IMF Has ‘New’ Policy Towards Africa

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).

The IMF

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.