes while tightening public spending — suffered one of the most catastrophic economic collapses in 2001. I would encourage you to watch the Fernando Solanas' 2003 excellent documentary “Memoria del Saqueo“, if you wish to know more.
3. Last year, Hungary told the IMF to take its recommendations and shove them where the Strauss-Kahn don't shine. The IMF insisted on tougher austerity measures, Hungary wanted to tax its banks and the rich. Talks between Hungary and the IMF collapsed and the IMF warned that Hungary would be punished for its folly. The Centre for Economic and Policy Research warned that the IMF's obsession with austerity was dangerous. A year on, the IMF had to eat its words and commend Hungary for its ongoing recovery, which is going very well — thank you.
4. Finally, it is most crucial to note what the IMF had to say on the UK economy in 2007, the performance of which it described as “impressive”. They said: “The financial sector is strong and well supervised with a principle-based approach. The fiscal framework is good, and the mission focused on how to build fiscal cushions needed to respond to adverse shocks. In particular, looking ahead to the framework over future cycles, we noted that debt is likely to rise to just under 40 percent of GDP over the next few years. This in itself is not a concern, and it still constitutes one of the lowest debt ratios among G-7 countries”. This was the year before the whole fecking thing collapsed on our heads.
In conclusion, one ought to approach any fiscal advice by the IMF like a chambermaid might approach the hotel room of its former head: with extreme caution.
Next week: Harold Shipman endorses the government's policy on the NHS
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On Thursday 19th May in “A Day At The Races” I suggested an alternative to the IMF and the ECB. It was only half serious then, but now I begin to wonder………..
I’m sure we’ve been here before with baleouts followed by collapse, all following the IMF’s advice. Oh thats right, that’s what happened to Ireland. If you dig further back, thats what happened to several Oriental countries about 10 years ago. There was stuff about this in the first episode of “All Watched Over By Machines Of Loving Grace”.
The IMF is a discredited reoganisation. Together with the World Bank, it pursues the Washington Consensus agenda which has failed miserably in many developing countries subject to ‘structural adjustment’ resulting in widening inequality and increasing poverty. It is quite unlikely to admit that its policies are not working so there was no prospect of it advocating a Plan B for the UK economy. Forecasts by this type of organisation are FORECASTS NOT FACTS and Osborne reallly is clutching at straws if he believes this nonsense. Hari’s article in the Independent about the consequences of IMF structural adjustment in Malawi should be read by everyone including him.
Richard – I am not sure that point #2 is correct. Cavallo’s convertibility regime strictly pegged the Austral to the Dollar, insisting that every Austral in circulation should be backed by one Dollar of reserve held by the Central Bank (which consistently cheated with that, but it is a different story). The IMF’s standard structural adjustment program usually calls for flexible exchange rates, and the lifting of capital controls.
This matters because Argentina’s undoing was the loss of external competitiveness caused by an overvalued exchange rate. Under a standard IMF program, this would theoretically not have happened.
People have been saying this about the IMF for a long time. The estimable Mr Bruce Cockburn, whom you first encountered last year (‘If I had a rocket launcher’), wrote a song 25 years ago called ‘Call it Democracy’. Youtube video here. Altogether now:
IMF dirty MF
Takes away everything it can get
Always making certain that there’s one thing left
Keep them on the hook with insupportable debt
I posted quotes from this piece (part of point 1, point 4 and the conclusion) with links to this page and to SturdyBlog in the comments section on the Guardian’s ‘George Osborne’s spending cuts win IMF backing — for now’ article and not only was the comment removed but now my ‘comments are being premoderated.’
Has the Guardian outsourced the moderation of its comments to Conservative Central Office?