Quelle Surprise! IMF Always Prescribes the Same Austerity Hairshirt. A new paper by Mark Weisbrot and Helene Jorgensen of CEPR have managed to unearth a dirty little secret: the IMF doesn’t just prescribe broadly similar policies in its Article IV consultations, it looks like its hands out the same medicine. We’ve used the metaphor of breaking countries on the rack, but cutting them to fit a Procrustean bed might be more apt. Their new paper describes the scope of their review: The IMF makes policy recommendations to European countries through its Article IV consultations and resulting papers. Part of what they found is unsurprising: the IMF loves telling client states to shrink spending and government overall, and they are particularly keen on cutting social safety nets.
Fiscal consolidation is recommended for all 27 EU countries, and expenditure cuts are generally preferred to tax increases. Th article recaps the recent embarrassment of the IMF having to admit that it got its fiscal multipliers all wrong. The IMF Goes All-Out on Balance-Sheet Recessions, Providing Sanity on Economic Policy. The literature summary I just put out on balance-sheet recessions examines the recent April 2012 World Economic Report by the IMF. It is remarkable how important this report is. The relevant part is Chapter 3, Dealing with Household Debt. This IMF report is well to the Keynesian side of almost all major US debate, and its recommedations and observations are incredibly sensible.
You should read it all, but I want to point out five few high-level arguments they make: 1. A run-up in household debt and leverage explains the economic collapse across countries. Here's a graph they include, comparing increases in household debt-to-income ratios from 2002-2006 against consumption collapses in 2010. Implicit here is that the problems aren't labor "inflexiblity" or whatever the latest faddish argument is. 2. There's a common wisdom among many elites that prolongued recessions are just what happens in the aftermath of a financial crisis. III. IV. Couldn't put it better myself. V. Huh. What Goes Around, Comes Around: the eurozone crisis, the BRICS and the IMF. Ilene Grabel From 1980s through the early 2000s developing countries faced repeated demands to get their financial houses in order as a condition of financial assistance from the international financial institutions (IFIs) and the world’s leading economies.
The Washington Consensus codified the standard conditionality. It tied financial rescue on all manner of draconian policies that were designed to ensure that developing country governments could meet obligations to their international creditors. In pursuit of solvency, few public sector expenditures were exempt from the neoliberal axe. Social welfare spending was slashed, taxes on all but the wealthy and large firms were raised, markets were liberalized, enterprises were sold off to the presumably more efficient private sector (though often the “private sector” were domestic elites with privileged access to the assets at bargain prices), and barriers to international trade and financial flows were rescinded.
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International Monetary Fund Home Page. We've yet to kill off the Washington consensus | Rick Rowden | Global development. If the Washington consensus policies are truly dead, then in addition to calling for more overseas aid to meet the millennium development goals (MDGs), readers of this blog should also tell their governments to stop having their representatives on the executive boards of the International Monetary Fund (IMF) and World Bank regularly approve loans with conditions that keep the consensus alive.
Over the last few years, we have heard various claims about the state of Washington consensus policies (fiscal discipline, cutting tax rates, interest rate liberalisation, competitive exchange rates, trade liberalisation, liberalisation of capital flows, privatisation and deregulation of prices and markets). We've been told that the policies have been "damaged", but are still essentially sound, and discredited, and that now we are living in post-Washington consensus world.
Others, however, have rightly questioned if a real break with the past is truly at hand. What was heresy is now (still far from) endorsed as orthodox at the IMF - Opinion. "What used to be heresy is now endorsed as orthodox," remarked John Maynard Keynes in 1944 after he helped convince world leaders that the newly established International Monetary Fund (IMF) should have the regulation of international financial flows as a core right.
By the 1970s however, the IMF and Western powers began to dismantle the theory and practice of regulating global capital. In the 1990s, the IMF went so far as to try and change its articles of agreement to manage the deregulation of cross-border finance. This week, the IMF grabbed headlines for seemingly going back to its more sensible roots. While the IMF has taken a step in the right direction, it still insists on the eventual deregulation of global financial flows and a "one size fits all" approach to how nations should manage volatile speculation. Last week, the IMF released a new "institutional view" on the management of cross-border financial flows. 'One size fits all' approach Capital account liberalisation.
Marshall Auerback: IMF’s Predatory Policies Likely to Continue with New Leadership. By Marshall Auerback, a portfolio strategist and hedge fund manager. Cross posted from New Deal 2.0. It doesn’t matter who leads the IMF when the institution is governed by ideology. Greece and Ireland appear to have lost an important political ally with the sidelining of Dominique Strauss-Kahn as both plead for more financial assistance from European partners to avoid an early restructuring of debt. The key word is “appears,” as in truth, arsenic remains arsenic, even if it is coated in sugar by an ostensible champagne socialist like Mr. Strauss-Kahn. The reality is far more brutal for all of Europe.
