Thursday 7th of July 2022

the devious IMF and the rotten world bank……...

The International Monetary Fund and the World Bank have long been criticized for the onerous influence they exert over the domestic policies of many states. Especially since the 1990s, they have been excoriated for imposing policies—such as structural adjustment reforms and austerity measures—on client states that deepen inequality in the Global South, which, in turn, benefits the powerful countries of the Global North.

 

A conversation with Jamie Martin about the imperial origins of the world’s economic governance, imagining an alternative to these institutions, and his new book, The Meddlers.By Daniel Steinmetz-Jenkins

 

How do we understand the structural origins of this global imbalance? One fairly standard view is to place the blame solely on neoliberalism. This perspective argues that the IMF and the World Bank—institutions that date back to World War II—at one time allowed for a more equitable system of economic governance under the Bretton Woods system of global monetary management, which collapsed in the early 1970s. In its place, the argument goes, free market economic policies began to dominate. Cemented by the elections of Ronald Reagan and Margaret Thatcher, these institutions moved in a decidedly neoliberal direction throughout the 1980s. By the 1990s, the Democratic Party had made its peace with this ideological revolution. Under Bill Clinton, the IMF and the World Bank furthered their embrace of economic shock therapies. In this way, the turn to neoliberalism is blamed for the Third World Debt Crisis, the Asian Financial Crisis of 1997–98, and the pillaging of Russia and the former Eastern Bloc countries after the fall of the Soviet Union.

Yet in his new book, The Meddlers: Sovereignty, Empire, and the Birth of Global Governance, Jamie Martin challenges this standard narrative. Martin, soon to be an assistant professor of history and social studies at Harvard University, argues that if we truly want to understand the disastrous consequences of the IMF’s and the World Bank’s interference in the domestic policies of sovereign states, it is necessary to understand the first international institutions of economic governance, such as the League of Nations and the Bank for International Settlement, which emerged in the wake of World War I. These institutions gave civil servants, bankers, and colonial authorities from Europe and the United States the extraordinary power to enforce austerity, oversee development programs, and regulate commodity prices. Many of them had civilizational, paternalistic, and white supremacist assumptions, which they used to justify meddling in the economies of other states. Martin argues that these institutions were, in fact, repackaging 19th-century practices of financial imperialism in a new, more sanitized form, given the decline of the European empires and the rising claims to self-determination. In making this analysis, Martin offers an alternative perspective on the crisis of global economic governance today, showing how the interventionist powers of the IMF and the World Bank have all along been rooted in empire and colonialism.

I spoke with Martin about his thinking on the relationship between empire and contemporary global economic governance, why the Bretton Woods system is misinterpreted, his definition of neoliberalism, and what he sees as an attractive economic alternative to “the meddlers.” This conversation has been edited for length and clarity.

—Daniel Steinmetz-Jenkins

DANIEL STEINMETZ-JENKINS: It is typical for critics to consider the economic policies of the International Monetary Fund, the World Bank, and the World Trade Organization through the prism of globalization. Most infamously during the 1990s, these institutions wreaked havoc on states in the Global South and the former Eastern Bloc countries through enforced austerity, structural adjustment reforms, and other economic shock therapies. Such policies were routinely criticized for violating the sovereignty of these states. Your book rejects this narrative, because you don’t see such policies as the consequence of the so-called neoliberal revolution of the 1970s. Why is this the case?

JAMIE MARTIN: The kind of far-reaching interventionist powers of international economic institutions that we associate with the Washington Consensus—powers to enforce austerity in borrowing states and demand they enact extensive liberalizing reforms—did not emerge out of the blue in the late 20th century. Instead, they originated many decades before, at the end of the First World War, when powerful states and private actors forged new partnerships to protect their interests at a moment of enormous global economic and political turmoil.

Now, it’s true that during the 1980s and ’90s, the IMF dramatically expanded its reach by making assistance conditional on borrowers committing to extensive market reforms. This took place during three successive periods of global upheaval following the end of the Bretton Woods system: the Third World Debt Crisis, the collapse of the Soviet Union, and the Asian Financial Crisis of 1997–98. During each of these periods, the IMF exercised enormous pressure on states in receipt of loans—from Argentina to Kazakhstan to Thailand—demanding they commit to austerity and major transformations of their domestic economies. Failing to agree to these terms not only jeopardized the IMF’s assistance; it also jeopardized access to other sources of foreign capital, since the existence of a prior arrangement with the IMF was used by other lenders to determine a country’s creditworthiness. It is this IMF that became notorious for intrusively meddling in the domestic affairs of sovereign states for the sake of globalizing a hyper-liberalized form of capitalism under US dominance.

