The International Monetary Fund was notorious for imposing strict fiscal discipline on the countries it lent money to. The rules were as follows: Cut public spending, increase taxes to pay of deficits and sell of national industries to foreign companies.
Most of the countries were impoverished developing nations of little consequence to the global financial system, so it didn’t really matter to the IMF whether their loan system actually worked or not. And the truth is, it didn’t work at all. The countries subjected to ‘structural adjustment’ were ruined as they spiraled into deeper debt, unemployment and desperate poverty while the IMF reaped the benefit of extortionately high interest loans.
But when a massive economy is in crisis, the IMF has a very different set of rules. From the Guardian:
The International Monetary Fund today gave strong backing to the
government’s “wait-and-see” approach to cutting Britain’s record
peacetime budget deficit, warning that the weakness of growth required
tax increases and spending cuts to be delayed until next year.
In a rebuff to David Cameron’s avowed intention to start repairing the public finances as soon as this spring’s election is over, the Washington-based IMF said the fragility of the global economy meant stimulus packages should be left in place well into 2010.
The obvious lesson here is that there is one rule for the rich, and one for the poor. If the IMF practiced what it preached, Britain would be subjected to the same ‘adjustments’ Latin America was during the 1980’s. But the truth is, the ‘adjustments’ were never to benefit the developing countries, only to exploit them for financial gain. Britain is far too powerful and important to the well being of the global financial system and the IMF wouldn’t dare prescribe a remedy it knows won’t work.
And for the exact same reasons, the Federal government bailed out the financial system in the US. When unemployment and poverty persist amongst regular folk, the prescription is always the same: Cut taxes, lower wages and decrease public spending in order to encourage people to get back to work. But when the rich are in trouble, the government does the exact opposite. Trillions of dollars were thrown at the banks with little to no conditions attached. Why? Because our government works as a giant welfare state for the powerful, a pesky little fact conservatives and free marketers would rather ignore.
With stories like the above, it’s hard to see how the blatantly fraudulent ideology can still be defended. But then that is the role of public intellectuals and politicians: To justify their own self interest using fancy words and high minded philosophy.
Because at the end of the day, it boils down to one thing:
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.