IMF: looking on the bright side, or the ‘right side’?
The International Monetary Fund (IMF) doesn’t have a fantastic reputation around the world for the damage it did to developing and Asian economies during the years of the neoliberal ‘Washington consensus’. Confessing to getting its analysis of the Greek economy catastrophically wrong and underestimating the multiplier effect of government spending during the global financial crisis (which led to many governments slashing spending when they should have been doing the opposite) haven’t exactly helped. And this week, IMF head Christine Lagarde has praised the lacklustre performance of the UK economy as a model to follow, while a new and uncalled for International Jobs Report has claimed that the global unemployment crisis is over, back to the not-exactly stellar levels of 2007 before the crisis hit. What is it with these people?
Lagarde’s intervention, of course, was nothing new. Newspapers and pundits who claimed that Britain’s economic record and its Chancellor George Osborne had been vindicated by the IMF ‘changing tack’ from warning about UK performance last year to praise this year simply don’t understand that Lagarde, the IMF head responsible for this week’s utterance, has often disagreed with her Chief Economist Oliver Blanchard, who issued last year’s warnings. Lagarde is a lawyer, and Blanchard an economist, but even more important is that Lagarde is a politician who has often sided with Osborne, not least because he backed her when she moved from holding the same position as him in the French Government to the IMF. Lagarde has barely said a word against Osborne since her appointment, whatever the facts about the UK’s actual performance (which compares appallingly with the US and Germany, for example.)
But the International Jobs Report (IJR) issued for the first time on Wednesday was even more of a spinning operation, and disgracefully timed to come out just days before Tuesday’s ILO Global Employment Trends, an established, annual publication that is well-respected, and expected to come up with far less positive results. The IMF says global unemployment has returned to 2007 levels (5.6%) whereas the ILO is expected to say that global unemployment was 5.5% in 2007 and is still at 5.9%. If that seems like a small difference, remember that that 0.3% difference is the equivalent of ten million people – and that overall, global unemployment is therefore still 180 million even on the IMF’s optimistic assessment.
So why the difference? The ILO has identified a number of methodological differences, but let’s just take the most glaring. The IMF’s far more optimistic story is achieved by analysing 105 countries rather than the 178 covered by the ILO data (and the ILO estimates that those countries have a slightly worse record on unemployment than those chosen by the IMF.) But by far the biggest difference is that the IMF omits China and India from its statistics. Yes, that’s right, the IMF has produced data on the global unemployment rate that omits 40% of the 3.25 billion global labour force. They are, however, good enough to accept that their partners in producing the International Jobs Report, The Economist Intelligence Unit, estimate that if you include China and India, the global unemployment rate soars to 7%, above even the ILO estimate.
Even the IMF’s story of the global unemployment rate, as shown in a table in the IJR (but not in the main headline about global unemployment being back to pre-crisis levels, surprisingly enough) shows we are nowhere near back at pre-crisis levels. According to the IMF, ILO and EIU data, unemployment in the advanced economies of the OECD peaked at 7% in 2003, falling to 5.7% in 2007 and then rocketed to 8.4% in 2010. It has since fallen back to 7.4% – still way above the pre-crisis level, and above even the previous peak after the dot.com bubble at the start of the century. What has pulled global unemployment down to what the IMF call pre-crisis levels is the performance of the non-OECD countries (although using official statistics for China and India rather than the EIU’s far less optimistic estimates), where the unemployment rate has been falling pretty steadily since 2003 (albeit with an upwards notch after the global financial crisis) from 6.4% to 5.5% before the crisis and now 5.1%.
At best the IMF can be accused of highlighting the data that back an over-optimistic assessment of the global economy since the crisis hit and downplaying the data that paints a bleaker picture. The motivation for issuing their report just days before the ILO’s deeper, more authoritative report, and at the same time as its chief was lauding the UK government record of creating low productivity, low wage and sometimes zero-hour ‘jobs’ can only be guessed at.