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Issues in Interdisciplinarity 2018-19/Imperialism and IMF

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Introduction

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Wall writing against the IMF in Greece, by Georgetikis

The International Monetary Fund (IMF) is an organisation founded in Washington, D.C., providing loans and financial guidances to countries in economic crisis.[1] Arguably the IMF's conditionality of loans, including structural adjustments, has imperialist characteristics, which caused unwanted reforms or large amounts of debts. Regarding this, usually, we limit our scope to economics, while politics and sociology also take major parts. Therefore, this chapter will analyse the imperialistic ideas of IMF during 1997 Asian financial crisis and Greek government-debt crisis through an interdisciplinary approach; which will enhance the evaluation of IMF.

IMF in Media

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The portraits of the IMF in mass media are often shadowed with criticisms. A documentary film, Life and Debt, reveals the reforms imposed only brought Jamaica debts. The former Prime Minister accused the IMF's policies of undermining the sovereignty of many nations which suffered from colonisation [2].

1997 Asian Financial Crisis

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The Asian crisis caused global panic, so IMF intervened and provided bailouts for severely affected nations to restore confidence.

Economics

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Criticism pinpoints that IMF exploited the crisis to conduct its economic agenda in Asia. In Korea, IMF helped bailout financial agencies and external lenders while requiring low inflation and other reforms including deregulation and capital liberalisation.[3] This raised local sentiment stating the programs were manipulated by America to benefit their industries.[4]As a consequence of the reforms, the stock market decreased by more than 40% and the value of its currency slashed by more than 50% compared with the year before.[5] Similar effects could also be found in other Asian countries. The contraction of the Thai economy deepened and in Indonesia, the rupiah kept falling and the economic scene further deteriorated.[6]

The role of IMF was reconsidered by economists. Feldstein emphasised the significance of autonomy in the domestic institutions which should not be subordinate to international agencies[7]. Fischer stated IMF should endeavour to help with key problems which lie in the crisis instead of rushing to structural adjustments.[8] Tabb argued although in the long-term these westernised reforms might bring economic growth, the shakeout during the transition could be destructive.[5]

Politics

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IMF's Political favouritism was evident during the Asian crisis. Given the U.S. holds 17% voting power, U.S. allied nations like Indonesia were prioritised[9]. Hence, IMF’s neoliberal programs and policies are tailored to the American government's wants and countries with friendly relations with the U.S. will be able to bend the conditions of the structural adjustment.[10]

Indonesian president Suharto's pro-America tendency made IMF turning a blind eye on his notorious patronage system and nepotism which precipitated the crisis. IMF required Indonesia to eliminate subsidies and tax breaks to various monopolies owned by Suharto’s family. This political flaw led the IMF’s rigid conditions to fall off-track in Indonesia co-occurring with the increasing macroeconomic turmoil and financial system collapse[11]. Moreover, policy changes from above like trade liberalisation and privatisation make the country more susceptible for multinational corporations to exploit. For instance, Indonesia becomes an export-oriented market and vulnerable to price wars.[12]

Sociology

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Sociologists criticise the IMF's interventions in Asian Crisis by analysing the ideological construction of this institution. Sarah Babb argues the IMF “[blindly promotes] free markets and its harsh austerity measures”[13], a huge diversion from Keynes' original ideas about the IMF. Flawed multilateral agreements prompted "‘slippage’ [in the direction of the IMF] over time”[13], suggesting members with arguably the most power can shape the intergovernmental organisations’ polices in their favour and cripple countries to bolster their economies. During the Asian Crisis – the SAPs were radically laissez-faire and insinuates the US's authority on the conditionality of loans, since the economic meltdown coincided with the economic legacies of the Reagan era. The "mission creep" of IMF, the expansion of objectives beyond its original targets, can be owed to the nature of the organisation. When an institution such as the IMF depends on nations for resources[14], its primary intent is deviated.

2010 Greek Government-debt Crisis

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The long recession in Greece left it with excessive debts, political disputes and social issues. To prevent contagion, rescue packages were launched by the Troika (European Commission, European Central Bank and IMF), conducting austerity measures as preconditions.

