The IMF is starting to sound like Bernie

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For three decades the IMF was the leading champion of neoliberalism and globalism. They also were in a position where they could force their free-market fundamentalism views upon the teaming masses of the world.
However, times have changed.

The flashpoint was a new IMF paper arguing that developed nations can share prosperity more evenly, without sacrificing growth, by shifting the income-tax burden onto the rich. “Excessive inequality can erode social cohesion, lead to political polarization, and ultimately lower economic growth,” it said. The study came out as Trump was hitting the road to promote the biggest overhaul of America’s tax code in decades. The Tax Policy Center, echoing most independent analysts, says it will benefit high-earners most.

Milton Friedman just rolled over in his grave.
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The ManChild-in-Chief Administration naturally took offense.

A senior Treasury official disputed the conclusion that less-progressive tax rates could slow growth and make inequality worse. The official said Trump’s proposed cuts will leave the median American worker better off. The Treasury questioned the Fund’s forecasting too, suggesting the prediction for U.S. growth should have factored in Trump’s tax plans, and been higher as a result.

This comes about a year since the last stunning IMF report.

And yet, there are major questions the IMF is now raising, specifically regarding two aspects of neoliberal agendas. One is the removal of restrictions to moving capital across national boundaries. The other is austerity to reduce deficit spending and debt. According to those policies specifically, the IMF study comes to three conclusions:

"The benefits in terms of increased growth seem fairly difficult to establish when looking at a broad group of countries."
"The costs in terms of increased inequality are prominent. Such costs epitomize the trade-off between the growth and equity effects of some aspects of the neoliberal agenda.
"Increased inequality in turn hurts the level and sustainability of growth. Even if growth is the sole or main purpose of the neoliberal agenda, advocates of that agenda still need to pay attention to the distributional effects."

In other words, according to the IMF, the growth that neoliberal theorists assume will happen, and to which they point in specific examples, doesn't seem to appear when you look across a spectrum of countries. In more prosaic terms, the evidence doesn't tend to exist if someone isn't cherry picking examples.

And to think, it only took three decades, millions to suffer, and thousands to die, before the IMF walked back their neoliberal agenda.
Wait, did I say "walk back"? I meant "talk the talk, not walk the walk."

Oxfam’s research is the first independent study of this pilot program. Oxfam looked into 15 of the 18 country reports available at the time and found none of them offered comprehensive steps to reduce inequality. In some cases the reports pushed policies, particularly on labor, which could worsen inequality.
Oxfam International’s Executive Director, Winnie Byanyima, said: “The IMF sounds like it wants to move on from its neoliberal past in acknowledging the massive threat inequality poses. But its actions have to match its own words and research.”

In other words, the IMF acknowledged that it's policies hurt poor people, even to the point of hurting long-term economic growth, but they aren't going to stop doing it.

There is actually multiple economic studies that show how inequality hurts long-term economic growth.

Another mechanism is that inequality can reduce productivity. For example, it generates (pdf) distrust which depresses growth by worsening the quality of policy; exacerbating “markets for lemons” problems; and by diverting resources towards low-productivity guard labour.

On one hand, it's great to see even mainstream economists admit the failures of neoliberalism.
On the other hand, none of it seems to matter because the wealthy elites don't care. They are the modern day pillaging army. Their indifference to the well-being of the human race is no longer hidden.

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In short, “neoliberalism” is not simply a name for pro-market policies, or for the compromises with finance capitalism made by failing social democratic parties. It is a name for a premise that, quietly, has come to regulate all we practise and believe: that competition is the only legitimate organising principle for human activity.

No sooner had neoliberalism been certified as real, and no sooner had it made clear the universal hypocrisy of the market, than the populists and authoritarians came to power. In the US, Hillary Clinton, the neoliberal arch-villain, lost – and to a man who knew just enough to pretend he hated free trade.
...
It isn’t only that the free market produces a tiny cadre of winners and an enormous army of losers – and the losers, looking for revenge, have turned to Brexit and Trump. There was, from the beginning, an inevitable relationship between the utopian ideal of the free market and the dystopian present in which we find ourselves; between the market as unique discloser of value and guardian of liberty, and our current descent into post-truth and illiberalism.

freedom.png

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@gjohnsit love that picture!

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k9disc's picture

source.

Worm is turning. I think we can expect a short circuit soon.

@gjohnsit

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“Tactics without strategy is the noise before defeat.” ~ Sun Tzu

@k9disc I think The Guardian is controlled by a Trust, that's why it has managed to escape the fangs of corporate takeover.

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It's simply too painful to acknowledge, even to ourselves that we've been taken. Once you give a charlatan power over you, you almost never get it back. Carl Sagan

@gjohnsit
naked capitaism

The Trump Administration just did the IMF a favor by calling attention to a new report that supported the idea of taxing the wealthy more heavily. And in picking this fight, the Administration also tacitly admitted that its very sketchy tax “reform” plan is going to favor the rich, despite repeated denials.

