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The IMF and its ideological orphans

Originally published: Resumen: Latinoamericano and the Third World on May 7, 2023 by Álvaro García Linera (more by Resumen: Latinoamericano and the Third World) (Posted May 11, 2023)

There was a time when the International Monetary Fund’s “recommendations” on how to reorganize an economy were read, defended and executed as if they were a divine mandate. Those were the 90s of the last century, when every study of the course of the world economy or agreement reached with this or that country, not only emanated an enlightened historical optimism with what was being proposed, but was also accompanied by a blind endorsement that went from ministers of economy to parliamentarians; from government economic advisors to renowned local businessmen; from prestigious universities to television and newspaper commentators; from academics to coffee-brewers, who licked their lips with every sentence, every piece of information, every suggestion made by this international organization.

Those were the times of the “great social consensus” woven by a profuse molecular network of public opinion, dedicated to agreeing that the collective sacrifices of the loss of rights, of the expropriation of public goods and state abandonment, were going to be redeemed with the brilliant individual success of becoming a businessman, shareholder or company director. Privatize everything, unprotect everything and let the free market take care of the rest were the founding credos of a new world of entrepreneurs, which the clerics of this religion immediately accompanied, amidst adherence and incence, with hollow phrases such as “shrink the state to enlarge the nation”, “country of winners”, “trickle-down distribution” or “end of history”.

But at the dawn of the 21st century, everything began to fracture. Poverty, hidden under the carpet of “entrepreneurship”, exploded. Brutal inequalities broke consensuses and the free market rushed to kneel before the State to demand financial bailouts or subsidies; first in the face of the subprime mortgage crisis; then in the face of the great encirclement of the covid-19; then in the face of China’s productive power; then in the face of rising fuel prices; then in the face of bank failures; then in the face of climate change. Exceptionality has become the rule.

And now it turns out that, of that great supreme organizing principle of late capitalism, the “free market”, there is nothing left but nostalgia. In 2020, the State has saved the companies and stock exchanges of the great economies of the North. Global trade and cross-border capital have structurally slowed their growth; energy, food and consumption subsidies have displaced free supply and demand. National security” or geopolitical expansionism have killed the law of supply and demand to define the prices of fuels, telecommunications networks, microprocessors or the energy transition. Europeans and North Americans reward with public money the entrepreneurs who bring their value chains back to each country and punish the efficiency of cost externalization. Globalism is being replaced by economic nationalism and geopolitics.

The IMF knows this. And infinitely regrets it. In a recent study, it recounts this catastrophic setback of the free market. It shows how, after a long globalist flux from 1980 to 2010, it has entered an ebb that could last for decades. To this end, it provides data on the decline of world trade in goods, services and finance, with respect to the Gross Domestic Product (GDP), from 45% to 33%. The worldwide increase, up to 400%, of restrictive and protectionist measures. It speaks of surveys that reveal the substantial increase in social distrust of globalization (50%) and the growth in the demand for projective measures (33%). The study also provides data on the earthquake in the collective imaginary that is accompanying all this by verifying how the words “national security”, “nearshoring” or “offshoring” are overwhelmingly replacing the old mercantilist lexicon in international institutions, entrepreneurs and business managers. To top off this adverse panorama, the latest April report on the world economy (World Economic Outlook) shows how foreign direct investment, from having reached 5% of GDP in 2008, has fallen to less than 2% by 2022. To overshadow the effect of these facts, the reports also point out that these “misfortunes” will bring a possible fall in world GDP in the order of 2 to 7% in the following years. But, in spite of this, it can only admit that far from being a bend in the road that will be straightened out by an immediate and triumphant return of the free market, this “slow globalization” is a structural and long-lasting fact.

Saying these things to an institution that for decades was the oracle of the inevitable triumph of the free market is not easy. It brings with it internal traumas, existential frustrations and a cataract of almost paranoid contradictions.

This was already evident in 2020, when at the end of the “great encirclement” in the face of the pandemic, the IMF recommended to the governments of the countries to raise taxes on the rich and increase public investment, both in social protection and in capital (World Economic Outlook, 2020); exactly the opposite of what it had demanded for all the previous 40 years.

But where this logical inversion of the world reaches gross heights is when, in the same document, two antagonistic paths are offered for the same problem. Faced with the sovereign debt crisis that has exploded worldwide in the last 5 years, the IMF demands, on the one hand, “fiscal consolidation”, a euphemism for reducing public investment, cutting social spending and laying off personnel, as it is trying to impose in Argentina. But, on the other hand, it dedicates a whole chapter to demonstrate that, according to the historical experience of 33 emerging market economies and 21 developed economies, between 1980 and 2019, the cases of fiscal contraction have not generated a significant reduction in indebtedness. And, on the contrary, factual data show that expansion of fiscal spending aimed at increasing GDP through a “positive supply and demand shock” significantly reduces public debt ratios by as much as one-third. Certainly this is a truism. Only by increasing the economy and the State’s income can the debt percentages be reduced and the credits paid; even more so in a world in which there is a structural withdrawal of foreign investment, which is opting to take refuge in the economically stronger countries, due to the high interest rates they grant and the economic uncertainty that has corroded any hint of confidence in the future.

Milton Friedman, spiritual guide of neoliberal times, recommended knowing “when the tide is turning” in order to make an economic doctrine effective. He was referring to having the sensitivity to understand changes in public opinion, in the intellectual atmosphere and in ordinary people. He was able to perceive this in the 1970s, when the Keynesian framework was crumbling and, together with others, was able to radiate the new economic creed. But it is clear that today, in order to understand the new “sea change”, his IMF acolytes are not doing so with sufficient insight.

But where the cognitive derangement is much greater is in the ideological children of the international organizations of the globalist order. Bearers of a liberal enthusiasm that compensates for a limited talent, the whole army of “economic analysts”, consultants, professors, politicians and promoters of the free market who drank from the dogma poured from the IMF or the World Bank, have been left with their heads cut off. Their flat world is sinking and they do not understand why.

Some have opted for paralyzing stupor. They feel betrayed by a reality that did not match their prophecies and changed their questions to their answers. The result is bewilderment before a society that has lost its way.

Others have become weeping specters of an economic order that is vanishing along with its certainties and, faced with the evidence, there is nothing left but to cling to the melancholy memories of compromises for which history was not yet prepared.

And finally, there are the zombie children, ruthless creatures born and nurtured by a historical time, paradigms and economic circumstances that no longer exist today. The globalist consensus and optimism that breathed life into them has died and so have they. But they have not yet realized it or do not accept it; and they wander around furiously proselytizing the corrupted threads of the old order dragged by inertia and the wind. Unlike the specter, which only wanders in the corners of pathetic consciences, the zombie is violent and destructive. Since it no longer seeks to seduce with the free market but to impose and punish its detractors, it proposes to “dynamite” the economic rules; it competes for the speed of “shock therapies” and there are even those who resurrect botched proposals of educational “vouchers”. They are liberals willing to defend a liberalism with sticks.

All in all, they represent the fossil memory of a failure that led to the continental outbursts of 2001-2003. With the aggravating factor that, unlike then, they promise not to be “soft” and to put the unruly in order, that is to say, more disasters is a spiral. Perhaps that is what Gramsci was referring to when he spoke of the morbid or monstrous expressions of a flagging hegemony typical of an “interregnum”.

Álvaro García Linera was Vice President of Bolivia from 2006 to 2019 and a member of the Movement for Socialism (MAS), in the early 1990s he was a leader of the Túpac Katari Guerrilla Army

Source: Cubadebate, translation Resume Latinoamericano – English

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