Economics

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The Troika lent nearly US$440 billion of loans during 2010–2015, though it culminated in the drop in GDP and more severe lasting debt burden. Greece's GDP dropped by 25% and its debt-to-GDP ratio rose from 127% in 2009 to around 170%.[15] The IMF also admitted having underestimated the damage the fiscal consolidation policies brought.[16] Economists reveal the bailouts simply transfer the debts instead of truly fixing the problems of Greece.[17] Studies indicate the loans were actually used to pay the previously piled debts, rescue private banks which were subordinated to other European banks, or compensate European investments, and no more than $8 billion went to Greek populace[18]. Meanwhile, the austerity measures drove the government to undercut the wage and money in businesses. Therefore, economic analysts, like Rasmus, claim 'an emerging new financial imperialism' behind the ideology of neoliberalism, meaning within a union, the underprivileged states' autonomy on their currency, fiscal expenditure is undermined, and then turn to be 'economic protectorates' as in the case of Greece.[19]

Politics

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Greece and the Troika, cartoon by Carlos

In the Greek crisis, the Troika must agree on certain policies. While IMF is a technocratic institution – though, not perfectly immune from political bias – the EC and ECB consist of politicians representing countries, with potentially different interests and aims [20]. They differed on the realism of some economic projections, including the nexus between growth and government budget[21]. However, the 27 EU members possess over 32% of voting power, and the managing director of IMF has always been a European [22]. Hence, the IMF’s involvement was approved speedily. Despite the slight differences in their objectives, their close link may weaken IMF’s role, increase political leverage and pressure on Greece[22]. This suggests the political impact heavily sways the decision making[23].

Sociology

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Sociologists propose members of intergovernmental organisations tend to force their norms on a global level, established as global conventions; hence the IMF’s original objectives, to prevent economic crisis from spreading, are digressed.[24] In the Greek case, austerity measures and reforms which required by the Troika included wage freeze/wage cuts on public sector workers, raised the retirement age, taxes and privatisation. This caused sharp increases in unemployment, cuts in welfare services disturbed social and healthcare services. This neoliberal reconstruction of the Greek economy, was forced, and did not take the social model of Greece into account. Therefore, social health care systems were severely overwhelmed because of the drastic fall in health expenditures[25]. Although the Greek economy has somewhat returned to a state of normalcy from a deep recession, its sufferings overweigh.[24]

Conclusion

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The Fund is the cause and symptom of imperialism. Therefore, its role as assistance should be retraced and it should consider the unique contexts of supported nations, rather than imposing cookie-cut policies [10].

When analysing real-life issues like the IMF, as disciplines are co-dependent, we could benefit from adapting interdisciplinary approach which provides multidimensional insights.

