Back to the IMF again. Goodness me! They finally say they have realised that they… well, er… um. Sort of did not get it quite right.They had estimated that for every Euro pulled out of the Economy under their infamous austerity plans, the economy would contract by 50 cents. So great that’s fine, bring on the chopper, women and children first! First on the chopping block not the life boat.
However, whoops! Oh dear. My goodness! Look what happened. For every Euro sucked out of the economy, it contracted by 1.30 Euro. Surprise, surprise! So they got their sums wrong. Again. Do they ever get anything right? And now Mme Lagarde is hectoring Europe for not doing enough to resolve the Euro crisis, and this is hurting the rest of the world. The global economy is teetering on the brink.
Why? Because of ingrained neo liberal dogma and selfish greed on the part of stronger countries. Remember all that Greed is Good crap? Well it isn’t. Take Germany for instance, which is at the root of the failure to resolve the Euro crisis. Slamming the countries in trouble with outrageous austerity plans, she benefited from high interest rates from these very countries and negative interest rates on what she paid to borrow.
In addition, funds fleeing from countries down graded to below junk level swarmed to German banks. And okay, our production and exports may not be as good as they were but we still have growth, so let the little weaklings go hang themselves. And keep paying in the gradual collapse of their economies.
However, it doesn’t quite work like that. In a global economy Greed is not Good. It isn’t in any economy. Germany thought, hang southern Europe, they are all swarthy idlers anyway, I will export to the new dynamic markets of China and India and the US of course! Oh will you? It appears that this did not work out as planned either. Quite simply because once Europe has started to seize up, the other economies begin to contract too. Simple first year economics one would have thought.
We are on the brink of global disaster. We need to re-plan the global economy and above all the out dated out of touch institutions supposedly in charge, such as the IMF in particular. As I said in yesterday’s blog, it is all very well for Mme Lagarde to start shouting at Europe, but in effect Europe was only following the IMF prescription and still is. And for all her bluster, the IMF is too. Look at Mr Poul Thomsen of the infamous troika.
Now, in the middle of this, the IMF is dragging its feet over representation in the IMF and upgrading the position of the emerging countries such as China, Brazil. The IMF is very good at banging struggling states over the head and telling them to reform and be flexible, why then does it not apply these principles to its own institution? What? And lose our power and cushy unaccountable (oh and untaxed) jobs? Green eyed greed again….
The World Economic system has collapsed. It collapsed in 2008 when the bubble allowed to blow out of all proportion through criminal deregulation of the banks, burst. We have been floundering since, pushing the crisis further down the road and basically steering it away from what caused it and onto the shoulders of the weakest and poorest who simply cannot sustain it even if they wanted to. Which does not auger well for any kind of resolution.
None of this austerity driven rubbish is going to work. It is only exacerbating an already dangerous problem. What is needed is a new Bretton Woods Conference. A thrashing out of the problems with honesty and an acute sense of what is really at stake. A conference that can no longer be dominated by the strong European countries and the US. A conference that must be all inclusive and take into account what Professor Yanis Varoufalkis calls the Surplus Recycling System of the global economy.
And this is where we despair of anything happening before it is too late. Last time around there were brilliant minds at work, such as that of John Maynard Keynes. This time around we have small minded non entities who cannot see further than their noses and petty self interest to the detriment of the whole global economy. Will anyone wake up?