The IMF Rules the World Will the Debtors Fight Back?

[seemslikeadream]

http://www.counterpunch.com/hudson04062009.html

April 6, 2009

Will the Debtors Fight Back?
The IMF Rules the World
By MICHAEL HUDSON

Not much substantive news was expected to come out of the G-20 meetings that ended on April 2 in London – certainly no good news was even suggested. Europe, China and the United States had too deeply distinct interests. American diplomats wanted to lock foreign countries into further dependency on paper dollars. The rest of the world sought a way to avoid giving up real output and ownership of their resources and enterprises for yet more hot-potato dollars. In such cases one expects a parade of smiling faces and statements of mutual respect for each others’ position – so much respect that they have agreed to set up a “study group” or two to kick the diplomatic ball down the road.

The least irrelevant news was not good at all: The attendees agreed to quadruple IMF funding to $1 trillion. Anything that bolsters IMF authority cannot be good for countries forced to submit to its austerity plans. They are designed to squeeze out more money to pay the world’s most predatory creditors. So in practice this G-20 agreement means that the world’s leading governments are responding to today’s financial crisis with “planned shrinkage” for debtors – a 10 per cent cut in wage payments in hapless Latvia, Hungary put on rations, and permanent debt peonage for Iceland for starters. This is quite a contrast with the United States, which is responding to the downturn with a giant Keynesian deficit spending program, despite its glaringly unpayable $4 trillion debt to foreign central banks.

So the international financial system’s double standard remains alive and kicking – at least, kicking countries that are down or are falling. Debtor countries must borrow a trillion from the IMF not to revive their own faltering economies, not to pursue counter-cyclical policies to restore market demand (that is only for creditor nations), but to pass on the IMF “aid” to the poisonous banks that have made the irresponsible toxic loans. (If these are toxic, who put in the toxin? To claim that it was all the “natural” workings of the marketplace is to say that free markets curdle and sicken. Is this what is happening?)

In Ukraine, a physical fight broke out in Parliament when the Party of Regions blocked an agreement with the IMF calling for government budget cutbacks. And rightly so! The IMF’s operating philosophy is the destructive (indeed, toxic) belief that imposing a deeper depression with more unemployment will reduce wage levels and living standards by enough to pay debts already at unsustainable levels, thanks to the kleptocracy’s tax “avoidance” and capital flight. The IMF trillion-dollar bailout is actually for these large international banks, so that they will be able to take their money and run. The problem is all being blamed on labor. That is the neo-Malthusian spirit of today’s neoliberalism.

The main beneficiaries of IMF lending to Latvia, for example, have been the Swedish banks that have spent the last decade funding that country’s real estate bubble while doing nothing to help develop an industrial potential. Latvia has paid for its imports by exporting its male labor of prime working age, acting as a vehicle for Russian capital flight – and borrowing mortgage purchase-money in foreign currency. To pay these debts rather than default, Latvia will have to lower wages in its public sector by 10 per cent -- and this with an economy already depressed and that the government expects to shrink by 12 percent this year!