After the Epic Fail of the imposed austerity program to Greece, economists at the International Monetary Fund seem to have come to their senses. They openly question neo-liberalism: that is austerity and deregulated capital flows.
In an article with Title “Neoliberalism: Oversold?” posted on IMF’s website, several economists realize that neoliberal policies do not create growth.
“Instead of delivering growth, some neoliberal policies have increased inequality, in turn jeopardizing durable expansion.”
That’s something that 10 million Greeks have been saying since 2011.
“The neoliberal agenda […] rests on two main planks. The first is increased competition—achieved through deregulation and the opening up of domestic markets, including financial markets, to foreign competition. The second is a smaller role for the state, achieved through privatization and limits on the ability of governments to run fiscal deficits and accumulate debt.”
“Competition” means, of course, also “decrease wages to the absolute minimum” pushing thousands of people to the edge of descent existential living. Who has forgotten Christine Lagarde claiming in 2012 – if I’m not wrong- that the wages in Greece should reach the level of Croatia in order to be competitive, although Croatia is not in the eurozone and therefore cannot be comparable to Greece. In the same logic of Lagarade;s neoliberal state of mind, wages in Greece could be down to level of China or India, no?
Claiming that neoloberalism and the global trade since the 1980’s ” has rescued millions from abject poverty” and praising “foreign direct investment and “privatization of state-owned enterprises“, the authors note:
However, there are aspects of the neoliberal agenda that have not delivered as expected. Our assessment of the agenda is confined to the effects of two policies: 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. An assessment of these specific policies (rather than the broad neoliberal agenda) reaches three disquieting conclusions:
•The benefits in terms of increased growth seem fairly difficult to establish when looking at a broad group of countries.
•The costs in terms of increased inequality are prominent. Such costs epitomize the trade-off between the growth and equity effects of some aspects of the neoliberal agenda.
•Increased inequality in turn hurts the level and sustainability of growth. Even if growth is the sole or main purpose of the neoliberal agenda, advocates of that agenda still need to pay attention to the distributional effects.
The rest is history of Greek daily life.
It’s especially exciting that the #IMF guys debunk the “expansionary #austerity” fairy tale used to torture #Greece. pic.twitter.com/THbnKWAG1j
— Valentin Schwarz (@v_schwarz) May 27, 2016
IMF website and full article here.
Seems to be a problem with this article as the printing is in grey on a black background making virtually imposible to read.
Other articles are ok.
oh. thanks. I’ll see what I can do.
Fixed!
Thanks for fixing KTG.
Varoufakis must have convinced the IMF. I hope the message now gets through to Schaueble and Dijjselbloem.
Neo-liberalism really is a load of tosh, but the elites believe it works because they themselves benefit. Any wealth that maybe created goes into the hands of the top 1% and much of it is spirited away into dodgy tax havens to avoid nations collecting tax to use for the benefit of the state. It is as if the earnings of the nations are being stolen from the labours of the population.
Why would the IMF say this? Austerity and SAP are the main pillars of their policies and programmes. They are also calling for debt relief and restructuring. All this goes exactly against everything they stand for. There must be some (political) reason for this and it is not because one day they grew a conscience.
Before you know it they say that Greece should default on its debts and go back to the Drachme for a while (which Greece should have done in 2011).
It is a legal reason. The IMF is bound by its constitution (and the USA, its main financer, is telling it to behave) to ensure that all loans are made under conditions that are realistically repayable. As Varoufakis noted from the outset, Greece is a bankrupt country and is being forced to accept even more debt — that can never be repaid — by its lenders. The IMF is not allowed to engage in obvious usury, as Schaeuble and his fascist buddies think they can do.
Ok, makes sense then. Well, as for Schauble and his buddies, I keep saying it again as I always have: Tax payers should not bail out banks that made bad investments. That is rogue capitalism. The banks don’t share their profits with tax payers either. Greece made a mess of its economy but the risk of loans should be with banks, not with tax payers. TBTF is not an excuse. And then TBTF should be reversed.
Yes you are correct.
The rules supporting the €uro are flawed by the unerstandable but incorrect conclusion of the German govt that the currency should be so robust that galloping inflation in the Weihmar repulic should not be repeated.
It is not prudent to lend if the borrower cannot repay. Help should be practical in facilitating better financial management and encourage by the offer of aid.