There are good reasons to associate the emergence of this muscular IMF with the contemporaneous neoliberal revolution. After all, the IMF was insisting on the same kind of market reforms in the Global South and postcommunist states that were then being implemented in the US and Europe. And given the dominance of the IMF by the US Treasury, it was often the very same people overseeing these transformations of the US economy that were calling for them in places like Russia or Indonesia.

But this was not the first time that this had happened. The first time that an international institution made bailout loans conditional on austerity and central bank independence was by the League of Nations in the former Habsburg and Ottoman lands in the 1920s. This involved adapting the techniques used by semicolonial debt commissions set up in the 19th century by European and US investors and governments to discipline borrowers and extract revenue from them across North Africa, the Balkans, Latin America, the Caribbean, and in China and the Ottoman Empire. There were deep continuities between these tools of informal financial imperialism from before the First World War and the emergence of global economic governance in its aftermath.

When the IMF was being designed in the early 1940s, some of its architects insisted that the new institution would have to abandon these obviously imperial practices. They didn’t want an IMF that could bully states into slashing their budgets and abandoning plans for postwar welfarism—and they agreed that governments should be allowed to protect their citizens from capitalism’s boom-and-bust cycles. This is one of the reasons why there’s so much nostalgia for the Bretton Woods system today, and why it’s so often described as an antidote to neoliberalism: because, in retrospect, its founders seemed to believe in the need for a humane reconciliation of a moderate form of globalization with national welfarism and Keynesian economic management.

But, in fact, there was little real commitment to this vision among the most powerful US actors in the IMF once the Second World War was over and the institution began to make its first loans to member states in the Third World. Already during the early Cold War, the IMF began to act like the earlier imperial creditor arrangements by making loans conditional on austerity and anti-inflationary policies, beginning in Latin American states like Mexico, Paraguay, and Chile, and then more broadly throughout the Caribbean and the postcolonial states of Africa. So it didn’t take the rise of neoliberalism for these practices to reemerge.

DSJ: What is the major takeaway from your alternative account of the IMF’s history?

JM: A key upshot of this history is to throw cold water on the idea that today’s IMF is likely to drop its insistence on conditionality. There’s good reason to take recent changes in economic ideas at the IMF seriously—from its new emphasis on tackling inequality, to a cautious support for the use of capital controls. But even if the IMF has formally loosened its tight embrace of some neoliberal ideas, the institution continues to link its assistance for vulnerable member states to the same old demands for austerity, including most recently in the series of emergency loans it made during the Covid-19 pandemic. Seeing these practices as innovations of the late 20th century suggests they may be easily abandoned with a shift away from neoliberal ideas. But if you see them as an extension of financial statecraft with over a century of history, it becomes clear why the IMF continues to prove immune to shifting paradigms in academic economics and in policymaking.

DSJ: Can you explain your concept of “meddling,” and specifically how it relates to what appears to be a major tension in your book: the conflict between the rise of national self-determination after World War I, as embodied by the League of Nations, and the global capitalist economic system that threatened national sovereignty? Might you elaborate on this tension? In what sense did the new internationalist solutions to this conflict involve a reinvention of empire?

JM: The idea of meddling explored in the book refers to a kind of power exercised by external actors over the domestic policies, institutions, and laws of sovereign states. One example would be the power exerted when an institution like the IMF insists that a member state slash its budgets or remove a central bank from parliamentary control in exchange for a loan. My book tells the history of how this power evolved from the 19th century through the 20th and how it transformed the meaning of statehood in the process.

Now it’s important to keep in mind that the loss of sovereignty this kind of interference involved was different from that which came from a country signing a treaty, adopting the fetters of the gold standard, or inviting foreign experts to help with domestic reforms. The meddling I’m interested in involved a country being compelled with real force to let powerful foreign actors shape domestic institutions and policies—whether with threats of military intervention in the 19th century or of being cut off from international capital markets in the 20th.

Taking this long view is helpful for understanding the radical nature of the power exercised by institutions like the IMF—and why it generates such resistance. Protection from the interference of external actors in domestic policies and institutions is coterminous with the modern conception of sovereignty itself—even if, in practice, it has historically been only the most powerful states that have enjoyed this protection. Up until the 19th century, it was questions of religion, dynastic succession, and constitutional matters that were seen as the most important to insulate. But by the early 20th century—a period of rapid economic globalization—economic policies were also seen as needing this protection as well.