The rationale of controlling government debt and budget deficits is also consistent with a prevailing rising neo-liberal orthodoxy that promotes inflation control as the macroeconomic policy priority and asserts the primacy of monetary policy (a narrow conception notwithstanding) over fiscal policy. Same thing in Greece. Johann Hari: It's not just Dominique Strauss-Kahn. The IMF itself should be on trial - Johann Hari, Commentators. So the fact that Dominique Strauss-Kahn, the former head of the International Monetary Fund (IMF), is facing trial for allegedly raping a maid in a New York hotel room is – rightly – big news. But imagine a prominent figure was charged not with raping a maid, but starving her to death, along with her children, her parents, and thousands of other people.
That is what the IMF has done to innocent people in the recent past. That is what it will do again, unless we transform it beyond all recognition. But that is left in the silence. To understand this story, you have to reel back to the birth of the IMF. In 1944, the countries that were poised to win the Second World War gathered in a hotel in rural New Hampshire to divvy up the spoils. With a few honourable exceptions, like the great British economist John Maynard Keynes, the negotiators were determined to do one thing. The IMF’s official job sounds simple and attractive. Let’s look at how this plays out on the ground. Christine Lagarde And The Demand For Dollars. By Simon Johnson After receiving US support at the critical moment, Christine Lagarde was named Tuesday as the next managing director of the International Monetary Fund.
In campaigning for the job, Ms. Lagarde – the French finance minister – made various promises to emerging markets with regard to improving their relationships with the IMF. But such promises count for little and the main impact of her appointment will be to encourage countries such as South Korea, Brazil, India, and Russia to back away from the IMF and to further “self-insure” by accumulating larger stockpiles of foreign exchange reserves – the strategy that has been followed by China for most of the past decade.
Seen from an individual country perspective, having large amounts of dollar reserves held by your central bank or in a so-called sovereign wealth fund makes a great deal of sense; this is a rainy day fund in a global economy prone to serious financial floods. Ms. IMF official admits: austerity is harming Greece | Business. A leading architect of the austerity programme in Greece – one of the harshest ever seen in Europe – has admitted that its emphasis on fiscal consolidation has failed to work, and said economic recovery will only come if the crisis-hit country changes tack and focuses on structural reforms.
Poul Thomsen, a senior International Monetary Fund official who oversees the organisation's mission in Greece, also insists that, contrary to popular belief, Athens has achieved a lot since the eruption of the debt crisis in December 2009. "We will have to slow down a little as far as fiscal adjustment is concerned and move faster – much faster – with the reforms needed to modernise the economy," he told the Greek daily Kathimerini, adding that the policy shift would be "reflected" in the conditions foreign lenders attached to a new rescue programme for Athens. The Greek economy is projected to contract by over 5% this year; GDP has fallen almost 16% over the past three years. Choosing the IMF's next leader. Sooner than expected, the International Monetary Fund (IMF) will have a new managing director.
For more than a decade, I have criticised the IMF's governance, symbolised by the way its leader is chosen. By gentlemen's agreement among the majority shareholders - the G8 - the managing director is to be a European, with a US citizen in the number two post and at the head of the World Bank. The Europeans typically picked their nominee behind the scenes, as did the Americans, after only cursory consultation with developing countries.
The outcome, however, was often not good for the IMF, the World Bank, or the world. Most notorious was the appointment of Paul Wolfowitz, one of the main architects of the Iraq War, to lead the World Bank. His judgments there were no better than those that got the United States involved in that disastrous adventure. Having placed fighting corruption at the top of the Bank's agenda, he left in the middle of his term, accused of favouritism. Who's up next? Why Are the French So Determined To Run The IMF – And What Will It Cost You? By Simon Johnson Just a few years ago, eurozone countries were at the forefront of those saying that the International Monetary Fund had lost its relevance and should be downsized. The organization was regarded by the French authorities as so marginal that President Nicolas Sarkozy was happy to put forward the name of a potential rival, Dominique Strauss-Kahn, to become managing director in fall 2007.
Today the French government is working overtime to make sure that a Sarkozy loyalist and the leader of his economic team – Finance Minister Christine Lagarde – becomes the next managing director. Why do they and other eurozone countries now care so much about who runs the IMF? The euro currency union has a serious problem, to be sure, with the likes of Greece, Ireland, and Portugal, but it is beyond bizarre that these countries now find themselves borrowing from the IMF. Those eurozone treasury and central bank officials had a point.
Why does this make sense? If Ms. In the IMF succession battle, a stench of colonialism. In its daily work, the IMF demands that the governments that seek its financial assistance adopt market principles of efficiency, transparency and meritocracy in exchange for its help. Yet that same institution selects its leader through a process completely at odds with those values. According to the agreement between Western Europe and the United States, the IMF’s top job always goes to a European, while the presidency of the World Bank is reserved for an American. This has been the case since these institutions were created in the mid-1940s, and while the deal might have reflected the world’s realpolitik at the time, it is now obsolete, unacceptable and counterproductive to the cause of global economic stability. Even the leaders of the Group of 20, the assembly of nations that accounts for more than 80 percent of the world’s economy and two-thirds of its population, recognize that leadership selection at these institutions must change.