What's so great about the IMF?

George OsborneChancellor George Osborne is basking in the praise of the International Monetary Fund after that body's endorsement of his policies. Predictably the Coalition is presenting this as a measured endorsement by a organisation that deals only in facts. But the IMF, like everyone else, has a point of view.
Being endorsed by the IMF doesn't mean that your policies are 'correct'. There are no correct policies, just policies that benefit the people you want to benefit. So being backed by the IMF means the IMF agrees with what you are doing – it's a point of view not a scientific analysis.

Joseph Stiglitz

So when the IMF says Osborne has got it right, what does it mean? Here's what Joseph Stiglitz, former World Bank chief economist, had to say in his 2002 book Globalization and its Discontents...

"When the IMF arrives in a country, they are interested in only one thing. How do we make sure the banks and financial institutions are paid?... It is the IMF that keeps the [financial] speculators in business. They're not interested in development, or what helps a country to get out of poverty."

That's just the view of one man. But a look at the history of the IMF reveals it has a very specific world view. Any financial aid it grants is tied to Structural Adjustment Programmes. And these SAP's reveal what the IMF likes and what it doesn't like.

The IMF doesn't like;
  • Taxes on business
  • Welfare benefits
  • Public services, especially free ones

The IMF does like;
  • Privatising things
  • Outsourcing
  • Cutting government spending
  • Increasing VAT.
For some years, Argentina was held up as the poster boy for IMF 'reforms'. During the 1990s the country privatised voraciously, slashed corporation tax and squeezed public spending. In 2001 it suffered a catastrophic collapse made worse by the government's inability to sustain a national infrastructure.

Eaten words on Hungary

Last year the IMF wanted Hungary to take on board its monetarist cure-all. Hungary said no. It's government wanted to tax the banks and the rich. The IMF stopped talking to Hungary. It predicted bad things. In February this year, The IMF's executive board "commended the ongoing recovery of the Hungarian economy." No thanks, though, to the IMF.

In 2007, the IMF said of the UK: "The financial sector is strong and well supervised with a principle-based approach." We all know what happened next. You'd think, with this record, IMF endorsement would not be seen as quite such a prized achievement by Mr Osborne.

But he and his government welcomes it because the IMF's view of what is right and of whose interests an economy should serve coincide with their own. Yesterday's enormous fuss about the IMF backing clever George would be better presented as 'people who agree with me, agree with me'.
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