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Greece against a cast of contemptible characters

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These images (taken from various news agencies) show how ordinary Greeks, but particularly elderly pensioners, have been tormented by EU politicians. This has been portrayed as a Greek debt crisis, but it is much more a crisis about what Europe is and stands for.

These images (taken from various news agencies) show how ordinary Greeks, but particularly elderly pensioners, have been tormented by EU politicians. This has been portrayed as a Greek debt crisis, but it is much more a crisis about what Europe is and stands for.

Update 11 July: The Greek parliament supported a so-called package of spending cuts, pension savings and tax increases with a majority of 251 votes in the 300-seat parliament. This is what the 61.3% ‘NO’ vote rejected six days ago! Naturally, this has set the stage for massive internal turmoil in Greece. Heavyweights of Syriza, parliament speaker Zoi Konstantopoulou and energy minister Panagiotis Lafazanis, and 15 other members either voted against the plan, abstained or were absent from the vote. Another 15 Syriza members of parliament said they also opposed the proposed measures and could reject them in future votes even though they supported prime minister Alexis Tsipras and his template of borrowed proposals. With breath-taking cynicism, the Syriza leader has presented this direct repudiation of the will of the Greek people as a “triumph of democracy”. Who is this man Tsipras working for?

The newest alumnus of the Transatlantic School of Austerity and Misery, with a special interest in 'haircuts'

The newest alumnus of the Transatlantic School of Austerity and Misery, with a special interest in ‘haircuts’

Beyond the beggaring calculations made by the economists and financiers of the Troika and the ahistorical stubbornness of the Berlin-Paris ruling cliques who will still not deviate from their ‘austerity’ prescription, is the legitimacy of Greece’s claim to autonomy. “Autonomy, the willingness and capacity to question and change our collective laws, is a universal principle and one that should be at the heart of the European project,” writes Giorgos Kallis. “Greece’s disobedience to the rule of the markets is a universalistic call for reclaiming democracy for all Europe, not a particularist protection of its own backyard. This is not a demand for the rest of Europe to obey to Greece’s will, but a plea to listen, reflect and genuinely co-decide.” Ah but Berlin cannot abide any other will than its own.

It is finanzpolitik, or perhaps the political economy of occupation by austerity. Whatever it is called in Eurolingua it has proved politically effective for European elites in general to present the Greek problem as their own debt problem. Doing so has provided a powerful ideological and moral justification for the brutal austerity policies prescribed to the countries of the European ‘periphery’ (and especially Greece) in recent years. And so, as Thomas Fazi has narrated, Euro-leaders’ “deeply moral interpretation of the euro crisis – which pitted the profligate, debt-ridden wrongdoers of the periphery against the virtuous, responsible countries of the core – rapidly became conventional wisdom among European politicians, commentators and bureaucrats”.

On Sunday 5 July 2015 Europe was shown to be imprisoned by its institutions. But the people of Greece chose with dignity and in solidarity to expose the prison, and walk away.

The landslide ‘no’ (or OXI) vote in the 5 July referendum on austerity in Greece is an overwhelming repudiation of the European Union and the austerity agenda pursued all over Europe since the 2008 economic crisis. The weapon of austerity is the euro, and it works by wiping out genuine economic and social progress through productive systems composed largely of small and medium enterprises, because this weapon pries open these local ‘markets’ (a despised term) to raids by financial monopolies.

RG_greece_20150710_gr3Such raids have the sanction of the International Monetary Fund, the European Commission, and the European Central Bank – together known as the troika which has waged war on the Greeks. The troika has waged such war as punishment (in the words of European politicians such as Angela Merkel, Francois Hollande, Martin Schulz, Wolfgang Schäuble and David Cameron) to the Greeks for their own failed design of the Euro in a system that is economically unsustainable and socially perverse.

