Symbol of Doom? by IMF
Dominique Strauss-Kahn, the International Monetary Fund's managing director, sexually assaulted a maid in a $3,000-a-night suite at the luxury Sofitel hotel in New York. Isn't this the same institution that preaches austerity to nations around the world?
The IMF has a long history of hypocrisy, so it's hardly surprising that at a time when the global economy is passing through a difficult time, the Fund was being headed by the champagne socialist, Strauss-Kahn, who according to the maid dragged her from room to room in a violent sex attack.
What sort of economics could this French JR have possibly peddled? A $3K splurge on a hotel room is small change for Strauss-Kahn who is married to millionaire art heiress Anne Sinclair, and owns a $5.6 million Paris apartment.
The IMF most certainly paid for his room, but even if it didn't it begs the question: Does Strauss-Kahn even understand the meaning of austerity? How can a person known to hang his suits in the shower and run the hot water for half an hour so the creases would disappear, empathize with those who can't afford clean drinking water?
The IMF is constantly asking desperately poor countries to tighten their belts another notch until they run out of notches. Now it appoints a serial sex offender as its chief.
Also, having a European in charge of an institution whose largest borrower is Europe was like having a fox in charge of a hen house.
But hypocrisy is ingrained into the IMF's DNA. This was quite evident during what came to be known as the IMF Crisis in 1997 when Asian economies collapsed in a heap after implementing its policies.
In the 1990's, flush with victory against the Soviet Union, the IMF launched "fast track capitalism." This involved among others, the elimination of restrictions on capital inflows, the encouragement of privatization, and implementing a high interest rate regime to attract foreign investors and bank capital into the securities markets.
Of course, what happened was something a 9th grader could have predicted. Prices for goods and services shot up due to inflation and the high rates of interest imposed by the IMF. Country after another, Indonesia, Thailand, Malaysia, Laos, were flattened by the economic tsunami.
Faced with a global-scale disaster, the IMF came up with a "rescue plan." It offered new loans so the nations could avoid defaulting.
However, the deal was conditional.
Author John Perkins, a former IMF adviser, writes in The Secret History of the American Empire, "In essence, each country was required to allow local banks and financial institutions to fail, drastically reduce government spending, cut food and fuel subsidies and other services for the poor, and raise interest rates still higher. In many cases they were also told to privatize and sell more of their national assets to multinational corporations."
For instance, the Russians, fairly new to market style capitalism, were told to let their banks, factories and financial institutions close down, if they failed in the market. Of course, the Russians didn't buy the Fund's line.
But in smaller countries in Asia and Latin America, as a direct result, an untold number of people, especially children, died of malnutrition, starvation, and disease. Many more suffered long-term consequences from lack of health care, education, housing, and other social services.
According to economists, the countries that had refused to yield to the IMF demands did best. China, for instance, took a very different course from that advocated by the IMF. It channelled foreign investments into factories rather than securities, thus insulating the country against future capital flight and also providing employment and other spin-off benefits. India, Taiwan, and Singapore defied the IMF; their economies remained robust.
These days, IMF economists are rarely welcome in Asia and Latin America, which are in any case experiencing rapid economic growth through South-South trade. Locked out of both these geographies, the Fund is attempting to stay in business by peddling the same snake oil economics to other regions where its image hasn't been ruined yet, such as the PIGS (Portugal, Ireland, Spain, Greece) and New Zealand.
When nations can lend each other and when long-term loans are available at low rates of interest, it begs the question: Who needs the IMF?
If that isn't convincing enough for you, listen to what Nobel Prize (Economics) winner Joseph Stiglitz, ironically the former chief economist of the World Bank, the IMF's twin sister, says in his book Globalization and Its Discontents:
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