This is a super interesting an thought provoking article. I enjoy thinking about things like this, but when I think of former colonial countries like Jamaica and their experience with the IMF, I’m not entirely convinced that Lenin would have approved of the IMF AS IT BECAME well after reconstruction. Because in addition to austerity and discipline, privatization has become a core of the IMF, and strict coordination of domestic production. In Jamaica this amounted to “you export bananas and import everything else from us.” I think this nefarious aspect of condemning a country to debt is something Lenin would have saw as a form of financial imperialism.
For years I have been following your notes on Twitter from Barcelona, although I have not actively intervened since I am not interested in debate but in information.
I really appreciate your comments on Twitter.
For reasons that you must already guess, I have decided to switch to bluesky.
I would very much like to continue following you in bluesky or, at least, in mastodon.
If you decide to change or add to another platform, I would appreciate it if you would communicate it through this blog to which I will continue to be subscribed.
Branko Milanovic’s analysis of the IMF is simplistic and problematic. And he is talking nonsensically about its ideological neutrality. Is he saying the capitalist system is not ideologically neutral but the IMF as an enforcing organization is? That makes no sense. Plus, the three simple goals for the IMF’s core mission are anything but simple, especially #2 and $3. That a country shouldn’t spend more than it collects in taxes is absurd. Let’s put aside Modern Monetary Theory and the awful neocolonial indebtedness situation that developing countries are in, Milanovic would allow no deficit spending by governments? And for goal #3, how to maintain macroeconomic stability and even how to define it is far from being ideologically neutral! What austerity means and when and how to implement it is the subject of much debate. I really can’t understand what Milanovic was thinking?
As I wrote, IMF is not ideologically neutral given the capitalist system within which it operates. However, its three fundamental goals are neutral in the sense that *any* reasonable social and political system would tend to observe them. You surely would not argue that socialism should be a system of hyperinflation, permanent govt deficits, and no repayment of loans? These rules apply to systems whatever their concrete social structure. Similarly, I said no deficit spending over a cycle; that could be a cycle driven by endogenous or exogenous developments (say, there is an earthquake; socialist govt would have to run a deficit),. But no deficit as a long-term policy. There is nothing there that I find objectionable.
I think one has to think a bit out of the box, and to ask, should a govt with public ownership of property, nationalized capital, reduced wage inequality between skilled and unskilled workers, run a totally different macro-economic policy and argue e.g. that debts should not be repaid? The answer is clearly "no".
At bottom, in today's world, the IMF (and the World Bank) are neocolonial institutions that need to be shut down and replaced with organizations that have much more democratic governance. We need a new Bretton Woods conference. 80 years is enough!
I appreciate your points. While I agree macroeconomic stability would be a goal of any system, don't you agree that even what it means -- other than avoiding extreme scenarios like hyperinflation -- is unclear and subject to ideological differences? Moreover, do you agree that how you achieve it and the meaning of, the need for, and the policies of austerity are subject to considerable ideological debate?
Sun Yatsen proposed five branches of government. Other than the Control Yuan, he also wants to have an Examination Yuan, to ensure fair and apolitical selection of government officials.
But I'm just amazed a contemporary economist would still remember his theories.
Thanks, I think you are right, there is a need for a way to discipline borrowers through monitoring. But I wonder whether it is best to separate the lending function from the monitoring function. So the lending could be done by development / policy banks, and the IMF limit itself to a monitoring role.
Also, there should be no need for private credit rating agencies. Or maybe the IMF could regulate the private credit rating agencies and call them out for any bias in favour of private sector financing.
I think it would be hard to dissociate monitoring from lending. Would not the monitoring institution have an incentive to be rather lax because inability to pay would affect the creditor but not the monitoring institution?
The liberal bourgeoisie has always been pulling out all stops to justify its exploitative class based rule. Implying that Lenin would have kept the IMF in a socialist environment is not just quite a stretch but borderline nonsensical even regarding potential state controlled capital controls.
