The IMF is starting to sound like Bernie
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.
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.