Delusional IMF in the dark

Confusion and disarray is apparent in every national and global capitalist institution – and nowhere more so than in the corridors of the International Monetary Fund. Despite access to confidential data, they don’t really have a clue as to what’s going on. When Olivier Blanchard, the IMF’s director of the research, introduced its latest World Economic Outlook (WEO) with sombre demeanour and measured words, he wasn’t pulling his punches:

The global economy has entered a dangerous new phase. The recovery has weakened considerably and downside risks have increased sharply,” he announced. "Fear of the unknown is very high. Stock prices have fallen. These will adversely affect spending and growth in the months to come.

Blanchard added:

Markets have clearly become more sceptical about the ability of many countries to stabilise their public debt.

Bad enough.

 But in the first paragraph of his foreword to the WEO, in which he calls himself “economic counsellor”, he makes an astonishing admission:

Relative to our previous World Economic Outlook last April, the economic recovery has become much more uncertain. The world economy suffers from the confluence of two adverse developments. The first is a much slower recovery in advanced economies since the beginning of the year, a development we largely failed to perceive as it was happening. The second is a large increase in fiscal and financial uncertainty, which has been particularly pronounced since August.

To repeat – “a development we largely failed to perceive as it was happening”.

 With all the resources they have at their disposal, how did they get it so wrong? It surely does no good at all for the reputation of counsellors of all kinds.

 With their oft-repeated mantra of a recovery, of a return to growth, the IMF has consistently underestimated the scale of the crisis, and overestimated the ability of governments and central banks to do anything about it.

 They have deluded themselves, and they have deluded governments and central banks. In 2008, for example they forecast that the UK economy would fall by 0.1 per cent in 2009 but it actually fell by almost 5%.

 Now that the necessity of a global contraction is evident to anyone with even a smattering of an understanding of the limits to growth, the IMF both continues on its delusional path, but is simultaneously forced to change tack.

 It has downgraded its economic outlook for the UK, the US and Europe through to the end of next year, effectively pulling the rug from all the deficit reduction plans in the world. It now predicts that UK gross domestic product will grow just 1.1% in 2011, compared with its April prediction of 1.7% The US, it says will grow by just 0.4% more than the UK and may already be in recession. But at the same time it warns that “if growth threatens to slow down substantially”, if activity were to undershoot current expectations, countries like the UK and Germany should “consider delaying some of their planned adjustment”.

 Which means, says the IMF, that the UK Coalition, adamant that its brutal austerity programme must stand, will have to think again. Government spending cuts may have to be delayed to avoid a greater catastrophe.

 If you or I put up a piece of work like the WEO we’d be out on our ears, but the IMF is accountable to no-one. Its enforcers are due back in Athens next week checking on the government’s progress with cutting wages, putting people out of work, selling off national assets etc etc.

 So now it’s time to build alternative, revolutionary governments everywhere, with the power to implement the May 27th vote of the People’s Assembly of Syntagma Square which ends:

 ‘We will not leave the squares until those who compelled us to come here, leave the country: the governments, the Troika (EU, ECB, IMF), banks, the IMF Memoranda, and everyone who exploits us. We send them the message that the debt is not ours.”

Gerry Gold, Economics editor. A World to Win

Workers must sacrifice so capitalists can profit

The Governor of the Bank of England, Mervyn King has assured us that unemployment will rise and the value of wages will fall as inflation lets rip, leading to the most dramatic assault on living standards since the 1920s.

What’s more, you’ll be pleased to know, it’s absolutely necessary. This is the price we are obliged to pay, says King, to smooth the path to growth and economic recovery.

In actuality, it’s the consequence of failed attempts to stave off the deepening recession and confirms that they don’t have a clue what to do, apart from the usual capitalist remedy of increasing exploitation and the share of national wealth that goes to the ruling classes.

It’s a similar story across the Atlantic as the rate of repossessions accelerates, driving millions of families from their homes and unemployment touches 10%. President Obama used his annual State of the Union address to warn that the US must mobilise to meet the “mortal threat of foreign competition from China and India”.

He is proposing to reduce government spending to the lowest share of the US economy since the 1950s. Despite renewed attempts to rehabilitate the policies of Keynes – who favoured higher spending in a recession – the crash of 2007-8 means that, for capitalism, the era of high levels of government spending is over.

Are these programmes of slashing cuts “ideological”? Yes indeed, they manifest the ideology of those whose job it is to sustain a society devoted to profit at the expense of the majority of people on the planet, and the planet itself.

Throughout the relatively short period in which capitalist production spread across the world, its inner dynamic forced its human agents to find ways to counteract the relentless tendency for the rate of profit to fall.

Investing in technology to increase productivity is one. Forcing wages down another. Together they lead to increases in productive capacity and the volume of goods and services. They call it “growth”.

Pretty soon production expands beyond the available marketplace of consumers. And then credit comes into play, stretching things beyond their “natural” limits – for a while. Then comes the crash. Surplus productive capacity is eliminated, and the process starts up, once again.

This time there’s a difference.

The period of growth called “globalisation” consumed the world’s natural resources at an exponential rate. Corporations spread production throughout the world by recklessly burning fossil fuels, unlocking energy and releasing it into the atmosphere and so intensifying weather patterns.

Early snow in Britain helped to reduce national output by an estimated 0.5% in the last three months of 2010. Floods in Pakistan and Queensland, Australia wiped out crops. Nature mocked capital as the floodwaters wrecked the extraction of coal.

But capital’s human agents are blind to these effects. They are tied into the historic logic of profit from which they cannot escape. Sir Richard Lambert, outgoing chief of the Confederation of British Industry accused the Coalition of having no strategy for growth.

But the Cameron-Clegg branch better reflects the needs of capital at this point in history. They are hell-bent on cutting the deficit, reducing capacity, shrinking incomes, eliminating jobs and services – every action aimed at facilitating the contraction without which “recovery” is impossible.

Rather than allow the destruction of the valuable results of a couple of centuries of human endeavour, it falls to the rest of us to bring the destructive system to an end before it threatens to end the conditions for life on the planet.

In the process of building a global network of people’s assemblies we can establish democratic stewardship of the world’s resources, utilising and advancing the science and technology for sustainable production, and setting ourselves the task of converting it to satisfy the needs of the majority.

Gerry Gold
Economics editor
26 January 2011

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