Saying that …’But the issue there is not the organization that is enforcing the rules, but the system. Thus if the critique be, it should be directed at the system, not at the enforcers’… is mirroring the perverted logic of liberal reversals: An organisation which is purporting and enforcing the rules of a system not just represents the system but is the system. And Lenin of all people knew exactly what to do to enforce institutional change. Whitewashing an imperialist US-dominated institution as sort of being neutral in imposing poverty and austerity across the globe by ‘disciplining’ peoples for capital accumulation by ways of saying it is in fact neutral is beyond reason. The quote from Lenin is about world trade and not about fiscality and monetary policies, which typically are the pillars of IMF economic prescriptions. One of the first things the West did was to redline the USSR from world trade, one of the measures exactly fitting the policy model of the later set up IMF. No institutional organisation is able to act independently of socio-economic formation and of politics. The IMF regarding its core mission is deeply capitalist and never was anything else than an extension of US imperialism. The whole post is both a poor attempt to somewhow whitewash the IMF on a meaningless theoretical level aside from pratical experience and its history - typical of the liberal narrative - and speculative nonsense
Thank you very much Branko for a fascinating recount of the past. We fully agree that the IMF is a necessary institution. We also agree that it is staffed by competent and hard working economists. That said. Is the current IMF what the world needs? Remember the IMF in the East Asia crisis when it forced countries with health current accounts into unnecessary austerity. Remember the IMF support to Argentina’s Menem/Cavallo program of “dollarization “ which precipitated Argentina into a crisis from which 20 years later it has still to recover. Also remember the IMF proclivity to encourage countries to take on external debt which later comes to haunt them as was the case again in Argentina during Macri while the IMF put the screws on domestic debt. In the case of the EU the IMF is raising a number of issues on the size of the public debt but has opposed reducing it through taxation. It has to be through expenditure cuts. We could go on and on with examples and on as to how the IMF is guided by ideological convictions rather than sound economic analysis. Some of these biases have been documented by the IMF Independent Evaluation Office. Last but not least we should remember that the imf board’s composition is heavily biased towards US and EU to the detriment of emerging economies. So, all in all, I think it fair to say that the imf is a necessary institution which , like the WTO, has been usurped of its ability to function efficiently by ideology and industrial countries interests.
I believe the IMF (or was it the World Bank?) has argued that austerity doesn't help; the indebted countries only get poorer from it, and more unable to pay their debts.
National enforcement officers, at least in my country, usually help indebted people to keep their duties, but they usually don't expect them to stop eating for example. But Latin America, to take one bunch of examples, lost decades because of enforced debt repayments. They couldn't afford making investments and have still about the same low work efficiency as they had in the 1970s.
PS. The reason IMF has been under fire is of course its involvement in the structural adjustment programs after the debt crisis of the 80s and 90s, and after. These programs have been destructive, to say the least, and they have also been extremely unfair.
- When the loans in question were taken they were not unreasonable. But when Fed presiden Paul Volcker, with a pen stroke, raised the interest to over 10% and thereby doubled the rate of the USD they became unbearable. One can argue that the debtor countries were stupid to agree on the terms of the loans that permitted him to do so, but one can do so about any victim of any confidence trick. And this was a confidence trick – and IMF helped the conman and his entourage to cash in.
- In many cases the governments that took the loans were not constitutional; they were simply robbers who had violently forced their way to power and afterwards taken the money they borrowded to pay into their private offshore bank accounts. Notable cases are Suharto, Mobutu, and the Argentinian military junta. Anyway IMF forced the countries' citizens to pay after they had sent the robbers packing, they never bothered with trying to find the secret accounts and let the robbers pay back what they had stolen.
- A notable feature in the structural adjustment conditionalities IMF forced upon the debtor nations was to sell out public property to private businesses, in many cases public utilities with monopoly positions. Everyone knows, and has done since the 19th century, that private monopolies sell bad services for high prices, but nevertheless it was IMF's policy. No bother that the countries in question got poorer that way.
- A study made by epidemologists in the UK found that the austerity program in UK had caused an excess mortality of about 120.000 between 2010 and 2014, with 45.368 identifiable cases. And that was in UK, a rich country. How many excess deaths have the IMF imposed austerity caused worldwide since it began? 10 million? 100 million? Nobody seems to know, but it seems clear that it belongs to the big massacres of the 20th century, in par with the Nazi one and the Stalinist one.
I agree with Branko that it is reasonable that one takes responsibility for one's debts. But there is a point when it gets unreasonable. Let's say that when you have to get over dead bodies to get the money it is not reasonable any longer, then there have to be some compromise.
IMF could also argue that it only followed their instructions, but that was a defence that didn't help any at the Nuremberg trials. One could at least have demanded that IMF should try to change its instructions to get them more equitable. But it has never argued that they did, so they probably didn't.
I should perhaps add that even considered these limitations, the IMF made an extremely haphazard work of it, posing exactly the same conditions on every country they twisted. According to economist Erik Reinert they even sometimes forgot to change the name of the country when they sent a file to a government, copying another file they had sent to another government. A bunch of third rank postgraduates trying to understand the world, as he commented on them.