“Shame on all those who have accepted the idea that the troika represents the European peoples,” wrote Samir Amin. “Shame on the governments that have installed in the presidency of ‘their Europe’ a Luxembourgian functionary in the service of a tax haven; installed in the management of ‘their central bank’ a character who made a career at Goldman Sachs, the bank associated with all the financial villainies of the century.”

RG_greece_20150710_gr1The ‘OXI’ (no) in the referendum means the Greeks voted for a socially just distribution of the burdens for the sustainable reforms necessary in their country to fight corruption and nepotism. They voted for sustainable reconstruction and growth of their economic structures, to reduce military spending and for mandatory negotiations on debt restructuring. Those who so voted on 5 July were 61.3% of the Greek people, drawn largely from the working class and poorer layers of the population.

But what happens now?

There is not much belief that the Syriza government will fulfil the ‘no’ vote mandate and bring austerity to an end. Reportage via independent media say that most people fear there will be new austerity measures, which the mass of the population can no longer take.

RG_greece_20150710_gr2Should the Greek Parliament approve talks on the new proposal (it may be acceptable to the Eurozone’s negotiators but has will still have to be approved by the European Parliament) there will be a short period during which the people of Greece will reflect on what is being done. They may decide to tolerate more ‘negotiation’, or not. They could rise up against a government that has gone back on its promises and disregarded their will as expressed in the referendum.

On the other hand Germany will balk at offering any debt relief. The European financial press (such as it is) is carrying reports that a section of German capitalist strategists are calculating that it is now cheaper to kick Greece out of the euro (provide a ‘humanitarian relief aid’ dollop) than continue to negotiate a formal bailout. A French publication reported that the Greek negotiation team was asked by Schäuble, “how much money do you want to leave the euro”, underlining how execrable the Euro political class has become.

These have been disastrous times for people in Greece. Salaries have been cut by half, taxes have increased eight times (not by 8% or 80% but eight times more), there are 1.5 million people unemployed and that is a full third of the working class, those who have jobs have often not been paid in weeks or months. There is misery and 60 euros as pension for those who can find 60 euros to draw out, but the Greeks want to their overthrow of austerity to be historic and permanent.

Poverty is a new market for management firms

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The Rs 1,336 proposed by McKinsey will neither help run this household nor provide any 'empowerment'.

The Rs 1,336 proposed by McKinsey will neither help run this household in rural Karnataka nor provide any ’empowerment’. The family’s entrepreneurship, running a cooked food stall in a part of the house, keeps it comfortably above the poverty line.

There is a new contributor to an old subject in India. The subject is poverty, and the newcomer is a management consulting company. This sort of company has no experience with such a subject, however the McKinsey Global Institute – which works as “the research arm of consulting company McKinsey” – has not been short of advisers on the matter.

What does this consulting company say and why should we keep an eye on their activity in this subject? This institute has issued a report called ‘From poverty to empowerment: India’s imperative for jobs, growth and effective basic services’. The proposal, unabashedly touted as new thinking, is that India should focus not on a poverty line but on a “more comprehensive measure of what it would take to satisfy a person’s basic needs for food, energy, housing, drinking water, sanitation, healthcare, schooling and social security”.

This new thinking – presented as a startling innovation in the same way that a new brand of running shoes or some such frippery is launched – is called an “empowerment line”. This ‘line’ has been placed at Rs 1,336 rupees a month – which McKinsey points out is about 50% higher than the national official poverty line.

McKinsey_India_poverty_coverWhat is sought to be fixed at the bidding of the current government of India and at what cost? This new report by the McKinsey Global Institute suggests that Rs 330,000 crore should be spent over the next 10 years to “empower 680 million Indians who are only marginally better than those under the poverty line”. And moreover that this spending be increased to reach 1.08 million crore by 2022 because “the government’s spending on various development schemes” does not “effectively reach much of the public”. At current rates of exchange, that is US$ 173 billion and what handsome percentage of that will be marked (or unmarked) as consultants’ fees?

