The IMF’s howler: Millions in poverty

The IMF’s howler: Millions in poverty

To the millions of pauperised citizens of Europe, there has been an unprecedented admission of guilt by the International Monetary Fund (IMF): we got it wrong.

In a New Year report entitled “Growth Forecast Errors and Fiscal Multipliers”, the IMF admitted that it had plunged nations of the Euro-zone into deeper poverty by enforcing its stringent austerity measures.

Followers of our 2012 visit to the Euro-zone will recall that Judith and I were horrified by the wanton destruction of jobs, living standards, public services like health, education and pensions by the so-called troika which we preferred to call the junta.

The IMF theory, fully supported by the world banks and the EU plutocrats, held that harsh austerity would “cut the fat out of bloated economies”, force up productivity and, therefore, economy recovery.

Now IMF Economic Counsellor Olivier Blanchard and research-department economist Daniel Leigh have co-authored a report showing that the IMF policy of slashing budgets also slashed growth. (Wow, what a discovery – and these guys have economics degrees too.)

While the top IMF and EU economists expected that cutting one euro from the budget would cost around 50 cents in lost growth, the actual impact was more like €1.50 per euro.

“We find that, in advanced economies, stronger planned fiscal consolidation has been associated with lower growth than expected, with the relation being particularly strong, both statistically and economically, early in the crisis,” Blanchard and Leigh wrote.

Their forecast had “significantly underestimated the increase in unemployment and the decline in private consumption and investment associated with fiscal consolidation.

“In a number of countries, we have revised our forecasts to reflect this research,” Blanchard told reporters. In other words, the IMF has belatedly relaxed its own deficit targets – but for the economies of Greece, Portugal, Spain and Italy it is probably too late to stop one of them tipping over the fiscal cliff some time this year. Then it will be a domino effect.

Blanchard, the IMF’s top economist and head of its research department, isn’t about to eat humble pie. “Self critique is always difficult, but it is not relevant in this case,” he sniffed.

What the bureaucratic language cannot hide is that the IMF got it wrong – big time – and the mistake is going to be cruel and costly for the people of the Euro zone and the world economy.

Writing for the Open Democracy web site, economist Ann Pettifor said: “In our 2010 report, Professor Victoria Chick and I warned explicitly and on the basis of a century of publicly available data, that in a slump, fiscal consolidation increases unemployment and cuts private investment.

“(Yet) an institution with a staffing of about 1100 professional economists (most of whom have PhDs) – and an overall personnel budget of about $800 million – failed to make that correct call.

“Instead, the IMF now admits that it ‘significantly underestimated’ the impact of public spending cuts on employment and investment.”

And as Georgia Logothetis wrote on the Daily Kos website: “Austerity borne on the backs of the 99 per cent doesn’t work. It not only doesn’t fix the problem, it makes it worse by exacerbating a country’s economic problems.”

The IMF’s disastrous Euro strategy had its loudest supporters in the Australian mainstream media, The Australian, The Australian Financial Review and ABC Radio National. Throughout 2010, 2011 and 2012 there were persistent demands for the so-called PIGS – Portugal, Italy, Greece and Spain – to slash public spending, sack public employees in order to pay down foreign debt and rescue the banks.

How come these ignorant clowns get away with this stuff and don’t feel obliged to make an account of their dribblings? Because they aren’t directly affected, it doesn’t hurt them or their lifestyle and they feel they don’t bear any moral and professional responsibility for dishing out editorial rubbish.

I am reminded of Prime Minister Julia Gillard’s appearance at the National Press Club in July 2011 when she was asked about the poor standard of media coverage and she advised the guests: “Don’t write crap. It can’t be that hard.”

Obviously, many of them are finding it difficult to break the habit.


On September 20, 2006, Venezuelan President Hugo Chavez gave a speech to the UN General Assembly in New York calling US President George W Bush “the devil”.

Speaking a day after Bush, Chavez received sustained applause from Third World ambassadors when he denounced US imperialism saying: “The American empire is doing all it can to consolidate its hegemonistic system of domination, and we cannot allow him (Bush) to do that.”

Referring to Bush, he said: “The devil came here yesterday and it smells of sulphur today.”

He accused Bush of speaking “as if he owned the world” and also said that the US Government was the “first enemy” of its people.

As a result Chavez went onto Washington’s Most Wanted List just below Osama Bin Laden who was assassinated in 2012,  Saddam Hussein who was hung in December 2006 and Libya’s Colonel Muammar Gaddafy who was murdered in October 2011.

Chavez is now in Cuba dying of cancer after a long illness and several operations.

In November PLO chairman Yasser Arafat’s body was exhumed in Ramallah to investigate claims he was poisoned with a radioactive substance which gave him leukemia and then killed him.

In October, Foreign Minister Bob Carr suggested the assassination of Syrian President Bashar al-Assad as a pre-requisite for settling the civil war.

“This sounds brutal and callous, perhaps an assassination combined with a major defection … is what is required,” he told Kerry O’Brien.

I hope Ecuador’s President Rafael Correa, who’s hosting Julian Assange in London, is taking the necessary precautions.

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