Even though the IMF report some attention in the financial and business press, it’s not the sort of thing that has much impact in the halls of Congress. Admittedly, the report also took a fiscally orthodox line, urging that US tax “reform” not lead to bigger deficits. But the fiercely hawkish CBO is likely to give the Administration plenty of grief if its tax cuts aren’t matched by spending cuts or tax increases elsewhere, and the CBO has vastly more sway in Washington than the IMF on budget sausage-making. So getting upset about the IMF report elevated it when it would have been wiser for the Administration to have shrugged it off.

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Lily O Lady's picture

@gjohnsit

economist of the University of Chicago. It sounds like just more neoliberalism to me.

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"The object of persecution is persecution. The object of torture is torture. The object of power is power. Now do you begin to understand me?" ~Orwell, "1984"

in saying anything because they know it' too late. I like to think they see just what a Trump can do to the world, but they've been all good as long as the one doing the wrecking wasn't named Trump.

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Only a fool lets someone else tell him who his enemy is. Assata Shakur

The Aspie Corner's picture

It doesn't matter if you call it the Austrian School or the Chicago school. The policies of Milton Friedman, the Mises Institute and the Cato Institute amount to nothing more than organized theft by the robber barons or techno barons.

And whether people realize it or not, the entity that identifies itself as the 'Libertarian Party' controls the Democratic and Republican parties via policy and bribery.

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Modern education is little more than toeing the line for the capitalist pigs.

Guerrilla Liberalism won't liberate the US or the world from the iron fist of capital.

mimi's picture

two to three decades ago (there were those guys, if you believe it or not) were all graciously sent into early retirement, or politely advised to earn their money elsewhere or bribed with some completely irrelevant job assignments as representatives in never ever lands.

Thanks for the essay, gjohnsit.

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Please get along with each other. We have only one planet. Do not destroy what we have. Do not kill anyone and do not kill yourself. Nature doesn't care about what you think.

Bollox Ref's picture

Found guilty of negligence, with less than a slap of an elegant wrist?

The transnational elite just laugh at us, as they pitch headlong into the caviar.

Someone's getting worried.

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Gëzuar!!
from a reasonably stable genius.

Oops. Fucking economc warfare has been proven to be a money making opportunity. Who could have guessed.

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Fighting for democratic principles,... well, since forever

Cassiodorus's picture

The IMF has more than once commissioned a report telling it that its policies sucked. Leadership always ignores these reports.

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"Freedom is always, and exclusively, freedom for the one who thinks differently.” -- Rosa Luxemburg

Cassiodorus's picture

Capitalism IS pillage. Read the new book by Moore and Patel.

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"Freedom is always, and exclusively, freedom for the one who thinks differently.” -- Rosa Luxemburg

Song of the lark's picture

neo-feudal weenie roast...better than burning man. Whole countries have been made to suckle at those teats.

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there does seem to have been an acceleration of the looting.

not much time left?

or simply,

who's gonna stop me?

If you think of the people as your enemy, then this is simply "pressing the advantage" in a fight.

can't expect a change of heart from these guys. ooh,no.

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SparkyGump's picture

makes me remember when Nixon went on Laugh-In. He was still a crook and the IMF is still a bunch of pigs.

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The real SparkyGump has passed. It was an honor being your human.

Meteor Man's picture

An update on this story from Common Dreams:

In a recent op-ed for the Los Angeles Times, environmentalist and billionaire president of NextGen America Tom Steyer declared that he is "strongly opposed to even one more penny in cuts for rich people and corporations" because such cuts "defund the critical public programs on which American families depend."

"Three decades of data prove that tax cuts for the wealthy do not 'trickle down' to working people or grow the overall economy," Steyer concluded. "Let's raise taxes on the rich and use the money to invest directly in the American people—by improving infrastructure, promoting clean energy, strengthening public education, and expanding healthcare. Let's boost wages to stimulate economic growth and job creation. It's the only way we will create broad prosperity, rebuild the middle class, and give working families a fair shake."

And another one:

Billionaire venture capitalist Nick Hanauer joined the list of wealthy opponents of the Trump-GOP tax proposals on Wednesday, writing for Politico that the president's tax plan is "a massive and destructive financial giveaway masquerading as pro-growth tax reform."

"The American tax code is already rigged in favor of the rich and powerful, and the Trump/Ryan tax plan would make it only worse," Hanauer concludes. "If we truly want an economy that works better for all Americans, we need to move in the other direction."

The big question is will they put their money where there mouth is.

https://www.commondreams.org/news/2017/10/12/imf-says-higher-taxes-wealt...

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"They'll say we're disturbing the peace, but there is no peace. What really bothers them is that we are disturbing the war." Howard Zinn

Lily O Lady's picture

@Meteor Man

along with those tax cuts in spite of their protestations.

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"The object of persecution is persecution. The object of torture is torture. The object of power is power. Now do you begin to understand me?" ~Orwell, "1984"

ZimInSeattle's picture

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"Those who make peaceful revolution impossible will make violent revolution inevitable." - JFK | "The more I see of the moneyed peoples, the more I understand the guillotine." - G. B. Shaw Bernie/Tulsi 2020