Christine Lagarde is not universally popular. Nor is the IMF. And there are good reasons. The IMF has made serious errors that have had enormous cost in many countries and resulted in the imposition of what has been called the Washington Consensus on far too many of them. But things are changing at the IMF. They are beginning to realise the error of their ways. This is from a new blog by Christine Lagarde introducing a staff paper that is part of its radical relearning of what economics has to be all about:
We have learned, both from working with our member countries, and from our research, that sharing the fruits of growth–what we call inclusion–is key to achieving sustainable economic growth. All segments of society should feel that they have an opportunity to make a better life for themselves.
Our new staff analysis, released today, uncovers the various channels through which critical reforms that promote growth (such as those in agriculture, the financial sector, and public investment) can sometimes widen inequality in lower-income countries. The study also illustrates how additional measures can mitigate such growth and equality trade-offs.
The bottom line is this: First, pro-growth policies can be truly inclusive only if policies are designed with careful attention to the details of who gains and who loses. Second, well-targeted measures can ensure that everyone gains from essential economic reforms–and help further strengthen the case for pursuing reforms.
The argument is clear.
First austerity does not work.
Second, trickle down does not work.
Third, what you promote as a mechanism for growth matters: not all growth is equal and much is inequality inducing.
Fourth, what matters most of all then is growth aimed at reducing inequality. Nothing else is sustainable.
I won't ignore the IMF's past mistakes. But I welcome any sinner who repents. I sincerely hope the IMF is doing just that. It's overdue.
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I could have told her that for 50p
I’d like to strike a wager that you haven’t read all 42 pages of the ‘staff analysis’ and haven’t noticed that it does not support your argument that spending more than you have ever had works.
The trickle down argument that recommends throwing public funds at already rich people in the hope that some of it will benefit poor people is not one you will find in economics theory. It is though a policy central to the EU’s farmland owner support programme which is the prime budget item of the EU, and an organisation endorsed by this blog over the alternative of non-membership. Go figure.
I can’t figure
There is not a hint for logic in what you have written
Do you really have a clue what you’re talking about?
I agree that there’s been a cautious lifting of the neoliberal veil at the IMF – or at least with some of its staff. But in the material you quote this line stood out to me:
‘critical reforms that promote growth (such as those in agriculture, the financial sector, and public investment) can sometimes widen inequality in lower-income countries.’
So, it can ‘sometimes’ and only it would apppear in ‘lower-income countries’. I suspect that doesn’t mean the UK. In reality lower incomes are relative, of course, consequently there are millions on low incomes in the UK as there are elsewhere in the EU and the US, and more widely. But I doubt that’s the way the IMF look at it. Lower-income countries to them mean Africa, the Indian sub continent and so on. So our austerity fixated governments and politicians in Europe are still getting a free ride from the IMF. You may therefore being a little too kind in forgiving this particular sinner so soon, Richard.
Have a good weekend.
Ivan
I know you think I’m too generous a chap
But it’s the hope that the generosity might just prove to be justified that keeps me going
Something has to do
Go well
Richard
And, maybe, just maybe, the generosity of spirit towards an institution that you have, rightly, criticised strongly leads that institution to engage with what you have to say.
Until the majority of people engage with each others’ hopes and fears, an engagement that has been stifled by years of divisive propaganda driving us towards disengagement with “others”, nothing can or will improve.
My vote goes to generosity of spirit.
I take another view.
Although it is good to see some sort of epiphany happening at the IMF this tells me something else.
What it tells me is that the IMF’s time is up.
If the IMF and the World Bank had been used as tools by the USA in the past to enable American economic and financial imperialism – a sort of ‘middle man’ – a seemingly independent body used as a cover the American policy – then I think that this is now over.
With Trump in I see a more direct and brutal approach being used to express American objectives abroad. I do want to be wrong but I fear not.
So glaringly obvious and so often dismissed, with the best of intentions, by people like Richard. By that I mean people that often focus on a snapshot of today and come up with the sorts of incremental changes that can work for everyone. There was never honour or serious intent on the other side and they have always moved the goalposts. People really don’t need an IMF report to tell them what has been obvious for years.
I’m not saying Richard never understood I’m saying he was too hopeful. But maybe that’s changing if his latest FU article is anything to go by.
I am well aware of the other side and what they do
I spend too long and too often in close proximity to them to not be so
And I also spend a lot of time thinking and analysing what they’re doing – that has been a key part of my job for some years now and still is: I am studying organisations as part of what I am now doing at City
And yes, I know people are angry. And with good reason. Danny Blanchflower and I spent time together nay sing that issue this week, and I am hopeful some work will come from that.
But let’s also be clear ion another issue: I am not a revolutionary. I think change will be incremental, even if I want to up the incremental step size and pace. The IMF is flawed. It is likely to remain so for a while. But if we got ris of the IMF we would need to create something else like it. So I do welcome change even if I can get angry – as the FU post showed.
Richard you know I think your work is excellent and the key part is what you identify as people led rather than profit driven policy. I just wonder if what we’re experiencing now is the slow realisation of the full results of neoliberalism. I have come to the conclusion that, like an emergent property, the psychopaths and sociopaths have risen to the top. I can think of no other explanation for the ability to take profit/political decisions that are so clearly causing damage and suffering.
Fanaticism of every stripe gets roundly condemned until you get to profit/greed then it’s just the way the world works. My optimistic side agrees with your incremental belief. My cynical side thinks that if we ever get serious traction these nutjobs will kick something extreme off to try and save themselves or keep the party going. In recent years my cynical side has been winning.
But I do hope you’re right.
Alastair
Thanks
I think I realised this a long time ago
I also realised inexperience can’t win e.g. Corbyn
So a different ethos has to b communicated
Bizarrely I think few in real life have real time for the likes of Trump
But they’re persuaded they are competent
That’s where there is a vacuum
Richard
Just to clarify – when I said that the IMF’s time is up, I mean in the sense of its unofficial role as the velvet glove surrounding the iron fist of American hegemonic economic policy (the Washington consensus).
If the IMF – under it’s very capable French leadership – has changed tack, as welcome as this is, the USA will simply go around it.
But the lack of US support will undermine the IMF – that is for sure and therein lies the problem. What will a less subtle USA look like?
Well, just look at Trump.
PSR, that was exactly how I took your comment, the IMF is a tool if it’s now compromised then it’ll be sidelined somehow. That’s what I mean by my doubts about incremental change. Years of work finally getting results via the IMF then they trash it and move on.
What we need are financial regulation and oversight institutions designed and run by people with integrity like Richard.
Too little, Too late. About fifteen years I’d say. You reap what you sow.