Perhaps the IMF has learnt from the disasters they recommended, and do it different these days. But I doubt it. They still recommend (=command) both austerity and fire sales of government assets, as far as I have learnt.
Thanks Branko. Quick question: Is it inherent in capitalism that it produces winners and losers, not only on an individual level but also among countries? If so, would the goal of a more equal world not require to work against these inbuilt tendencies of capitalism which are reproducing and exacerbating inequality?
What are some of the key successes and failures of the IMF and World Bank over the last 20-30 years? Were they involved much in China's or Eastern European growth? Or projects/growth elsewhere? Sorry I have not kept tracked...
A thought provoking article! Thank you for writing it!
I disagree about what Lenin's judgement would have been, however. He was not a simple disciplinarian, but someone who would gamble or sow chaos one moment and try to manage the country as if it was one big factory another. His foreign policy is exemplary of his unprincipled, but dedicated approach. He wanted cultural autonomy for nations within the USSR's military borders, but full sovereignty for the nations of neighboring states and empires' subordinated people. This is not because he had strong feelings about order or the right to self-determination, but because such a stance helped the revolution and undermined the global Thermidor's viability. If he saw a real possibility of a revolutionary advance that destroyed financial stability, then he would have probably changed his tune.
Republics of the USSR had much more than cultural autonomy. (Cultural autonomy was the idea of Austrian Marxists within the Habsburg empire.) USSR republics had the right to secession, insisted upon by Lenin, and that eventually was evoked in the break-up of the USSR.
It seems to me that the thesis supports all that Foucault has argued about the profound modernity of marxist thought and it also offers a powerful response to marxist critiques of Foucaldian thought.
I dunno -- were I in charge of a developing country I'd be trying to give the IMF a wide berth and in service to that end would be going to the greatest lengths possible NOT to borrow $USD ...
This is a super interesting an thought provoking article. I enjoy thinking about things like this, but when I think of former colonial countries like Jamaica and their experience with the IMF, I’m not entirely convinced that Lenin would have approved of the IMF AS IT BECAME well after reconstruction. Because in addition to austerity and discipline, privatization has become a core of the IMF, and strict coordination of domestic production. In Jamaica this amounted to “you export bananas and import everything else from us.” I think this nefarious aspect of condemning a country to debt is something Lenin would have saw as a form of financial imperialism.
Agree. Technically & legally, privatization was never the Fund's function. It became so after 1990 under the Fukuyama-like world.
For years I have been following your notes on Twitter from Barcelona, although I have not actively intervened since I am not interested in debate but in information.
I really appreciate your comments on Twitter.
For reasons that you must already guess, I have decided to switch to bluesky.
I would very much like to continue following you in bluesky or, at least, in mastodon.
If you decide to change or add to another platform, I would appreciate it if you would communicate it through this blog to which I will continue to be subscribed.
Branko Milanovic’s analysis of the IMF is simplistic and problematic. And he is talking nonsensically about its ideological neutrality. Is he saying the capitalist system is not ideologically neutral but the IMF as an enforcing organization is? That makes no sense. Plus, the three simple goals for the IMF’s core mission are anything but simple, especially #2 and $3. That a country shouldn’t spend more than it collects in taxes is absurd. Let’s put aside Modern Monetary Theory and the awful neocolonial indebtedness situation that developing countries are in, Milanovic would allow no deficit spending by governments? And for goal #3, how to maintain macroeconomic stability and even how to define it is far from being ideologically neutral! What austerity means and when and how to implement it is the subject of much debate. I really can’t understand what Milanovic was thinking?
Steven Klees, University of Maryland
As I wrote, IMF is not ideologically neutral given the capitalist system within which it operates. However, its three fundamental goals are neutral in the sense that *any* reasonable social and political system would tend to observe them. You surely would not argue that socialism should be a system of hyperinflation, permanent govt deficits, and no repayment of loans? These rules apply to systems whatever their concrete social structure. Similarly, I said no deficit spending over a cycle; that could be a cycle driven by endogenous or exogenous developments (say, there is an earthquake; socialist govt would have to run a deficit),. But no deficit as a long-term policy. There is nothing there that I find objectionable.
I think one has to think a bit out of the box, and to ask, should a govt with public ownership of property, nationalized capital, reduced wage inequality between skilled and unskilled workers, run a totally different macro-economic policy and argue e.g. that debts should not be repaid? The answer is clearly "no".
