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11 June, 2016

IMF says ... "neoliberalism"!

Miraculously, a recent IMF paper appeared to be challenging the dominant neoliberal doctrine. As described by Yves Smith of nakedcapitalism :

While the IMF’s research team has for many years chipped away at mainstream economic thinking, a short, accessible paper makes an even more frontal challenge. It’s caused such a stir that the Financial Times featured it on its front page.


The article cheekily flags the infamous case of the Chicago Boys, Milton Friedman’s followers in Pinochet’s Chile, as having been falsely touted as a success. If anything, the authors are too polite in describing what a train wreck resulted. A plutocratic land grab and speculation-fueled bubble led quickly to a depression, forcing Pinochet to implement Keynesian policies, as well as rolling back labor “reforms,” to get the economy back on its feet.

Indeed, a few IMF executives start to decline from the neoliberal orthodoxy and some evidence can be found in the paper. For example, although they refuse to abandon their faith to the neoliberal doctrine stating that “There is much to cheer in the neoliberal agenda”, they reach the conclusion that “there are aspects of the neoliberal agenda that have not delivered as expected”.

Indeed, they are very polite against the destruction that the IMF policies brought to many economies, lately in Greece. However, it is interesting that they start to question two fundamental aspects of the neoliberal agenda: removing restrictions on the movement of capital across a country's borders (so-called capital account liberalization); and fiscal consolidation, sometimes called “austerity,” which is shorthand for policies to reduce fiscal deficits and debt levels.

Specifically, in the paper it is mentioned that “Austerity policies not only generate substantial welfare costs due to supply-side channels, they also hurt demand—and thus worsen employment and unemployment. [...] in practice, episodes of fiscal consolidation have been followed, on average, by drops rather than by expansions in output. On average, a consolidation of 1 percent of GDP increases the long-term unemployment rate by 0.6 percentage point and raises by 1.5 percent within five years the Gini measure of income inequality ...”, which is totally opposite from the positions of the neoliberal doctrine gurus and from Berlin's "unexplained" sacred devotion to fiscal discipline.

We may have to consider this paper as another attempt by the IMF to mitigate the cumulative negative criticism that it faces from the public, due to its devastating policies all over the world. Greece has been the latest victim, through a 6-year uninterrupted destruction imposed by the IMF, ECB and European Commission - through various, even undemocratic methods - based on the IMF neoliberal agenda.

As has been pointed already since 2013 through the article IMF new tactics: It is better to appear unreliable than to let people understand that you serve specific interests: “... it was the turn of Olivier Blanchard, chief economist at the Fund, to admit through a report which was given to the public a few days ago, that the Fund, together with all European leaders, finance ministers, European Commission and ECB, made a serious mistake in their calculations, underestimating the devastating consequences of austerity policies imposed on indebted countries. [...] the admission that there was a mistake in calculations with the reference to a specific factor known as the "multiplier", is an IMF tactic to convince the public that it is a purely calculation error, which is based on wrong estimates. Through this tactic, IMF is trying to establish the false picture that operates purely technocratic and that the catastrophic effects are solely due to wrong calculations and estimates and not due to an attempt to serve specific banking and speculative interests.

Besides, the IMF should have learned from its mistakes a long time ago, at least since the 90s where its policies have brought absolute destruction in Russia, SE Asia and elsewhere. If the IMF executives had real intention to fix their totally problematic recipes, we would have seen alternate policies in the Greek case.

Yet, what's most impressive in this latest IMF paper, is that its authors use the term "neoliberalism" and "neoliberal agenda"!

George Monbiot started his article Neoliberalism – the ideology at the root of all our problems , two months ago, with the aspect of the anonymity of neoliberalism: “Imagine if the people of the Soviet Union had never heard of communism. The ideology that dominates our lives has, for most of us, no name. Mention it in conversation and you’ll be rewarded with a shrug. Even if your listeners have heard the term before, they will struggle to define it. Neoliberalism: do you know what it is? Its anonymity is both a symptom and cause of its power. It has played a major role in a remarkable variety of crises: the financial meltdown of 2007-8, the offshoring of wealth and power, of which the Panama Papers offer us merely a glimpse, the slow collapse of public health and education, resurgent child poverty, the epidemic of loneliness, the collapse of ecosystems, the rise of Donald Trump. But we respond to these crises as if they emerge in isolation, apparently unaware that they have all been either catalysed or exacerbated by the same coherent philosophy; a philosophy that has – or had – a name. What greater power can there be than to operate namelessly?

The IMF and other major carriers of the neoliberal doctrine avoided for decades to call it by a name. IMF itself struggled for decades to impose the neoliberal agenda away from publicity lights. But now, because these policies have been imposed to a developed economic area, called eurozone, the IMF didn't manage to avoid publicity. The destruction of the Greek economy is beyond doubt. People's lives as well as numbers reveal a total failure.

Is it time for the IMF and the other mechanisms of the elites to abandon neoliberalism? Probably yes, but that doesn't mean that they have something better in mind for the majority. On the contrary, we are already witnessing the transformation of Capitalism into a global brutal Feudalism with neoliberalism as the intermediate stage. As long as societies remain apathetic to this rapid transformation, no "sincere" admissions by the IMF or other mechanisms would prevent it.

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