IMF pats itself on back for irrelevant conditionality report
The IMF used to be a cornerstone of the neoliberal Washington consensus that played havoc with developing countries’ economies in the name of ‘structural adjustment’ in the 1980s and 90s. Since then, campaigners including trade unions have pushed back, and demanded that the IMF justify its policies. Here, the head of the Global Unions’ Washington DC office, Peter Bakvis, assesses the latest attempt by the IMF to defend itself. Unnecessary spoiler alert: he’s not convinced!
Last week the IMF yesterday released a 2011 Review of Conditionality: Overview Paper which announced a new and improved 2012 model IMF. Loan conditions are more focused, “parsimonious” and “well-tailored”; fund lending programmes are now “even-handed”, “unbiased” and flexible; and “while it was difficult to quantify …, the macroeconomic and social effects of programs appear to have been generally positive”.
There’s only one problem with this rosy assessment of IMF loan conditionality: it applies to less than 10% of the Fund’s current outstanding credit. The review’s overall conclusions are not relevant, admits the report, for crisis loans paid out since 2008 in Europe, which have become the Fund’s core business and more than 90% of total current lending volume.
The review was supposed to cover loans until September 2011, but “most of these programs are ongoing, so it is difficult and premature to assess them fully. The review’s observations … will need to be revisited in due course.”
A footnote specifies that, in particular, the current loan programme in Greece was not covered in the review. Since a considerable part of the ITUC’s written comments submitted during 2011 consultations concerned the Greek loan conditions, it is safe to assume that global labour’s recommendatons went directly into the IMF’s recycling bin.
European crisis loans are referred to in various parts of the conditionality report, but mostly to say that the general conclusions don’t apply. Thus the report declares that “streamlining conditionality has been successful” because “the number of structural conditions has followed a downward trend in recent years”, but then clarifies that the opposite has happened in Europe:
“The number and depth of structural conditions has increased in the Euro Area programs, compared to previous programs, including in areas outside the Fund’s core areas of responsibility…. Some increase in the scope of conditionality was undoubtedly appropriate given the profound structural reforms required for program success, including in labor and product markets.”
The paper takes it on faith, as do most IMF staff reports, that the deregulatory labour market reforms imposed in Europe are necessarily growth-enhancing, something that is not borne out by numerous academic studies nor agreed to by the ILO.
The European crisis loan exception is also expressed when the report boasts of the IMF’s increased attention to social programmes: “Social spending has been largely safeguarded under most Fund-supported programs and has even tended to increase in [low-income country] programs…. Nevertheless, in certain programs, successful crisis resolution has required significant cuts in expenditures, including in social sectors, and in real wages (the Greece program is a leading example).” It should come as a surprise to many readers that the IMF considers Greece’s economic crisis to have already been successfully resolved.
The report does encourage IMF staff to pay more attention to “employment issues and inclusive growth”, especially in light of recent experience in the Middle East-North Africa and Europe, and to “collaborate closely with organizations that have specific expertise in the area”. Unfortunately the international body that has labour and employment as its mandate, the ILO, is not mentioned among the latter; only the World Bank and OECD which more or less discovered inequality when the “Occupy” movements started last year.
The report’s emphasis on the need for the IMF to develop processes for Fund staff to collect views on conditionality from “stakeholders” – trade unions, parliamentarians, civil society groups – may seems positive.
But it is made clear that such consultations are conceived above all as a public relations exercise “to promote understanding of program objectives and measures. Views expressed … can serve to inform the staff’s advice, to validate difficult choices, and to develop broader ‘buy-in’.