G20 and the IMF: It's business as usual

G20 and the IMF: It's business as usual

I own up! I have been hitting the patisserie next to our offices in London with relentless eagerness this past week. From cream éclairs to chocolate mousse, I have done it all! My thighs and waistline will look richer for it, but overall, I will feel poorer!

So what’s eating me? The International Monetary Fund, the IMF is. Well, not literally, but you get my gist.

It had its yearly meeting in Istanbul, and rich countries have agreed to shift 5% of their votes to emerging economies such as China and Brazil. Most people seem to be celebrating this shift in power towards developing countries - whether it be at the IMF or the fact that the G8 is now officially replaced by the G20. We feel that the global system has reformed itself, and learned from the financial crisis - that they way the world does business cannot be left in the exclusive hands of the rich boys and girls from the G8.

But this got me thinking – will making the G20 the new decision-making power in the world, or giving developing countries more of say in how the IMF works, really change anything? Will it stop another crisis? 

Well, I really don’t think it will because it never mattered how many people sat round the decision main table, whether it was 8 or 10 or even 20. What mattered was what they were serving the rest of the world, and there is no real sign that things have changed on that front.   

Since the crisis began, the IMF has told us that it has learnt from its past mistakes, and that it has changed. In effect, its charismatic and ebullient managing director, Dominique Strauss-Khan, has stated on numerous occasions that the bad old days of the IMF forcing strict and austere conditions on countries for them to be allowed to access IMF loans assistance have gone.

In large part, yes, one can argue that the fund is saying all the right things, but in practice, things are still the same. A report out this week by Solidar states that the IMF is a leopard that can’t change its spots. This week I interviewed Andrea Maldosovic, the lady who coordinated the report, which focussed on new loan recipients from the fund - Latvia, El Salvador, and Ethiopia - and she states:

“Once again, instead of the IMF helping people survive the crisis by expanding and supporting social protection just when they needed most, the IMF is back to business as usual, with workers and the poor suffering bearing the brunt of the IMF’s obsession with financial conservatism.”

It appears that the IMF is allowing these countries some fiscal easing but the sting is in the tail, and when the final years of the loan come round,  state pay, state spending on education, health, etc. will be severely cut.  The IMF’s hate for anything “ fiscal” returns with a vengeance.

I know, and before you say it, wasn’t it the IMF that has been pleading with rich countries to carry out huge “fiscal stimulus” packages? It wanted America and Europe to carry out huge ones! Well, it just shows you that there is still one rule for the rich and one rule for the powerless and poor!  Nothing new there then! 

So instead of reforming the way the IMF does business, the world - including the G20 - have bolstered the coffers of the IMF to the tune of $1 trillion  to continue business as usual. They truly have been the winners of the crisis. 

Where’s the next éclair- I am not sure I can handle this!