Take the example of trade: While many trade agreements were signed in the 19th century, tariffs were understood as strictly domestic policies, even though they affected the economic well-being of other countries. It’s seldom remembered that Congress refused to allow the United States to join the League of Nations not just out of some general isolationist sentiment but from a very specific fear: that the league would intervene in two of the most controversial areas of US domestic policy, tariffs and immigration. The same was true with public finance: How a state chose to tax citizens and spend its revenue was one of the most fundamental expressions of its sovereignty. In the early 20th century, any state that allowed others to determine its fiscal system was no longer considered a full state, but instead a quasi-sovereign or semicolonized polity, like China or Egypt at the time.

When institutions of global economic governance began to emerge after World War I, the political problem they faced was whether they could intervene in these domestic policies and institutions. It was clear that governing global capitalism could not only involve managing relations between states, such as preventing one from going to war with another; it could also involve weighing in on sensitive domestic economic questions. But these institutions had to try to exercise these interventionist powers in ways that would not look like just more of the same kind of bullying that empires had long visited on states on the peripheries of the global economy.

Now there was little question that the new international institutions like the League of Nations were inheriting old imperial practices. The most powerful members of the league, after all, were Britain and France—two sprawling colonial empires. But during an era of rising claims to self-determination, self-governing polities—particularly states that had recently won their independence, like, say, Poland or Albaniadidn’t want to be bossed around like the poor, semi-sovereign debtors of the 19th century, constantly under the watch of their creditors and not fully in control of their domestic policies.

The point of international institutions was to make this less humiliating, by offering formal representation to the state where these powers were being applied. In this way, these institutions were to serve as legitimation machines—making older imperial practices easier for sovereign states to tolerate in an era of demands for self-determination. But even in this new sanitized form, these powers generated enormous resistance wherever they were brought to bear.

DSJ: How do we see similar dynamics still playing out today?

JM: From the late 1990s, more and more countries have turned away from the IMF after it became clear what accepting an IMF bail-out involved. This is particularly true for those “emerging market” economies—Russia, China, South Korea, and Turkey—that have developed ways of dealing with financial instability that obviated the need for IMF assistance. This isn’t because all of these states have been waging a war on neoliberalism; far from it. Take Putin’s Russia, long committed to a deeply conservative form of fiscal restraint and boasting a central bank staffed by the most modern technocratic economists. This Russia would never have allowed the IMF to tell it to commit to these policies, particularly given Russia’s experiences with the institution after the collapse of the Soviet Union. Allowing this kind of interference in its domestic affairs by an institution dominated by the US Treasury would be akin to admitting to the kind of loss of sovereignty that comes from losing a war. In some ways, we might see the rise of Putin as a self-described protector of Russian autonomy and civilizational prestige as a direct reaction to the perceived humiliations of allowing institutions like the IMF to become so deeply involved in Russia’s domestic economy and politics during the 1990s.

One of the aims of my book is to show just how old this dynamic is. Even states that have accepted the need for liberal reforms or fiscal restraint have always been reluctant, except when in severe distress, to commit to them when demanded to do so by powerful outside actors. Accepting the discipline of a body like the League of Nations or, later, the IMF could of course be strategically useful for certain political actors—delegating away a decision to impose austerity, for example, was often done by governments to block domestic opposition to it. But doing so was always politically risky, since it was likely to be seen as moving a given state to a lower rung in global hierarchies and as a relinquishment of autonomy that threatened a loss of statehood itself. This was an extremely shaky ground on which to build a viable vision of international cooperation.

DSJ: Can you pinpoint the civilizational, racial, and cultural hierarchies of these first international institutions of economic governance and, in turn, how they made their way into the Bretton Woods Conference of July 1944, which led to the founding of the IMF and the World Bank?

JM: In the early 20th century, many countries with formal sovereignty saw extensive unwanted interference in their domestic affairs. This took many forms. Foreign-run commissions controlled assets and dictated policies in borrowing countries like Egypt and Nicaragua; other states, like China and Siam, lost their power to set their own tariffs. In many countries, natural resources and land were owned by foreign actors and central banks were controlled by foreign directors. States like Haiti, Liberia, Iran, Mexico, Greece, and many others did not see their legal sovereignty translate into real autonomy from external compulsion.

Well aware of this contradiction, many attempted to justify it in various ways. There were glaringly racist defenses of this sovereign inequality—with some arguing that true autonomy and economic self-determination really only belonged to white- and Christian-majority countries in the West. There were also justifications of it in terms of development: the idea that newly independent states needed foreign tutelage to set them on a path toward “responsible” government and economic progress. This was also a time when states were judged according to the side they had chosen during the First World War. It was no coincidence that it was in the losers of the war—Austria, Germany, and Hungary—where some of the earliest and most interventionist tools of international economic governance were developed. But opponents of these tools also appealed to the same imagined civilizational hierarchies. From the vantage point of a state like Germany or Austria in the 1920s, opposition to external interference was described by political actors of all ideological commitments as key to preventing the country from falling to the status of a China or a Greece—formally sovereign, but constantly subjected to humiliating interventions in their domestic affairs.