At bottom, in today's world, the IMF (and the World Bank) are neocolonial institutions that need to be shut down and replaced with organizations that have much more democratic governance. We need a new Bretton Woods conference. 80 years is enough!
I appreciate your points. While I agree macroeconomic stability would be a goal of any system, don't you agree that even what it means -- other than avoiding extreme scenarios like hyperinflation -- is unclear and subject to ideological differences? Moreover, do you agree that how you achieve it and the meaning of, the need for, and the policies of austerity are subject to considerable ideological debate?
Sun Yatsen proposed five branches of government. Other than the Control Yuan, he also wants to have an Examination Yuan, to ensure fair and apolitical selection of government officials.
But I'm just amazed a contemporary economist would still remember his theories.
Thanks, Dean. Yes, I forgot the fifth. You are right to bring it back.
Thanks, I think you are right, there is a need for a way to discipline borrowers through monitoring. But I wonder whether it is best to separate the lending function from the monitoring function. So the lending could be done by development / policy banks, and the IMF limit itself to a monitoring role.
Also, there should be no need for private credit rating agencies. Or maybe the IMF could regulate the private credit rating agencies and call them out for any bias in favour of private sector financing.
I think it would be hard to dissociate monitoring from lending. Would not the monitoring institution have an incentive to be rather lax because inability to pay would affect the creditor but not the monitoring institution?
That’s true …
The liberal bourgeoisie has always been pulling out all stops to justify its exploitative class based rule. Implying that Lenin would have kept the IMF in a socialist environment is not just quite a stretch but borderline nonsensical even regarding potential state controlled capital controls.
Saying that …’But the issue there is not the organization that is enforcing the rules, but the system. Thus if the critique be, it should be directed at the system, not at the enforcers’… is mirroring the perverted logic of liberal reversals: An organisation which is purporting and enforcing the rules of a system not just represents the system but is the system. And Lenin of all people knew exactly what to do to enforce institutional change. Whitewashing an imperialist US-dominated institution as sort of being neutral in imposing poverty and austerity across the globe by ‘disciplining’ peoples for capital accumulation by ways of saying it is in fact neutral is beyond reason. The quote from Lenin is about world trade and not about fiscality and monetary policies, which typically are the pillars of IMF economic prescriptions. One of the first things the West did was to redline the USSR from world trade, one of the measures exactly fitting the policy model of the later set up IMF. No institutional organisation is able to act independently of socio-economic formation and of politics. The IMF regarding its core mission is deeply capitalist and never was anything else than an extension of US imperialism. The whole post is both a poor attempt to somewhow whitewash the IMF on a meaningless theoretical level aside from pratical experience and its history - typical of the liberal narrative - and speculative nonsense
Thank you very much Branko for a fascinating recount of the past. We fully agree that the IMF is a necessary institution. We also agree that it is staffed by competent and hard working economists. That said. Is the current IMF what the world needs? Remember the IMF in the East Asia crisis when it forced countries with health current accounts into unnecessary austerity. Remember the IMF support to Argentina’s Menem/Cavallo program of “dollarization “ which precipitated Argentina into a crisis from which 20 years later it has still to recover. Also remember the IMF proclivity to encourage countries to take on external debt which later comes to haunt them as was the case again in Argentina during Macri while the IMF put the screws on domestic debt. In the case of the EU the IMF is raising a number of issues on the size of the public debt but has opposed reducing it through taxation. It has to be through expenditure cuts. We could go on and on with examples and on as to how the IMF is guided by ideological convictions rather than sound economic analysis. Some of these biases have been documented by the IMF Independent Evaluation Office. Last but not least we should remember that the imf board’s composition is heavily biased towards US and EU to the detriment of emerging economies. So, all in all, I think it fair to say that the imf is a necessary institution which , like the WTO, has been usurped of its ability to function efficiently by ideology and industrial countries interests.
You could replace this whole article with "We were just following orders."
I believe the IMF (or was it the World Bank?) has argued that austerity doesn't help; the indebted countries only get poorer from it, and more unable to pay their debts.
National enforcement officers, at least in my country, usually help indebted people to keep their duties, but they usually don't expect them to stop eating for example. But Latin America, to take one bunch of examples, lost decades because of enforced debt repayments. They couldn't afford making investments and have still about the same low work efficiency as they had in the 1970s.
