A recent IMF study (June 2016) exposes flaws in neoliberal policy that have afflicted progressive issues for over 40 years. The title of the study itself “Neoliberalism: Oversold?” hints at the underlying thesis that something must be wrong. Why else pose the question?
“Instead of delivering growth, some neoliberal policies have increased inequality, in turn jeopardizing durable expansion.” (Neoliberalism: Oversold? IMF, Finance & Development, June 2016, Vol.53, No.2 ). Senator Bernie Sanders wholeheartedly agrees.
And, according to the study: “Austerity policies not only generate substantial welfare costs due to supply-side channels, they also hurt demand—and thus worsen employment and unemployment.” Bernie would probably agree with this too.
This sudden revelation calls for trumpets, horns, bells, and Roman Candles shooting off multi-colored projectiles into the sky, a celebration… maybe?
The IMF, yes the International Monetary Fund, has exposed the soft hidden underbelly, the innate destructiveness, of neoliberal policy, although the IMF is too diplomatic to use the word “destructiveness.” In fact, the IMF endorses neoliberalism.
But, here’s what they’ve concluded: Austerity backfires!
Not only that, it always, inevitably, almost for sure sucks the air out of social welfare programs, but the IMF study did not address this.
Their conclusion that neoliberalism has warts is a blessing for all whom frown upon neoliberalism, although very, very late in coming, because the way things have been going, neoliberalism, quietly over the past four decades, has built a head of steam towards re-instituting brutal feudalism, a throwback to the Middle Ages, circa 900-1200 AD, when fiefdoms displaced tribalism of the Dark Ages. Kings, queens, lords and serfs, mostly serfs, really a lot of serfs, 99% serfs (some things never change) labored self-sufficiently on the lord’s land in exchange for protection from bands of wanderers. Today, self-sufficiency’s gone out the window, forever no more, so people simply starve to death, which is a huge drawback in returning to the days of lords and serfs.
Still and finally, after four long decades, the International Monetary Fund (IMF) has come to the conclusion that, for example, Chile’s neoliberal experiment, in some respects, was a mistake, especially its austerity measures.
And, that’s not all; pitfalls in neoliberal policy have continued ever since the official christening of “austerity policies” by the hand of Pinochet, Kissinger, Friedman & CIA, Ltd way back in the 1970s.
After all, only recently austerity measures brutally hammered the country of Greece, taken down onto wobbly knees, its head bent forward in lifeless supplication.
The IMF will never admit to hammering the daylights out of Greece, but they were complicit, at the least! They destroyed the country. Greece may never recover from the heartless forces of austerity imposed by the Troika, consisting of the European Central Bank (ECB), the European Commission (EC) and the International Monetary Fund (IMF), which consortium, headquartered in Brussels, actually managed to squeeze blood out of a turnip, including theft of Greece’s state assets plus undercutting any future hope whatsoever for a decent livelihood by its citizens. These are facts, not hype!
But, standing far above the fray, Greek bondholders (creditors) remain sacrosanct, even though rank speculators, who prey upon the weak like gigantic vultures hovering above, waiting to attack the next weakened nation/state, know the Troika has their back, standing to make hundreds of millions, maybe billions, in speculative profits. This happened only recently in South America, again, but that region’s vulnerability to financial rape artists is an old threadbare story by now.
The IMF study found “much to cheer in the neoliberal agenda” as well as “aspects of the neoliberal agenda that have not delivered as expected,” Ibid. For the record, on balance, the IMF likes neoliberal policies.
As such, since the world has largely turned in favor of the neoliberal agenda over these past 40 years, nobody needs convincing of its merits. So, a review of the demerits, as concluded by the IMF, deserves attention.
The IMF study focused on failure in neoliberal policy: (1) removing restrictions on the movement of capital across borders (kinda complicated stuff) can, and often times does, inhibit economic growth, and (2) fiscal consolidation, more commonly referred to as austerity, damages economic growth by depressing demand for goods and services.
According to the IMF, “An assessment of these specific policies (rather than the broad neoliberal agenda) reaches disquieting conclusions.” The IMF preference for the word “disquieting” is a soft synonym for the word “disaster,” e.g., the Greek experience.
