Huffpost UK Politics uk
The Blog

Featuring fresh takes and real-time analysis from HuffPost's signature lineup of contributors

Mark Donne Headshot

From Westminster to the World: Farewell to Voodoo Economics?

Posted: Updated:

In these times of pinching pennies, monetary McCarthyism in the public sector and the savage exposure of any "drain" on public finance, it was interesting to see one rather faceless block of tax payers' money hit the stream recently, without very much of a splash.

In July, an obscure mechanism of parliament (in an especially leaden room of the gothic palace) voted to double the UK's subscription to the International Monetary Fund; raising the potential cost to the taxpayer from £10.7 billion to £20.15 billion. Extraordinarily - given the status quo of successive governments behaving obsequiously towards global finance monoliths - Labour MP's voted against the increase; a move which stunned parliamentary anoraks, but travelled no further than the barriers of Westminster tube station.

Inside, a growing posse of euro-loathing Tories who daily lament our fees to the EU are also sore at the hike. Many feel that increases to euro-zone bail outs via whatever channel should be minimal, not least because their Friday surgery sessions are beginning to swell with livid former public sector workers clutching P45's.

But why wouldn't the government plunge our money deeper into the seat of the IMF? After all, former JP Morgan banker and deputy head of the fund John Lipsky sent George Osborne into a carefully supressed dance this summer when he praised the government's cuts strategy. Through a mouth silken with saliva, Osborne boomed to the commons "I welcome the IMF's continued strong support for our overall macroeconomic policy mix, including our deficit reduction strategy."

Back to absolute accountability and monetary McCarthyism: what do we, other than praise for cuts no-one voted for, get for our money? Or rather what do the nations who can lend from this gargantuan Money Shop get? Like the World Bank, the IMF has almost no place at all in political conversations in the UK; even amongst the politicised or active. It is hidden, permanent, omnipotent and un-buckable. Where does it live? What does it do? Why do we pay for it?

The IMF has two global headquarters, both in Washington. It raises funds from 185 member states through a quota system that is based on each nation's economic size. The US is the IMF's largest shareholder. Loans from the fund, often to desperate countries, come with far-reaching, highly ideological conditions, including "structural adjustments". For "structural adjustments" read privatisation and broad deregulation.

So when the Greek civic coalition against their own domestic cuts agenda observed the recent IMF/EU bail out, one can understand the words of the coalition president: "Those who think the squares will not fill up again in September are deluding themselves .... People cannot accept they have no future, no job. They feel despair and rage." What the fund warmly advocates here in the UK is just as unpopular and undemocratic as what it imposes in Greece. And it has previous.

The IMF has supported military dictatorships in Brazil and Argentina with oppressive leaders receiving IMF funds denied to other nation states. In the case of Argentina and indeed many countries mired in the Asian financial crisis of 1997, the IMF - with its pathological conditionality of market obsessed, tight fiscal policy to reduce budget deficits - was roundly and credibly observed to have made difficult economic situations far worse.

It is also regularly accused of bullying the developing world. Jeffrey Sachs, an economics professor from Harvard University says: "The situation is out of hand [...] It defies logic to believe the small group of economists on 19th Street in Washington should dictate the economic conditions of life to 75 developing countries with around 1.4 billion people." But from Westminster to the world, is this unaccountable financial force in the first stages or rejection? In short, the answer is yes.

In spring this year, the G24 group of nations that includes Brazil and India warned the fund about external interference, with G24 ministers also calling for "urgent and concerted" measures to mitigate the seriously negative impact on their populations of high energy and food prices. In one outspoken aside to the IMF, Lesetja Kganyago, Director-General of South Africa's National Treasury stated different priorities: "it is also the issue of food security; we are going to have to be producing food. And for our governments, what is important is that this is a basic need for our citizens"

Other notable IMF rejecters include the world's fourth largest oil producer (Venezuela), the country with half of the world's lithium reserves (Bolivia) and a very recently liberated Egypt, where owing to "the pressure of public opinion" IMF loans were resisted. The fund had widely been perceived as supporting policies that hit the poorest hardest, and bolstering the government of (now criminally indicted) former President Hosni Mubarak. The rebel administration in Libya too is being publicly warned of the dangers of IMF support, laden as it is with conditions of dramatic budget deficit reduction, across the board privatisation and wage depression.

Add to all this the environmental impact of IMF and World Bank policies, including spending billions of pounds subsidising coal-fired power stations in developing countries whilst simultaneously claiming that the burning fossil fuels exposes the most desperate to the immediate perils of climate change, and one might well ask what we, and our world, get from the IMF? That conversation should start now.