Monday, May 23, 2011

The Strauss-Kahn scandals we ignore

The press coverage of Dominique Strauss-Kahn’s arrest leaves me ambivalent. Like every other journalist who has written about the matter, I am not qualified to speculate on whether he committed the crime for which he has been charged. Rape is a very serious matter; so is the right to a fair trial.

Instead of rushing to pass judgment before the accused even set foot in court, perhaps the mainstream media should be asking why it generally ignored firm evidence that Strauss-Kahn had done wrong over the past few years. I am referring here to the decisions he took and the work he approved as head of the International Monetary Fund.

Last month, Strauss-Kahn gave a speech in Washington, in which he lamented how “in too many countries, inequality is at record highs”. Arguing that the IMF could not be “indifferent” to issues of wealth distribution, he added: “We are paying more attention to the social dimension in our programmes—protecting social safety nets for the poor and supporting an equitable sharing of the burden.”

Analysed properly, there is something obscene about that comment. The global financial crisis was caused by the feckless behaviour of financial wizards – some of whom have continued to trouser extravagant bonuses. Why should the poor have to bear any burden for a problem that the rich created?

A 2010 paper by Unicef, the United Nations children’s fund, illustrated that the “safety nets” of which Strauss-Kahn was so proud were not sufficient to prevent millions from slipping through them. It highlighted how countries such as Angola, Chad and Congo were planning to introduce cutbacks of up to 13% of gross domestic product over the following year, despite how they all had high levels of malnutrition, childhood mortality or HIV infection. Declining oil revenues were partly responsible for the economic woes of Angola and Chad but the paper suggested that IMF pressure was, too, predicting that the cuts will “likely incur potentially irreversible long-term human costs.”

Beyond some cosmetic changes to policy, Strauss-Kahn has continued to sign the same ruinous prescriptions for many economies that his predecessors have signed since the institution was hijacked by acolytes of Margaret Thatcher and Ronald Reagan. A new study by the Centre for Economic and Policy Research in the US concluded that conditions imposed on Jamaica by the IMF in the past few years are almost identical to those imposed in the 1970s and 1980s, including a freeze on public sector wages. One of the most inimical effects of the measures is that Jamaica suffered one of the highest rates of decline in treatment rates for tuberculosis of any country where this disease is prevalent between 1997 and 2006. And while the enrolment rate for Jamaica’s primary schools reached 97% in 1991, it fell to 87% in 2007.

Strauss-Kahn’s professed concern about inequality and “burden sharing” belies the IMF’s stance towards Pakistan. Between 1980 and 2000, the burden of taxes paid by the poorest households in Pakistan rose by 7%. Yet the country’s richest saw their tax levels fall by 15% over the same period. Value-added tax is known to hurt the poor far more than the rich, yet the Fund has been pushing for VAT increases in Pakistan over the past year. The IMF has remained rigid on this point, despite the floods that devastated much of Pakistan in 2010.

Here in Europe, the austerity measures introduced in Latvia and Estonia at the IMF’s behest have pushed their unemployment levels to almost 20%. In Greece, a nominally socialist government has pledged to raise €15 billion from selling off state-owned resources to pay back debts to the IMF; that is twice the level of privatisation the Greeks promised last year. Portugal is about to tighten the belts worn by its citizens as part of the “fiscal consolidation” strictures of the Fund and by the EU. Ordinary Portuguese are footing the bill for a bail-out of private banks. Portugal has a gross external debt of €216 billion but just €43 billion of that sum is owed directly by the Lisbon government.

I don’t imagine that Strauss-Kahn’s prison cell has been inundated with “thank you” cards from IMF staff. But the Fund has flourished under his leadership, which – happily for him – has coincided with a global crisis. In April 2009, it was allocated a whopping $750 billion by the Group of 20 (G20) top economies. By selling gold, it has amassed a further $2.8 billion, while the interest payments on its loans are expected to bring it a cool $500 million profit this year.

Strauss-Kahn’s appointment to the IMF was orchestrated by his nemesis Nicolas Sarkozy, who was keen to send a top rival far away from Paris for a few years. No matter how much his fellow Socialists may deny this, the reality is that Strauss-Kahn has been acting as a puppet of the US Treasury and Wall Street, which ultimately control the IMF, since he moved to Washington in 2007. His successor will also be under the Treasury’s tutelage, regardless of who that person may be or what his or her nationality is.

Strauss-Kahn was able to stay at luxury $3,000-a-night hotels, while implementing ruinous policies that keep millions of poor women, men and children subjugated. It is a shame that the mainstream press was so fixated with his thirst for power that the most scandalous consequences of his work went overlooked.

·First published by New Europe (, 22-28 May 2011

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