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08 February, 2013

IMF new tactics: It is better to appear unreliable than to let people understand that you serve specific interests

by system failure

Lately, we see an increasing number of revelations from IMF executives or former executives related to the admission that the Fund has failed on the objectives it had set for the recovery of Greek economy and the exit from the debt crisis.

After the statement of Panagiotis Roumeliotis - former Representative of Greece in IMF – to NY Times, that the IMF knew that the program for Greece was impossible to implement because there was nowhere a successful example, a statement that was made purely for distraction purposes ( ), it was the turn of Olivier Blanchard, chief economist at the Fund, to admit through a report which was given to the public a few days ago, that the Fund, together with all European leaders, finance ministers, European Commission and ECB, made a serious mistake in their calculations, underestimating the devastating consequences of austerity policies imposed on indebted countries.

While it may seem strange, this is a corrective movement from IMF officials. As the Fund has fully lost its reliability due to the failed policies applied in many cases in the past, the officials appear to change their tactics by being “honest”, and try to “refine”, as much as they can, straight statements like that of Roumeliotis . The move was made basically for three reasons:

First, as the IMF has already lost its reliability and as the recent severe economic crisis and its expansion into an economically developed area like eurozone, has attracted the attention of public opinion on it, the Fund is trying to change its strategy giving importance to its public image and present a different picture at least in the part that concerns the intransigence of its executives. Τheir unexplained obsession about specific policies which was often accompanied with an arrogant attitude, is well known. In the past, countries which adopted these policies under the pressure of IMF, have experienced an economic disaster. Josef Stiglitz in his book “Globalization and its Discontents”, describes examples of this behavior and its devastating effects on the follow. “Crises of honesty” and admitting mistakes help to change this picture.

Secondly, as the debt crisis in eurozone gets a spiral form out of control, the IMF wants to include, as equaly responsible, other factors such as the various EU institutions and the ECB, because the continuing crisis in eurozone and the fiscal worsening at least in the countries of the periphery, are bringing bad signs for the future. It is almost certain that the crisis will hit the heart of the eurozone in future with unpredictable consequences, and as the IMF knows that this will happen sooner or later, it does not want to appear solely responsible for all this situation. However it is true that specific policies of the EU and ECB have contributed to this continuing crisis.

Third, the "leak" in the form of a technical report, and the admission that there was a mistake in calculations with the reference to a specific factor known as the "multiplier", is an IMF tactic to convince the public that it is a purely calculation error, which is based on wrong estimates. Through this tactic, IMF is trying to establish the false picture that operates purely technocratic and that the catastrophic effects are solely due to wrong calculations and estimates and not due to an attempt to serve specific banking and speculative interests.

But the true role of IMF is well known to many, especially in the Asian crisis in the late 90's, where the Fund gave loans in order to resque the western investors, while the policies imposed under its pressure, plunged into recession many countries of South-East Asia and inflated public debt with all the consequences, such as increased poverty and unemployment.

And finally, the destruction of the economy, the increasing poverty and unemployment, are things that have real and serious consequences on the lives of millions. And therefore, the new Blanchard confession, can only be treated as another cynical and arrogant behavior by the IMF and not as a sincere statement concerning wrong estimations.

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