DSJ: In what sense was this hierarchy modified given the United States’ rise to an economic and military superpower? What did the US learn from British and French meddling during the period between the world wars? And in what ways did the British and French now have to deal with a taste of their own medicine with the US meddling in their economies after World War II?

JM: There is a well-known story about the origins of the Bretton Woods system during the Second World War. In 1944, representatives of 44 countries met at the Mount Washington Resort in New Hampshire to rewrite the rules of the international economy and create two new institutions, the IMF and the World Bank, to govern the postwar world economy. On most accounts, this process involved fraught negotiations between a declining great power—the British Empire, represented by John Maynard Keynes—and a rising one—the United States, represented by the Treasury economist Harry Dexter White—that resulted in one of the greatest international agreements of all time.

But Bretton Woods was, at best, a mixed achievement. Sure, the United States took on more commitments to provide global public goods and fight crises than ever before. But the IMF, the more important of the two Bretton Woods institutions, was designed to be dominated by the US—even more so than the British had dominated the League of Nations before this. As the British came to grips with this fact, they began to worry that the United Kingdom, weakened by the war, now faced the risk that the IMF would intervene in its domestic affairs, just as the UK had long done in the Balkans, the Middle East, and elsewhere. British officials worried that the UK was sinking in US eyes to the level of the kind of “irresponsible” debtor state long subject to the intervention of US officials and bankers in its affairs. This was a replay of older dynamics: In Germany and Austria in the 1920s, contemporaries constantly referred to these countries being treated by Britain and France in the ways that these empires had treated the Ottoman Empire and China before the First World War.

Keynes worked tirelessly to prevent the IMF from developing these interventionist powers—not out of some commitment to universal sovereign equality (he was mostly dismissive of Latin American and non-Western delegations at the Bretton Woods Conference), but because he feared a weakened British Empire was now vulnerable to US meddling. Just days before the Bretton Woods Conference, he drove this point home to his counterparts in the Roosevelt administration by asking them how they’d feel if an international institution had told the United States it couldn’t afford the New Deal.

Whether or not the IMF would be able to do this was left ambiguous at the Bretton Woods Conference. Keynes felt confident that he had won a commitment from Washington that the institution would not tell Parliament it couldn’t afford the Beveridge Plan. But soon after the conference, Keynes realized he’d lost this struggle: The US-dominated IMF was clearly going to be able to tie its assistance to extensive demands on the domestic policies of borrowers. Sure enough, as soon as the IMF opened its doors, shortly after Keynes’s death in 1946, its British and French members saw that this was not the institution they had signed up for. In a stark reversal of fortunes, the meddlers now risked becoming the meddled-with. But in the end, it wasn’t Western Europe where the IMF developed its most interventionist powers. It was in the Global South.

DSJ: How did representatives of the Global South deal with the meddling of the IMF and the World Bank in the 1960 and ’70s? For instance, there has been much written of late about the New International Economic Order that emerged at this time. What did it hope to achieve?

JM: The evolution of IMF conditionality during the Cold War was seen by representatives of Global South countries as being similar to the many other kinds of foreign interference their countries had long faced. As such, it was they, often backed by the Soviet Union, that were the most consistent in claiming a right for all states to enjoy protection from the meddling of others. This became a central demand at the United Nations, including in the push for a New International Economic Order in the early 1970s. The major exceptions to this were apartheid in South Africa and Jim Crow in the United States, which were seen as domestic legal and institutional arrangements that should not be hidden behind sovereign walls. But when it came to economics, the anti-interventionist emphasis of Global South countries was consistent.

Within the IMF, the conflict over this issue began well before the rise of the Washington Consensus. Already in the 1960s, there was a growing backlash among representatives of Third World states to the double standards and asymmetries of IMF interventionism. This reached a fever pitch after the IMF bailed out the United Kingdom in 1967 without nearly as many demands on British policy as it routinely made on the policies of members in, say, South America. As scholars like Adom Getachew and Christy Thornton have shown, there was, well before the Cold War, a long history of Global South officials and activists attempting to make sovereign equality a reality in a deeply hierarchical international system, but without calling for a full retreat to nationalism. So, too, did the backlash to conditional lending appear much earlier than during the wave of global protests against the IMF in the 1990s.

DSJ: Let me ask you to elaborate on something you alluded to previously. In the conclusion of The Meddlers, you state that “the history told in this book suggests that the challenges of global governance in the early twenty-first century are more significant than what is implied by stylized histories of embedded liberalism and its collapse into neoliberalism.” Is this an indictment against liberalism in general? Do liberalism and empire go hand in hand?

