Ha-Joon Chang writes: Throughout the 1980s and 90s, when many developing countries were in crisis and borrowing money from the International Monetary Fund, waves of protests in those countries became known as the “IMF riots”. They were so called because they were sparked by the fund’s structural adjustment programmes, which imposed austerity, privatisation and deregulation.
The IMF complained that calling these riots thus was unfair, as it had not caused the crises and was only prescribing a medicine, but this was largely self-serving. Many of the crises had actually been caused by the asset bubbles built up following IMF-recommended financial deregulation. Moreover, those rioters were not just expressing general discontent but reacting against the austerity measures that directly threatened their livelihoods, such as cuts in subsidies to basic commodities such as food and water, and cuts in already meagre welfare payments.
The IMF programme, in other words, met such resistance because its designers had forgotten that behind the numbers they were crunching were real people. These criticisms, as well as the ineffectiveness of its economic programme, became so damaging that the IMF has made a lot of changes in the past decade or so. It has become more cautious in pushing for financial deregulation and austerity programmes, renamed its structural adjustment programmes as poverty reduction programmes, and has even (marginally) increased the voting shares of the developing countries in its decision-making.
Given these recent changes in the IMF, it is ironic to see the European governments inflicting an old-IMF-style programme on their own populations. It is one thing to tell the citizens of some faraway country to go to hell but it is another to do the same to your own citizens, who are supposedly your ultimate sovereigns. Indeed, the European governments are out-IMF-ing the IMF in its austerity drive so much that now the fund itself frequently issues the warning that Europe is going too far, too fast. [Continue reading…]