As concluded by the IMF:
*“The benefits of increased growth seem fairly difficult to establish when looking at a broad group of countries.” Or, to put it another way: Aspects of neoliberalism hinder rather than promote economic growth.
*“The costs in terms of increased inequality are prominent.” Or, put another way: Neoliberal policy enhances inequality, in turn, suppressing economic growth. Or, in the colloquial, the rich get a lot richer and everybody else sucks wind!
In point of fact, the IMF concludes neoliberal policy does contribute to the rich getting fabulously richer and the poor horribly poorer (but that’s not how the IMF characterizes it). By now, everybody has figured this one out (Bernie Sanders 101), which presents a problem: Neoliberalism becomes problematic policy sans the old-fashioned safety net of “self-sufficiency” of the Middle Ages, which is no longer an option.
People get restless without adequate foodstuff and safe shelter. Just look at the entire Middle East and the southern Mediterranean for real time examples of this happenstance. People morph into refugees, “bands of wanderers,” similar to the “bands of wanderers” that terrorized safe sanctuary during the Middle Ages. But, nowadays, the lords of the realm view serfs as expendable because they no longer grow crops in self-contained fiefdoms for the liege’s table. That connection is lost. What’s left for the distraught victums?
Interestingly, there’s more to the IMF study than mere critique of negative aspects of neoliberalism. By wading through several paragraphs of the IMF study, it becomes only too obvious that the clarion call of the study is an endorsement of fiscal consolidation, aka: austerity, for certain countries but not others “… surely the case that many countries (such as those in southern Europe) have little choice but to engage in fiscal consolidation [austerity], because markets will not allow them to continue borrowing.” Alas, “markets” determine policy, which is, and always has been the heartbeat of neoliberalism. People are subjugated to “the markets,” like it or not.
In a sense, the IMF revelations about problems with neoliberalism are rendered meaningless by the dictates of the “markets.” Regardless of whether problems with neoliberalism are clearly identified by the IMF study, the “markets” dictate policy anyways!
Thus, even though certain aspects of austerity are downers, not good for economic impulses, certain countries still need to experience the big chill, like Greece, for example.
And thus, the IMF revelations depart from a universal fix for neoliberalism’s ills, “the need for consolidation in some countries does not mean all countries,” is the hook, clearly pointing to Germany, the U.S. and the UK as exceptions to the rule. They can handle debt whereas others like the Mediterranean countries cannot. Thus, the big Western Boys and Gals get a pass and in fact should avoid austerity because, after all, it does impede growth. This is the IMF’s subtle message to Washington “avoid austerity,” even though most Republicans and many neoliberal Democrats experience wet dreams over implementing neoliberal austerity policies.
The IMF study revealed: “…episodes of fiscal consolidation [austerity] 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,” Ibid.
Not exactly what the good ole USofA needs these days, meaning that a strong dose of “austerity measures” in America could upset the entire applecart from the economy to cratering the stock market.
Where’s the safety net? The Fed is already up to its eyeballs in debt and interest rates can only go up since already near zero. What can be done to help? Some believe the negative interest rate experiment could backfire in a very big harmful way. Speaking of which, isn’t QE also an experiment?
So, in the final analysis, even though the IMF recognizes weaknesses within the neoliberal framework, those weaknesses still do not get countries like Greece or Italy or Spain or Portugal off the hot seat. Still, they need their heads bashed in on occasion. However, Germany, the U.S. and the UK can, and probably should, ignore neoliberal shortcomings by not lowering their heads in fealty.
In the final, final analysis, the IMF officially admits to glaring weaknesses in neoliberal policies that hurt economic growth but still has not found a way to help countries like Greece other than an old-fashioned whipping in the woodshed.
Well, still, there is one major positive to the IMF study. It lends tremendous credence to Bernie Sanders’ claims about inequality, the one percent, and Wall Street fleecing activities.
Still and all, cancel the trumpets, bells, horns, and Roman Candles. The parade is called off.
However, the IMF findings do offer more than a glimmer of hope that neoliberal policies will be forcefully challenged as the world economy has only tentatively stepped beyond outright depression, a risky environment that progressive minds, like FDR, counteracted with the opposite of today’s neoliberal agenda, meaning an emphasis on social welfare programs, not destruction of social welfare.
After all, the medieval safety net of self-contained fiefdoms is long gone.