JM: If we focus too much on the relatively recent history of neoliberalism, we risk overlooking a much longer-term evolution in the relationship of global capitalism and empire. We miss that we continue to live in a world shaped by older practices of informal financial imperialism, which date back at least to the mid-19th century and have existed under the many varieties of liberalism that historians and social scientists often see as neatly separated: classical liberalism, “embedded liberalism,” neoliberalism, and so on. Structural adjustment is not just a kind of distant relative of empire, but its direct descendant.

DSJ: I recently interviewed Gary Gerstle, whose new book on the rise and fall of neoliberalism specifically argues that something like “embedded liberalism” did collapse into neoliberalism, eventually bringing down the New Deal order with it. Gerstle also argues for a global perspective, but sees the rise of a neoliberal order being inseparable from the downfall of the Soviet Union. How, though, do you explain the gradual undermining of the New Deal since the 1970s (something that has analogues across the North Atlantic) from the global perspective you put forward in the book?

JM: Generally, accounts of IMF interventionism focus on the transition from the supposed Keynesian consensus of the early Cold War to the neoliberalism of the late 20th century. On this telling, the Bretton Woods system replaced the interwar gold standard with a new international system that allowed states more autonomy to pursue expansive policies, build welfare regimes, and insulate their citizens from economic crisis—all without resorting to the kind of competitive nationalism that shattered the world economy in the 1930s. The insight of the Estonian economist Ragnar Nurkse is often used as shorthand for this innovation: The world economy was now to be governed for the sake of domestic social and economic priorities, not the other way around. The political scientist John Ruggie described this arrangement as an “embedded liberal” compromise in 1982.

But this narrative relies on a mythical rendering of the mid-20th century. This kind of autonomy was a luxury that few states could afford. Now this is not to say that neoliberalism is not real or that the undermining of postwar social democratic arrangements, where they existed, was not a major political development with worldwide consequences. Far from it. But I think we should be careful to avoid nostalgia for a postwar moment when social democracy was secure, states could control their own economic destinies, and welfarism was vibrant and universal. We know full well just how much this is a myth on the national level.

The racist compromises and structural contradictions at the heart of the New Deal state are obvious to US historians; so too is it clear that Keynesianism was much less of a consensus in postwar America than many would like to think. What I want us to see is that we should also be wary of using the concept of embedded liberalism to describe the global order after 1945, unless we’re referring to a small handful of relatively wealthy states in the North Atlantic during a brief period of time. Obviously, much of the world still lived within the confines of colonial empires, and few states that achieved “flag independence” saw this translate into robust autonomy in practice. Embedded liberalism may have been something that US and British officials talked a lot about during the Second World War. But it was not something that ever became an organizing logic of the global order after 1945, as much as we’d like to wish that it had and that it could somehow be recaptured today.

DSJ: What historical alternatives might we consider—paths not taken—that would allow us to rethink the relationship between the national and the international so as to overcome meddlers today?

JM: There are pushes for reform at the IMF that we should encourage, and new ideas are clearly taking root in the institution. There’s a welcome recognition among some IMF officials that the institution overreached in the 1990s and that forms of lending without strings attached, like special drawing rights, have a place in the institution’s toolkit. There are efforts to reform how the IMF treats debtors, particularly by reducing its punitive surcharges. And the G20—if it’s not to be completely hamstrung by great power competition—has some potential to lead collective efforts at sovereign debt relief. Despite the current moment of global crisis (or perhaps because of it), now is a time when there are vibrant and productive discussions about how to reform international economic institutions.

But I also think we need to escape thinking in terms of reaching “a new Bretton Woods,” as is so often the tagline of these calls for reform, or of limiting our ambitions to tweaking existing institutions. These institutions were designed at a time when empire was still taken for granted as an organizing principle of the global order, and were set up to ensure the dominance of one great power. We need to think creatively, from the bottom up, about what kinds of institutions might actually work in our multipolar and unstable world order: institutions that are able to achieve collective aims, whether this is the reduction of global inequalities or mitigating climate change, and that states look to with enthusiasm, not just under duress.

I don’t have the answer to what exactly this would look like. But I see this as a long-term effort that needs to be engaged across multiple sites of scholarship, politics, and social movements. I find it difficult to imagine life on earth continuing as we know it if we cannot craft collective responses to the existential challenges we face. But we can’t begin to imagine what is politically feasible without reckoning with how we’ve arrived where we are now—and with how the legacies of empire need to be continually overcome in the pursuit of new and more just forms of international cooperation.

