Monday, December 13, 2010

IMF: master of Europe

Did you weep with joy on New Year’s Day 2002? For Romano Prodi, the experience of watching shiny euro coins spring from cash registers for the first time was akin to a federalist wet dream. “The euro is our money, my money, your money,” Prodi, then president of the European Commission, gushed. “And a little piece of Europe in your hands.”

Prodi was one of several EU leaders to hail the introduction of a single currency as proof that wounds opened by the Second World War had finally been heeled. What hogwash. Far from being a triumph for peace, the euro was the realisation of a plan hatched by a corporate clique. Just five companies – Fiat, Total, Solvay, Philips and Rhône Poulenc – laid the euro’s foundations when they formed the Association for the Monetary Union of Europe in 1987. According to their rationale, the patchwork of different currencies used in Europe at the time hampered it from competing with Japan or the US.

Next week the flaws in that blinkered logic will be exposed when the EU’s presidents and prime ministers meet in Brussels. Apparently in a bid to stop the euro-zone from disintegrating, the summit is expected to endorse a “financial stability mechanism” for economies in difficulty. Doubtlessly, there will be some effort made to depict the scheme as a gesture of solidarity; yet the small-print reveals that many of the levers of economic power will be held by an institution based in Washington.

In order to qualify for loans from the mechanism, a country would have to go through rigorous checks from the International Monetary Fund. The IMF might typically be headed by a European nominee but is nonetheless an agent of US imperialism. Piecemeal reforms to the fund in recent times have not weakened America’s grip over it. Commanding 16.5% of its voting shares, the US retains a veto over all key decisions. Rather than the euro enabling Europe to compete with America, a US proxy is now to be given greater power to meddle in our economies.

For a brief period in 2008, it was fashionable for commentators to predict the end of neo-liberalism – that poisonous ideology under which the market was treated as infallible. The savage cutbacks forced on Greece and Ireland this year by the IMF – with the backing of the EU’s top institutions - illustrate how premature those predictions were.

Naomi Klein’s book The Shock Doctrine offers an indispensable guide to understanding what is really happening. She traces how the IMF underwent a process of “colonisation” by acolytes of Milton Friedman, the right-wing economist who acted as a mentor to such destructive politicians as Donald Rumsfeld and the Chilean tyrant Augusto Pinochet. That process came to fruition in 1989 when the “Washington Consensus” was unveiled, committing the IMF and its sister body the World Bank to privatising every activity under the sun, as well as to scaling back public spending everywhere.

I have just returned from a speaking tour of Ireland, where I was astonished with the deference with which Ajai Chopra, head of an IMF “mission” to the country, was treated by the national broadcaster RTE. Chopra’s surface geniality and his insistence that he is merely a humble civil servant should not be allowed conceal how he is a Friedmanite fundamentalist. During the 1990s he was tasked with “rescuing” the South Korean economy. The “humble” servant treated democracy with disdain by telling all four candidates in a presidential election that Korea would receive no foreign assistance unless they signed up to an austerity programme. The resulting cuts he demanded helped Korea’s unemployment rate to triple between 1996 and 1999.

Chopra has displayed similar contempt towards Irish sovereignty. Although Brian Cowen, the Taoiseach (Irish prime minister), stated that the IMF had no interest in micro-managing economies, that is precisely what it’s doing. After an IMF paper from November advocated that the country’s minimum wage should be slashed, the Dublin government obediently took measures to steal from the poor. You can be sure that Chopra and his team would never agree to work for €7.65 per hour (down from €8.65 per hour) but that is the new minimum wage that has been set for Ireland.

Things are even worse in Romania, where the IMF has told the Bucharest authorities not to increase wage levels that are as paltry as €150 per month. And they are worse again beyond this continent, where the cost of the IMF’s inflexibility can be measured in human lives. As its contribution to a United Nations summit convened to address global poverty in September, the IMF argued that low-income countries in Africa and Asia should not increase government spending unless their revenue also rises. This hawkish approach to deficit management is imperilling the realisation of the UN’s millennium development goals for reducing the most extreme forms of poverty – including infant and maternal mortality – by 2015, a study by Oxfam has found.

Five years ago, the Malian president Amadou Toumani Touré poured brilliant scorn on the IMF for conditioning assistance to the country on privatisation of its cotton industry. “People who have never seen cotton come to give us lessons on cotton,” he thundered. “This is not a partnership. This is a master relating to his student.”

The IMF’s status as master of Africa has long been assured. We know now that it is master of Europe too.

·First published by New Europe (, 12-18 December 2010

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