Naomi Klein, the IMF, and What I Would’ve Said to Alex Witt
I was on MSNBC yesterday with Alex Witt and Amanda Carpenter, talking about Barack Obama’s trip to the G20. Time ran out before I had the opportunity to address one of Amanda’s points, namely about what the president accomplished while he was there.
Obama committed the US to $100 billion in aid to the IMF, part of the $1.1 trillion stimulus package agreed to by G20 leaders. The funds will be devoted to poorer nations, many in Eastern Europe, and the market rallied on the announcement.
But in order to get around the limitations of pay-go, Congress will have to approve the aid in the form of a supplemental appropriation. Which gives them the opportunity to attach some strings. Before I went on I asked Naomi Klein what she would recommend on that front, and here’s what she said:
It should first of all demand an independent review of the role the IMF played in creating and deepening the crisis (for instance, by requiring that loan recipients deregulate their financial sectors and eliminate capital controls, as the IMF did during the Asian Economic Crisis). And it should demand that the IMF never require recipients of this loan money to make deep cuts to social spending (on health, education and pensions…) or to lay off public sector workers in the midst of the crisis. This is crucial because the IMF has been requiring exactly these types of budget cuts and layoffs in exchange for loans in Latvia and elsewhere in Eastern Europe, causing massive unrest. Further, if governments decide that in order to meet the crisis, they need to do things like subsidize farmers (the major demand in the Greece protests, for instance), they must retain the flexibility to do that.
The reasoning is simple: Obama is on record demanding that other G20 countries spend money on economic stimulus. The trillion dollar G20 pledge was presented to us as a global economic stimulus package. But the IMF is well known for demanding the exact opposite from its loan recipients: deep budgetary austerity, tax increases, and bans on subsidies. That means that unless there are clear conditions attached to the new IMF money, the extra trillion dollars could actually lead to deep economic contractions, with the new money just going to useless financial sector bailouts in countries around the world, rather than into real economy investments. It’s also worth noting that some of the money is going to the World Bank so it’s an opportunity to make demands that the World Bank invest in green energy and infrastructure, as opposed to dirty energy, a bad habit of the bank.
So, Naomi thinks that Congress needs to be vigilant in making sure that the money actually goes for stimulus, and doesn’t get stolen by banks around the world — as IMF money is often wont to do. Since a bill like this would have to go through markup by several committees, there will be plenty of opportunities to exert these safeguards.
It’s hard to compress that into a cable sound bite, so I was almost glad when time ran out because I knew I was going to have trouble boiling it down. But, that’s what blogs are for.