The IMF needs to butt out of British affairs
We should take no lectures from this destructive globalist outfit.
To paraphrase a former US president, the nine most terrifying words in the English language are: ‘I’m from the IMF, and I’m here to help.’ Indeed, last night’s extraordinary intervention from the International Monetary Fund, and its unsolicited advice to the new UK government, is not just unhelpful – it is also a democratic outrage.
Just days after new prime minister Liz Truss and chancellor Kwasi Kwarteng unveiled their now infamous ‘mini-budget’, the technocrats of the IMF are up in arms. According to the fund, the UK government’s multibillion-pound package of energy bailouts and tax cuts is economically risky, inflationary and likely to spur greater inequality. The IMF even called on the government to ‘re-evaluate’ its measures at the earliest possible opportunity. As it made its unprecedented demand for a G7 country to change its economic policy, its tone was, in the words of the BBC, ‘direct, uncompromising, unflinching and… humiliating’.
Of course, there is no denying the huge scale of the turmoil unleashed by Truss and Kwarteng’s mini-budget. Since Friday’s announcement, the financial markets have been in meltdown. The pound has gone haywire, the cost of government borrowing has soared and the Bank of England has warned that interest rates will soon have to rise sharply. The Tories’ (largely unearned) reputation for economic competence now lies in tatters, with Truss’s government sliding down in the polls.
Yet none of this excuses the IMF’s intervention. The UK has not sought the IMF’s advice. It has not sought an IMF bailout. And so the IMF should have no authority whatsoever to weigh in on the economic policies and direction of the UK government. Indeed, simply by making its announcement, the IMF has spooked the markets further, fanning the flames of the economic turmoil. Thanks for nothing.
Even putting aside any democratic objections to this intervention, the IMF is totally unfit to give out economic advice. Where it has attempted to ‘bail out’ struggling economies, it has left a trail of destruction in its wake.
Over the past few decades, the IMF has been one of the world’s most powerful and brutal enforcers of failed austerity policies. During the Euro crisis of the 2010s, the so-called Troika – of the IMF, the European Commission and the European Central Bank – imposed harsh austerity measures on struggling Greece in exchange for bailout loans. Public-sector employment was duly slashed by 30 per cent.
The then IMF chief, Christine Lagarde, backed these measures publicly. But according to the former Greek finance minister, Yanis Varoufakis, Lagarde acknowledged in private that the harsh medicine was never going to work. It just had to be administered anyway, for political reasons. At the worst point, Greece lost more than a quarter of its entire GDP. Unemployment climbed by 16 percentage points and youth unemployment peaked at around 56 per cent. Worse still, Greece has hardly recovered since. Its GDP per capita is roughly where it was in the year 2000.
Twenty years earlier, there was the Asian financial crisis, or the ‘Asian contagion’. As Asian economies went into meltdown, the IMF urged a sharp tightening of monetary policy and sharp reductions in government spending, mainly in order to restore the confidence of (largely Western) investors. Interest rates were hiked to crippling levels even amid the recession. The crisis has since been dubbed the ‘IMF crisis’ by some economists, who say the IMF only deepened the catastrophe.
Some IMF economists have since gone lukewarm on austerity, suggesting that it hurts economic growth. And in its rebuke to the UK, the IMF explicitly cites ‘inequality’ as a reason to oppose the UK government’s economic plans. Such comments must be taken with more than a pinch of salt. The IMF is not our friend. The medicine it prescribes to troubled countries is almost always economically contractionary. Besides, it is more than a little strange for the IMF to single out the government’s regressive tax cuts, following more than a decade of quantitative easing and loose monetary policy across the West. These policies have put inequality on steroids, yet they have not drawn anything like the same ire from the IMF that the UK’s mini-budget has.
Given this dismal record, it is shocking, though hardly surprising, that much of the British left has cheered on the IMF’s UK intervention. Labour leader Keir Starmer has so far treated the IMF’s rebuke as the view of impartial experts, ‘correcting’ a reckless government. When Labour is cosying up to an interfering, neoliberal institution like the IMF you can see any trace of radicalism has been drained from it.
The IMF’s leaders are not just benign, competent bean counters. In fact, an extraordinary proportion of recent IMF heads have even been caught up in criminal enterprises. Former head Christine Lagarde was convicted several years ago for negligence with public funds in a major fraud case, while she was France’s finance minister. Meanwhile, Rodrigo Rato, who served as IMF chief from 2004 to 2007, was imprisoned in Spain for embezzlement until 2020. And this is before we even mention the string of sexual-assault allegations against Dominique Strauss-Kahn, who led the fund from 2007 to 2011.
But even if the IMF were a model of managerial competence, a faultless dispenser of sound economic advice, its intervention in the UK economy would still be unwarranted, unwelcome and unacceptable. Whatever the faults of Liz Truss’s economic policies, it must be down to voters, not unelected technocrats, to pass the ultimate judgement. The IMF should butt out of British affairs.
Picture by: Getty.
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