 

READ MORE:

https://scheerpost.com/2022/06/16/the-rotten-roots-of-the-imf-and-the-world-bank/

 

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the underlying focus….

 

The underlying focus of the IMF and the World bank is to control countries and call upon them when the US Empire makes the final assault on the HEARTLAND (destroy Russia and China)......

 

SEE ALSO:

 

https://yourdemocracy.net/drupal/node/43171

 

https://yourdemocracy.net.au/drupal/node/43377

 

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bananas…….

The anti-inflation policies driven by the U.S. and the Eurozone are not going to ease the burdens on the working class in their countries and certainly not in the debt-ridden Global South, writes Vijay Prashad.

 

Tricontinental: Institute for Social Research

 

In April, the United Nations established the Global Crisis Response Group on Food, Energy and Finance. This group is tracking the three major crises of food inflation, fuel inflation and financial distress. Their second briefing, released on June 8, noted that, after two years of the COVID-19 pandemic:

“the world economy has been left in a fragile state. Today, 60 per cent of workers have lower real incomes than before the pandemic; 60 per cent of the poorest countries are in debt distress or at high risk of it; developing countries miss $1.2 trillion per year to fill the social protection gap; and $4.3 trillion is needed per year – more money than ever before – to meet the Sustainable Development Goals (SDGs).”

This is a perfectly reasonable description of the distressing global situation, and things are likely to get worse.

According to the U.N. Global Crisis Response Group, most capitalist states have already rolled back the relief funds they provided during the pandemic. “If social protection systems and safety nets are not adequately extended,” the report reads, “poor families in developing countries facing hunger may reduce health-related spending; children who temporarily left school due to Covid-19 may now be permanently out of the education system; or smallholder or micro-entrepreneurs may close shop due to higher energy bills.”

 

The World Bank reports that food and fuel prices will remain at very high levels until at least the end of 2024. As wheat and oilseed prices have escalated, reports are coming in from across the globe — including in wealthy countries — that working-class families have started to skip meals. This tense food situation has led United Nations (UN) secretary-general’s special advocate for inclusive finance for development, Queen Máxima of the Netherlands, to predict that many families will move to one meal a day, which, she says, “will be the source of even more instability’ in the world. The World Economic Forum (WEF) adds that we are in the midst of “a perfect storm” if you take into account the impact of increasing interest rates on mortgage payments as well as inadequate salaries. The managing director of the International Monetary Fund, Kristalina Georgieva-Kinova, said late last month that the “horizon has darkened.”

 

These assessments come from people at the heart of powerful global institutions — the IMF, World Bank, WEF and the U.N. (and even from a queen). Although they all recognize the structural nature of the crisis, they are reluctant to be honest about the underlying economic processes, or even about how to adequately name the situation.

David M. Rubenstein, the head of global investment firm The Carlyle Group, said that when he was part of U.S. President Jimmy Carter’s administration, their inflation adviser Alfred Kahn warned them not to use the “R” word — recession – which “scares people.” Instead, Kahn advised, use the word “banana.” Along those lines, Rubenstein said of the current situation, “I don’t want to say we’re in a banana, but I would say a banana may not be that far away from where we are today.”

Marxist economist Michael Roberts does not hide behind words such as banana. Roberts has studied the global average rate of profit on capital, which he shows has been falling, with minor reverses, since 1997. This trend was exacerbated by the global financial crash of 2007–08 which led to the Great Recession in 2008. Since then, he argues, the world economy has been in the grip of a “long depression,” with the rate of profit at a historic low in 2019 (just before the pandemic).

 

“Profit drives investment in capitalism,” writes Roberts, “and so falling and low profitability has led to slow growth in productive investment.”

Capitalist institutions have shifted from investment in productive activity to, as Roberts puts it, “the fantasy world of stock and bond markets and cryptocurrencies.” The cryptocurrency market, by the way, has collapsed by over 60 percent this year.

Dwindling profits in the Global North have led capitalists to seek profits in the Global South and beat back any country (especially China and Russia) that threatens their financial and political hegemony, with military force if necessary.

Ghastly is the way of inflation, but inflation is merely the symptom of a deeper problem and not its cause. That problem is not merely the war in Ukraine or the pandemic, but something that is confirmed by data but denied in press conferences: the capitalist system, plunged into a long-term depression, cannot heal itself. Later this year, notebook No. 4 on the theory of crisis from Tricontinental: Institute for Social Research, written by Marxist economists Sungur Savran and E. Ahmet Tonak, will establish these points very clearly.