References

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  1. ↑ International Monetary Fund. About the IMF: the IMF at a glance. Available from: https://www.imf.org/en/About [Accessed 5th December 2018].
  2. ↑ "Life and debt" Film website. About Life and Debt. Available from: http://www.lifeanddebt.org/about.html [Accessed 5th December 2018]
  3. ↑ Medley JE. The East Asian economic crisis: surging U.S. imperialism?. Review of Radical Political Economics.2000 September 1;32(3):379-387.[1]
  4. ↑ Vatikiotis M. Fund under fire. Far Eastern Economic Review. 1998;161(20): 60-62.
  5. ↑ a b Tabb WK.The East Asian financial crisis. Monthly review.1998;50(2):24-38.[2]
  6. ↑ Katz SS. The Asian crisis, the IMF and the critics. Eastern Economic Journal. 1999;25(4):421-439.[3]
  7. ↑ Feldstein M. What the IMF should do. the Wall Street Journal. 1998 October 6
  8. ↑ Fischer S. The IMF and the Asian crisis [Lecture] University of California Los Angeles. 20th March 1998.
  9. ↑ International Monetary Fund. IMF Members' Quotas and Voting Power, and IMF Board of Governors. Available from: https://www.imf.org/external/np/sec/memdir/members.aspx [Accessed: 7th December 2018].
  10. ↑ a b Stiglitz J. Globalization and Its DiscontentsNew York: W.W. Norton & Company; 2002.
  11. ↑ Kim SW. Covering globalisation: A comparative analysis of news reports about the 1997 Asian economic crisis and the IMF bailout[dissertation on the Internet]. Indiana University; 2001[Cited 8th December 2018] Available from:https://www.proquest.com/docview/275739757
  12. ↑ Kutan A, Muradoglu G, Sudjana B. IMF programs, financial and real sector performance, and the Asian crisis. Journal of Banking & Finance. 2008;36(1):1-4. Available from:https://www.sciencedirect.com/science/article/pii/S0378426611002111[Accessed 8th December 2018]
  13. ↑ a b Babb S. The IMF in sociological perspective: A tale of organizational slippage. Studies in Comparative International Development. 2003;38(2):3-27.
  14. ↑ Babb S, Buira A. XVIII G24 Technical group Meeting.Mission Creep, Mission Push and Discretion in Sociological Perspective: The Case of IMF Conditionality, Geneva 2003;1(1):3-27. Available from:https://www.sciencedirect.com/science/article/pii/S0378426611002111[Accessed 8th December 2018]
  15. ↑ Eurostat. General government gross debt-annual data. Available from:https://ec.europa.eu/eurostat/tgm/table.do?tab=table&init=1&language=en&pcode=teina225&plugin=1 [Accessed 5th December 2018]
  16. ↑ Elliott L, Smith H. IMF 'to admit mistakes' in handling Greek debt crisis and bailout. The Guardian [Internet]. 2013 [cited 5th December 2018] Available from:https://www.theguardian.com/business/2013/jun/05/imf-admit-mistakes-greek-crisis-austerity
  17. ↑ Janssen R. Greece and the IMF: who exactly is being saved? Available from: http://www.kalami.net/2010/cosmos/gr-imf-jul10.pdf [Assessed 5th December 2018]
  18. ↑ Rocholl J, Stahmer A. Where did the Greek bailout money go? ESMT Berlin. Publication number: WP-16-02.https://www.esmt.org/where-did-greek-bailout-money-go
  19. ↑ Rasmus J. Greek debt and the new financial imperialism. Available from:https://www.counterpunch.org/2016/08/24/greek-debt-and-the-new-financial-imperialism/ [Accessed 5th December 2018].
  20. ↑ Ardagna S, Caselli F. The Political Economy of the Greek Debt Crisis: A Tale of Two Bailouts. American Economic Journal: Macroeconomics. 2014;6(4):291-323.
  21. ↑ El-Erian M. Greek debt: IMF and EU's quick fix isn't enough | Mohamed El-Erian [Internet]. The Guardian. 2017 [cited 7th December 2018]. Available from: https://www.theguardian.com/world/2017/jun/22/greek-debt-imf-eu-bailout.
  22. ↑ a b Seitz F, Jost T. The Role of the IMF in the European Debt Crisis. 1st ed. Aschaffenburg: Hochschule Wissenschaften; 2012 Available from: https://www.researchgate.net/publication/254459647_The_role_of_the_IMF_in_the_European_debt_crisis [Accessed 6th December 2018]
  23. ↑ Hetzner C, Kyriakidou D. Europe's debt crisis may spread: IMF; Greek collapse? National Post[Internet]. 2011 [cited 7th December 2018]. Available from: https://www.proquest.com/docview/866516465
  24. ↑ a b Kentikelenis A, Seabrooke L. The Politics of World Polity: Script-writing in International Organizations. American Sociological Review. 2017;82(5):1065-1092.
  25. ↑ Kondilis E, Giannakopoulos S, Gavana M, Ierodiakonou I, Waitzkin H, Benos A. Economic Crisis, Restrictive Policies, and the Population’s Health and Health Care: The Greek Case. American Journal of Public Health. 2013;103(6):973-979.
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