PS. The reason IMF has been under fire is of course its involvement in the structural adjustment programs after the debt crisis of the 80s and 90s, and after. These programs have been destructive, to say the least, and they have also been extremely unfair.
- When the loans in question were taken they were not unreasonable. But when Fed presiden Paul Volcker, with a pen stroke, raised the interest to over 10% and thereby doubled the rate of the USD they became unbearable. One can argue that the debtor countries were stupid to agree on the terms of the loans that permitted him to do so, but one can do so about any victim of any confidence trick. And this was a confidence trick – and IMF helped the conman and his entourage to cash in.
- In many cases the governments that took the loans were not constitutional; they were simply robbers who had violently forced their way to power and afterwards taken the money they borrowded to pay into their private offshore bank accounts. Notable cases are Suharto, Mobutu, and the Argentinian military junta. Anyway IMF forced the countries' citizens to pay after they had sent the robbers packing, they never bothered with trying to find the secret accounts and let the robbers pay back what they had stolen.
- A notable feature in the structural adjustment conditionalities IMF forced upon the debtor nations was to sell out public property to private businesses, in many cases public utilities with monopoly positions. Everyone knows, and has done since the 19th century, that private monopolies sell bad services for high prices, but nevertheless it was IMF's policy. No bother that the countries in question got poorer that way.
- A study made by epidemologists in the UK found that the austerity program in UK had caused an excess mortality of about 120.000 between 2010 and 2014, with 45.368 identifiable cases. And that was in UK, a rich country. How many excess deaths have the IMF imposed austerity caused worldwide since it began? 10 million? 100 million? Nobody seems to know, but it seems clear that it belongs to the big massacres of the 20th century, in par with the Nazi one and the Stalinist one.
I agree with Branko that it is reasonable that one takes responsibility for one's debts. But there is a point when it gets unreasonable. Let's say that when you have to get over dead bodies to get the money it is not reasonable any longer, then there have to be some compromise.
IMF could also argue that it only followed their instructions, but that was a defence that didn't help any at the Nuremberg trials. One could at least have demanded that IMF should try to change its instructions to get them more equitable. But it has never argued that they did, so they probably didn't.
I should perhaps add that even considered these limitations, the IMF made an extremely haphazard work of it, posing exactly the same conditions on every country they twisted. According to economist Erik Reinert they even sometimes forgot to change the name of the country when they sent a file to a government, copying another file they had sent to another government. A bunch of third rank postgraduates trying to understand the world, as he commented on them.
Perhaps the IMF has learnt from the disasters they recommended, and do it different these days. But I doubt it. They still recommend (=command) both austerity and fire sales of government assets, as far as I have learnt.
Thanks Branko. Quick question: Is it inherent in capitalism that it produces winners and losers, not only on an individual level but also among countries? If so, would the goal of a more equal world not require to work against these inbuilt tendencies of capitalism which are reproducing and exacerbating inequality?
Interesting, Thanks. What's your take on the sister institution, then, the WB? If the Fund is "bad cop", is the WB "good cop", and is this needed?
What are some of the key successes and failures of the IMF and World Bank over the last 20-30 years? Were they involved much in China's or Eastern European growth? Or projects/growth elsewhere? Sorry I have not kept tracked...
A thought provoking article! Thank you for writing it!
I disagree about what Lenin's judgement would have been, however. He was not a simple disciplinarian, but someone who would gamble or sow chaos one moment and try to manage the country as if it was one big factory another. His foreign policy is exemplary of his unprincipled, but dedicated approach. He wanted cultural autonomy for nations within the USSR's military borders, but full sovereignty for the nations of neighboring states and empires' subordinated people. This is not because he had strong feelings about order or the right to self-determination, but because such a stance helped the revolution and undermined the global Thermidor's viability. If he saw a real possibility of a revolutionary advance that destroyed financial stability, then he would have probably changed his tune.
Republics of the USSR had much more than cultural autonomy. (Cultural autonomy was the idea of Austrian Marxists within the Habsburg empire.) USSR republics had the right to secession, insisted upon by Lenin, and that eventually was evoked in the break-up of the USSR.
It seems to me that the thesis supports all that Foucault has argued about the profound modernity of marxist thought and it also offers a powerful response to marxist critiques of Foucaldian thought.
I don't think Lenin would approve the existence of the IMF at all. You're seeing patterns that don't exist.
I dunno -- were I in charge of a developing country I'd be trying to give the IMF a wide berth and in service to that end would be going to the greatest lengths possible NOT to borrow $USD ...