For now, capitalist economic theory starts with the assumption that any attempt to settle an economic crisis, such as an inflationary crisis, must not, as John Maynard Keynes wrote in 1923, “disappoint the rentier.” Wealthy bondholders and major capitalist institutions control the policy orientation of the Global North so that the value of their money – trillions of dollars held by a minority – is secure. They cannot, as Keynes wrote nearly a hundred years ago, be disappointed.

The anti-inflation policies driven by the U.S. and the Eurozone are not going to ease the burdens on the working class in their countries, and certainly not in the debt-ridden Global South. The chairman of the U.S. Federal Reserve, Jerome Powell, admitted that his monetary policy “will cause some pain,” but not across the entire population.

More honestly, Amazon’s founder Jeff Bezos tweeted that “Inflation is a regressive tax that most hurts the least affluent.”

Rising interest rates in the North Atlantic make money far more expensive for ordinary people in that region, but they also make borrowing in dollars to pay off national debts in the Global South virtually impossible. Raising interest rates and tightening the labor market are direct attacks on the working class and developing nations.

There is nothing inevitable about the class warfare of the governments of the Global North. Other policies are possible; a few of them are listed below:

  1. Tax the global wealthy. There are 2,668 billionaires in the world who areworth $12.7 trillion; the money they hide in illicit tax havens adds up to about $40 trillion. This wealth could be brought into productive social use. As Oxfam notes, the richest 10 men have more wealth than 3.1 billion people (40 percent of the world population).
  2. Tax large corporations, whose profits haveescalated beyond imagination. U.S. corporate profits are up by 37 percent, far ahead of inflation and compensation increases. Ellen Zentner, the chief U.S. economist of the leading financial services company Morgan Stanley, argues that, during the long depression, there has been an “unprecedented” plunge in the share of Gross Domestic Product earned by the working class in the United States. She has called for a return to a more just profit-wages balance.
  3. Use this social wealth to enhance social expenditures, such as funds to end hunger and illiteracy and build health care systems as well as non-carbon forms of public transportation.
  4. Instituteprice controls for goods that specifically drive-up inflation — such as prices for food, fertilizers, fuel and medicines.

The great Bajan writer George Lamming (1927–2022) left us recently. In his 1966 essay, “The West Indian People,” Lamming said, “The architecture of our future is not only unfinished; the scaffolding has hardly gone up.”

This was a powerful sentiment from a powerful visionary, who hoped that his home in the Caribbean, the West Indies, would be shaped into a sovereign region that could relieve its people of great problems. This was not to be. Strangely, the IMF’s Georgieva-Kinova quoted this line in a recent articlewhile making the case for the region to collaborate with the IMF. It is likely that Georgieva-Kinova and her staff did not read all of Lamming’s speech, for this paragraph is instructive today as it was in 1966:

“There is, I believe, a formidable regiment of economists in this hall. They teach the statistics of survival. They anticipate and warn about the relative price of freedom… [I] would just like you to bear in mind the story of an ordinary Barbadian working man. When he was asked by another West Indian whom he had not seen for about 10 years, ‘and how are things?’ he replied: ‘The pasture green, but they got me tied on a short rope.’ “

Vijay Prashad is an Indian historian, editor and journalist. He is a writing fellow and chief correspondent at Globetrotter. He is an editor of LeftWord Books and the director of Tricontinental: Institute for Social Research. He is a senior non-resident fellow at Chongyang Institute for Financial Studies, Renmin University of China. He has written more than 20 books, including The Darker Nations and The Poorer Nations. His latest book is Washington Bullets, with an introduction by Evo Morales Ayma.

The views expressed are solely those of the author and may or may not reflect those of Consortium News.

This article is from Tricontinental: Institute for Social Research.

 

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less bitter fruit and more better fruit…...

 

BY Vladimir Danilov

 

Moscow has in recent years been increasingly developing its cooperation with Africa in all directions. The current world situation has prompted the search for new opportunities for direct trade and economic ties, and for many years now SPIEF has been one of the platforms for communication between various states and businesses.

It is therefore not surprising that one of the most interesting and promising discussions at the 25th St. Petersburg International Economic Forum (SPIEF) was the Russia-Africa Business Dialogue. The event, which focused on the priorities of Russian-African cooperation in a changing world order, evoked a keen interest in both Africa and Russia. 

It was attended by representatives of official authorities, the public and business from Russia, African states and many countries from elsewhere that have shown interest in cooperation with Africa. During the dialogue, the Prime Minister of the Central African Republic, Félix Moloua, the Minister of Industry and Trade of Egypt, Nevin Gamea, the Minister of Industry of Algeria, Ahmed Zeghdar, the Minister of Mines, Energy and Water of Mali, Lamine Traoré, the Minister of Industry and Trade of Zimbabwe, Sekai Nzenza, the President of the Commission of the Economic Community of Central African States, Gilberto Da Piedade Verissimo and other politicians expressed their vision for cooperation between Russia and Africa.

