By Ben Cohen
Rather than nakedly robbing Africa, the International Monetary Fund is now moderating its loan agreements with Sub Saharan Africa. Writes Danny Rodrik:
In countries with fiscal space, the IMF recommends ramping up
spending on Infrastructure and social safety nets (and not cuts in
taxes, which the paper says would be inequitable).
hasn’t totally given up on fiscal prudence of course. The paper warns
that in resource-based economies, where the shock is concentrated in
one or two sectors, the fiscal stimulus is unlikely to put capital and
labor back to work since inter-sectoral mobility will be limited. It
also asks that any fiscal stimulus be reversible to prevent debt
problems down the line.
While this a positive sign that the organization is tempering its policies to deal with the severe global economic crisis, no one should be under any illusions as to the Fund’s real aims. For a real understanding of how much damage the IMF has done to the third world, check this interview with Noam Chomsky here. The crux of the argument is as follows:
Through the 1970s, the World Bank and the International Monetary Fund
were pressuring countries to take loans, borrow, and create huge debt.
They argued that it was the right thing to do. In the early 1980s, with
the Volcker regime in Washington, the whole system collapsed and the
countries that had taken the debts were hung out to dry. Then the World
Bank and the IMF pressured them strongly to introduce structural
adjustment programs — which means that the poor have to pay off the
debts incurred by the rich. And of course there was economic disaster
all over the world……
The IMF is not the World Bank, but it’s closely related. The IMF’s
former U.S. executive director Karin Lissakers accurately described the
Fund as the credit community’s enforcer. The IMF is very
anti-capitalist. For example, suppose I lend you money. And I know that
you’re a risky borrower, so I insist on a high-interest rate. Now,
suppose that you can’t pay me back. In a capitalist system, it’s my
problem. I made a risky loan. I got a lot of profit from the interest.
You defaulted. It’s my problem.
That’s now what the IMF is
about. What the IMF is saying, to put it in personal terms, is that
your friends and neighbors have to pay off the loan. They didn’t borrow
the money, but they have to pay it back. And my friends and neighbors
have to pay me to make sure that I don’t lose any money. That’s
essentially what the IMF is.
If Argentina takes out an IMF
loan with huge interest rates because it’s risky and then they default,
the IMF comes along and says the workers and peasants and other people
in Argentina have to pay for that. They may not have borrowed it, it
may have been borrowed by a military dictatorship, but they have to pay
it back. That’s what structural adjustment is. And the IMF will ensure
that western taxpayers pay off the bank. It’s radically
anti-capitalist, whether you like that or not. The whole system has no
legitimacy. In fact the whole debt system in the world, which is
crushing much of the world, most of it is fake debt.
Ben Cohen is the editor and founder of The Daily Banter. He lives in Washington DC where he does podcasts, teaches Martial Arts, and tries to be a good father. He would be extremely disturbed if you took him too seriously.