Likewise, we must also examine those who have provided, as McKinsey has said, “insights and guidance” for this work. Among those listed are Subir Gokarn, director of research of Brookings India and former deputy governor of the Reserve Bank of India; Vijay Kelkar, chairman of the India Development Foundation, former chairman of India’s Finance Commission, and former finance secretary, Government of India; Montek Singh Ahluwalia, deputy chairman of the Planning Commission of India; Arun Maira and B K Chaturvedi, members of the Planning Commission of India; Rakesh Mohan, India’s executive director at the International Monetary Fund; Nandan Nilekani, chairman, Unique Identification Authority of India; S Ramadorai, adviser to the Prime Minister, National Council on Skill Development; and Soli Sorabjee, former attorney-general of India.

Disconnected entirely from the dynamics of district livelihoods and factors that influence income and well-being, consulting companies such as McKinsey must not continue to be engaged by central and state governments in any capacity.

Disconnected entirely from the dynamics of district livelihoods and factors that influence income and well-being, consulting companies such as McKinsey must not continue to be engaged by central and state governments in any capacity.

These people are votaries of the thesis that GDP growth is good, and that all policy must conform to such a doctrine. Hence it becomes easier to see the connection between the direction that the UPA 1 and UPA 2 governments have taken till here, and the firm grip finance and industry have on the country’s journey into ‘development’, aided by the outpourings of management consulting companies such as McKinsey. This ‘empowerment index’ is nothing but a repetition of the desire that over the period 2010-20, urban India must create 70% of all new jobs in India and these urban jobs will be twice as productive as equivalent jobs in the rural sector, as stated in ‘India’s Urban Awakening: Building Inclusive Cities, Sustaining Economic Growth’, a report by the McKinsey Global Institute issued in early 2010.

The expectation is that as India’s cities expand, India’s economic profile will also change. In 1995, India’s GDP was divided almost evenly between its urban and rural economies. In 2008, urban GDP accounted for 58% of overall GDP. By 2030, according to the McKinsey report’s calculations, urban India will generate nearly 70% of India’s GDP. Such a transformation, if it comes to pass, is expected to deliver a steep increase in India’s per capita income between now and 2030 wherein the number of middle class households (earning between Rs 2 lakh and Rs 10 lakh a year) will increase from 32 million to 147 million. And it is against the drawing of that alarming line of minimum urbanisation drawn four years earlier, that this new line must be viewed, together with the injunction that “India can bring more than 90 percent of its people above the Empowerment Line in just a decade by implementing inclusive reforms”.

Finally some good news from the IMF

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The Dalai Lama at the IMF? Not at all, but we think he would like the IMF's new de-growth manifesto and would be delighted if all macro-economists turned vegetarian. Photo: Courtesy the official website of His Holiness The 14th Dalai Lama of Tibet

The Dalai Lama at the IMF? Not at all, but we think he would like the IMF’s new de-growth manifesto and would be delighted if all macro-economists turned vegetarian. Photo: Courtesy the official website of His Holiness The 14th Dalai Lama of Tibet <http://www.dalailama.com/&gt;

The first signs of the long-awaited change in thinking at the International Monetary Fund (IMF) can now be seen in the World Economic Outlook report. This routine blatherfest, which is issued by the IMF’s slick-but-barmy public relations department, is unremarkable on every occasion and the only reason you’d want to punish yourself by plodding through the 500-odd pages of this ode to deforestation is to admire the very latest chic for presenting boring graphs and charts. But this time, it’s as if a Buddhist rinpoche has edited the manuscript.

What’s changed and why? For the year 2013 the IMF has said that ‘global output’ (output of what, you may well ask, but do hold your horses) to expand 2.9% instead of the 3.1% it had, in an unsporting manner, forecast this July. Between that monsoon month and this one some heads must’ve rolled at the IMF (many more to follow suit I hope) because now the IMF has taken a firm long stride towards its manifest destiny: bringing about the no-growth economy.