In their speeches, African countries supported anti-globalization sentiments, stressing that the West exploits the resources of their continent and profits from conflicts. Russia, on the other hand, is an exporter of stability and security in the region. Many speakers pointed out during the dialogue that the purpose of the anti-Russian sanctions imposed by the US and the West is not only to destroy Russia, but also to “strangle” others, including African states. At the same time, they have no doubt that the US and its European allies will offer the governments of the continent solutions that benefit only the West, bypassing their cooperation with Russia.

Zimbabwe’s Minister of Industry and Trade, Sekai Irene Nzenza, expressed her gratitude to Moscow for its support during the COVID-19 pandemic. She also stressed Zimbabwe’s openness to cooperation with Russian entrepreneurs, pointing in particular to the country’s wealth of natural resources and willingness to jointly develop tourism, and to the successful work of several Russian companies in the country, such as Alrosa. 

On the sidelines of SPIEF-22, Senegalese entrepreneur Moustapha Thiam said that all global problems should be solved together and that African countries should always maintain contact and cooperate with Russia. In Senegal, the entrepreneur founded Sentech Energy, an innovative company that combines developments in agriculture and renewable energy. Moustapha Thiam expressed his interest in cooperation with Russian business and recalled that Russia and Senegal have been cooperating for many years and that relations between the countries are constantly developing. A fortnight ago even Senegalese President Macky Sall, Chairman of the African Union, came to Moscow to meet Putin. Moustapha Thiam is convinced that cooperation with Russia can have a huge impact in the future and open even more opportunities and doors for Russia in Africa. At the same time, he stressed that Western sanctions against Russia are perceived very negatively in Africa and are already harming the peoples of the continent. Moustapha Thiam spoke with enthusiasm about the Pan-African projects, which aim to integrate African countries economically and culturally in order to accelerate their overall development.

The President of the Commission of the Economic Community of Central African States (ECCAS), Gilberto Da Piedade Verissimo, noted in his speech that African countries have a long history of cooperation with Moscow, many of them in need of support from Russia. In recent years, mutual turnover has doubled, from $41 million to $80 million, strengthening Russia’s position in Africa.

As the head of Mali’s delegation, Minister of Mines, Energy and Water, Lamine Seydou Traoré, noted in his speech, the SPIEF-22 forum was very relevant, because for a long time relations between different states have been focused on the West. But today most countries have a choice of whom to trade with, there is an opportunity for lucrative exchanges, both economically and militarily, and there is a choice of partners. Mali is a shining example of new African resistance to the hegemony of France and other Western countries. Answering the question of why Bamako has become one of the powerful centers of search for an alternative path for the people of Africa, Traoré said that last autumn, after the failure of Western counter-terrorism missions in the Sahel, Mali began to actively expand security cooperation with Russia. The rapprochement with Russia has displeased NATO and the EU, but Bamako authorities have not bowed to pressure, and cooperation between the two countries is now on the rise.

Speakers at SPIEF-22 expressed a common view that Russia needs to develop direct cooperation with African states, which opens up many prospects for Moscow, and which is extremely important in the modern context.  Representatives from Africa also see SPIEF-22 as a mutually beneficial opportunity to strengthen cooperation with Russia. 

Aleksandr Shokhin, head of the Russian Union of Industrialists and Entrepreneurs (RSPP), said during a speech at the SPIEF conference that African countries are interested in working together on international projects with Russia. Shokhin stressed that “negotiations on free trade zones with individual African countries, including between the Eurasian Economic Union (EAEU) and associations of the Dark Continent, are underway. African countries are reaching out for integration projects on their own. It is the initiatives related to the use of raw materials, minerals and goods produced in Africa that are important.”

Russia’s readiness to further develop cooperation with Africa in university studies was expressed by Natalya Bocharova, Russian Deputy Minister of Science and Higher Education. She recalled that ever since Soviet times, Africans have been coming to Russia to receive education, with some 27,000 African students now studying in the Russian Federation. Last year, the Russian-African University opened, but for the time being it will be online, offering programs in English and French. In addition, an IT course has been introduced for African students, and business is involved in the university, which is important for the process of technology adoption in the countries of the Dark Continent.

The discussions at SPIEF-22 highlighted the mutual interest in developing trade and economic ties between Russia and Africa. Their priorities have been identified as food and energy security, developing new ways of financial settlement, cooperation in innovation and technology, health, education and culture, as well as cooperation within integration alliances.

 

 

Vladimir Danilov, political observer, exclusively for the online magazine “New Eastern Outlook”.

 

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