Return of the IMF

from David Ruccio

To judge from last weekend’s meeting, the International Monetary Fund is back from the dead. And it’s still a menace.

The fact is, the mission of the IMF has changed. For decades, it represented the imposition on a host of Third World nations of policies drawn from neoclassical economics and the finance ministries of the advanced capitalist nations. Then, in recent years, it all but died, with few countries seeking to borrow from the IMF and to suffer through IMF conditionality (Turkey being one of the few exceptions). Now, the IMF has found a new lease on life, starting with Greece and expanding to the rest of the advanced capitalist nations themselves.

The policies advocated by the IMF still stem from neoclassical theory and the ideas produced within the finance ministries of the United States and the European Union. But now, according to the Washington Post, their goal is the combination of “rebalancing and consolidation” they believe is necessary within the advanced nations.

Translated, rebalancing means a change in the balance of payments—of net exports and capital flows—to avoid what Ben Bernanke and others have long taken to be a “global saving glut” (an “unnatural” situation, whereby advanced nations run current account deficits and borrow capital, while China and other developing capitalist economies run current account deficits and lend money).  The goal is to promote changes in policies on both sides of the current imbalance, not only improving the “investment climate” within developing capitalist economies but increasing the profitability of the production of exports within the advanced capitalist nations.

Fiscal consolidation means lowering government deficits, by cutting the growth of government programs and increasing taxes. One leading proposal for accomplishing this is making people work more years (thus increasing revenues for social security and decreasing the number of years retirees receive benefits). People who work for a living in the United States are already working longer hours per year and sending more people into the labor force. Now, they’re going to have to spend more years in the labor force.

The translation offered by the Washington Post reporter is more succinct: “Suck it up. The party’s over.” For most people, it’s going to mean the night of the living dead.

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