However, some die-hard lumpens are still doing their best to rally growth insurrectionists to their tattered flag. They are still making announcements like “our analysis attributes the slowdown in part to cyclical forces, including softer external demand and in part to structural bottlenecks” and are wondering why “this has happened in spite of supportive domestic macroeconomic policies, (still) favorable terms of trade, and easy financing conditions, which only began to tighten recently” but confess to being bemused by “a non-trivial portion of the slowdown remains unexplained, suggesting that other factors common to emerging markets are at play”.

Not to worry, these radical elements will soon be overwhelmed, rounded up, their iPads and Nasdaq terminals will be confiscated and they will be issued the standard entry level rations of organically grown tulsi tea, second-hand kolhapuri sandals (‘chappals‘ to the initiated) and Indian khadi kurtas.

All you ever wanted to know about excel charts but were afraid to ask. I have suggested to our IMF comrades that they rename the 'current slowdown' bubble 'the fish'n'chips crisis'.

All you ever wanted to know about excel charts but were afraid to ask. I have suggested to our IMF comrades that they rename the ‘current slowdown’ bubble ‘the fish’n’chips crisis’.

Nonetheless, I will be the first to admit that their ideologues present quite a different challenge. You can see for yourself how difficult it is going to be to dislodge some of the rebel ideologues from an IMF that has already, in rank and file, enthusiastically redefined odious growth to in fact mean none at all. This soporific video will help you judge. I couldn’t get beyond 00:07 of the footage before falling over with acute narcosis, but perhaps you are made of sterner stuff.

Likewise, one of the leading rebel subcomandantes is broadcasting a steady tattoo of counter-revolutionary propaganda. She has been recorded as saying “changing global growth constellations have exacerbated risks in emerging market economies” and that “monetary policy accommodation combined with domestic vulnerabilities in emerging market economies may lead to further market adjustment globally” and even threatening “risks of asset price overshooting or even balance of payments disruptions”.

It is only a matter of time before this resistance is overcome. Meanwhile, I would be remiss in my duties as a degrowth advocate along the inspiring lines now redrawn by IMF if I did not remind these recalcitrants that Chairman Mao had said “A revolution is not a dinner partyy” or that Muammar Gaddafi had written (the Green Book, naturally) that “Mandatory education is a coercive education that suppresses freedom. To impose specific teaching materials is a dictatorial act” and that General Vo Nguyen Giap had when confronting the enemy firmly said “Their morale is lower than the grass”.

Finally, intelligence reports just in have confirmed that the conclusion of the IMF’s revolutionary new no-growth tract, which reads “a new round of structural reforms is a must for many emerging market economies, including investment in infrastructure, to reignite potential growth” is in fact a printer’s devil.

Of German wurst, French fries and an IMF bullet

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A closed chips stall called 'La Reine des Fritures' ('The Queen of French Fries') in French Flanders. Photo: Stephan Vanfleteren / Panos Pictures

Le Monde Diplomatique, that fearless critic of globalisation and the tyranny of the multilateral lending institutions, has said in its 2011 December issue that in November, the Franco-German directorate of the European Union, the European Central Bank and the International Monetary Fundthe ‘troika’ — were furious when the Greek prime minister, George Papandreou, announced plans to hold a referendum.

Absolute oligarchs dislike referendums because the idea has a great deal to do with consultation – not a favourite subject for the IMF in the 67 years it has claimed to shape the global economy. That is why, summoned to Cannes for an interview during a summit that his country was too small to attend, kept waiting, and publicly upbraided by Angela Merkel and Nicolas Sarkozy (who were responsible for exacerbating the crisis), Papandreou was forced to abandon the plan for a referendum and resign. His successor, a former vice-president of the ECB, promptly decided to include in the Athens government a far-right organisation banned since the Greek colonels lost power in 1974.

