This post is authored by Cmnimo as part of the Making Ripples that last project:
It’s no secret that the IMF is presently re-negotiating terms with emerging markets. The priority is on re-balancing the relationship of surplus-rich developing nations with those of deficit-laden advanced economies.
Top of the list is ‘stabilising’ the Eurozone and the need to pacify the markets has turned short-term auterity measures into an excuse for a wave of mass privatisation. From this point on, there’ll be no turning back. The transfer from public ownership to a global market is already underway.
Christine Lagarde of the IMF has presented this as the answer to recapitalising the financial institutions at risk in the Eurozone but the private insurers and pension funds are themselves in no shape to deal with their own books let alone a mass transfer from public to private liabilities. This could explain the talk of cutting red-tape along with safety-nets. Private investment is geared to cherry picking. The need to reduce operational cost while increasing profits, then to sell off for maximum returns was, in it’s way, a key ingredient of the financial crisis. But these are laws of the market place. Left unchallenged, market forces will place downward pressure on wages and is why credit makes up the shortfall in many household which keeps the price of assets (domestic or otherwise) rising… until boom turn to bust. The money is by nature amoral. Markets do not factor in the human cost, only track human responses.
The ‘Smart Money’s’ not geared to configure the impact and subsequent knock on effects on the real economy. That’s not the business they’re in. We say recession, traders see a once in a generation opportunity. Populations quake at the thought of depression, they dream of vulture-fest. It was why, after giving the private sector every opportunity, successive governments found the only viable response to employment, housing, education, health and general infrastructure was the creation of welfare systems. Despite the lessons of the past, present and clear warnings for the future, across the spectrum, both public and financial leaders state the infrastructures of advanced economies are sound enough to make these welfare systems redundant(ffw 7mins 12secs).
As this consensus was formed in a democratic vacuum, it should tell them what everybody else knows… it won’t work. Likewise Lagarde went for the simplest solution, ignored the data and chose to reinterpret the cause of the credit crisis as individual households living beyond their means but perhaps that’s due to the IMF’sown present vulnerabilities, Here, the areas which have seen large scale privatisation (housing. utilities. transport) are actively increasing the chances of a double dip recession by awarding themselves an ever greater slice of average household budgets while they either penalise or constructively factor out low income customers. Without a counter balance there is nothing to correct these perpetual profit driven errors. What’s impossible to ignore is the inevitable deterioration in conditions for those on low incomes once the safety-net is removed although the IMF does try.
A study by the UN children’s fund, Unicef, said there would be “irreversible impacts” of wage cuts, tax increases, benefit reductions and reductions in subsidies that bore most heavily on the most vulnerable in low-income nations. It found that between 2010 and 2012 a quarter of developing nations were engaged in what it called excessive belt-tightening
That couldn’t be a clearer indication. Although the IMF developed its pro-growth/austerity programmes in emerging economies, it offered only a blanket denial and mechanised response to Unicefs report.
”Recent Fund research shows that social spending has increased at a faster pace in countries with IMF-supported programmes … particularly in low-income countries. This is true for social spending in relation to GDP and as a share of total government spending, as well as increases in per capita social spending after adjusting for inflation.”
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