In ‘Europe in crisis, rule by troika’, Serge Halimi has written in LMD that the European project was supposed to secure prosperity, strengthen democracy in states formerly ruled by juntas (Greece, Spain, Portugal), and defuse “nationalism as a source of war”. But it is having the opposite effect, with drastic cuts, puppet governments at the call of the brokers, and renewed strife between nations. Everything, in short, that the IMF and the World Bank have pursued since 1944 mostly successfully in Asia, Africa and South America.

Former bankers Lucas Papademos and Mario Monti have taken over in Athens and Rome, exploiting the threat of bankruptcy and the fear of chaos. They are not apolitical technicians but men of the right, members of the Trilateral Commission that blamed western societies for being too democratic. “Having crushed Greece and Italy, the EU and the IMF have now set their sights on Hungary and Spain,” Halimi has written, and it is a grim warning.

A ferris wheel runs in the centre of Brussels next to an old building advertising Martini and Zanussi. Photo: Stephan Vanfleteren / Panos Pictures

Red Pepper has more on the ways and means of the IMF.

“It’s stripped millions of people of their livelihoods, but the global economic crisis has brought one institution back from the dead: the International Monetary Fund. Two years ago, the IMF looked to be on its last legs. It had got to the stage where nobody wanted to borrow its money. Many developing countries started accumulating reserves to avoid ever having to go to the IMF loan shark. Developed countries in trouble would go just about anywhere – China, Russia, Saudi Arabia – to avoid the IMF.”

Then came the meltdown. “The IMF failed to see it coming – pretty damning for a body supposed to oversee global financial stability – but bankrupt countries suddenly had no choice but to come begging.” Exactly the point – the IMF did see it coming because this is what its prescriptions for the previous decade were aimed at in the first place. In April last year, the G20 pumped the organisation with £330 billion of new funds. Uruguayan writer Eduardo Galeano called the decision ‘black humour’, saying it would ‘rub salt in the wound’ of countries hit by a crisis they did not create. The IMF is now re-armed and doubly dangerous, with large new areas in what was formerly the Eurozone to subjugate.

Not quietly by any means. After all, the Greeks are Greeks first and then, perhaps, Europeans. Ditto with the Italians, Portuguese, Hungarians, Spaniards and Latvians. It is looking rather like the Germans and the French (elite, mind you, not the labour, the unemployed, the migrants and the armies of informal workers struggling on 25 euros a day) are the last Europeans left.

But this is why major protests have been convulsing Greece throughout the autumn with strikes, and occupations of the main squares in many towns. Civil servants blockaded their ministries, preventing ministers from accessing their departments in September and October. The early November surprise announcement of a popular referendum in Greece on the EU-IMF loan terms and conditions would have marked the first time an IMF lending package was subjected to a test of popular ownership. In the end the political pressure heaped on the Greek prime minister by other European countries, the Greek political opposition and factions from within his own government forced him to back down and resign as prime minister.

After the collapse of the Greek government, Elena Papadopoulou of the Athens-based Nicos Poulantzas Institute said: “Despite the proclaimed enthusiasm, there is no realistic reason to believe that the new coalition government – with the participation of the extreme right – will follow anything other than the socially destructive policies applied according to IMF recipes with the agreement of the European elites.”

The carefully constructed mirage of the ‘green economy’

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Not a week goes by nowadays without one high-profile institution or high-powered interest group directing us all to be part of the ‘new, green economy’. That’s where the next jobs are, where innovation is, where the next wave of financing is headed, where the best social entrepreneurship lies. There are the big inter-governmental organisations telling us this: United Nations Environment Program, UNCTAD, OECD, International Energy Agency, the big international lending agencies like the World Bank and Asian Development Bank. There are big think-tanks telling us the same thing – backed up by hefty new reports that are boring to read but whose plethora of whiz-bang charts are colourful. There are big companies, multinationals and those amongst the Fortune 500, also evangelising the new green economy and patting themselves on the back for being clean and green and so very responsible.

Artisanal blacksmith and his family, Maharashtra, India

What on earth are they all talking about? Does it have to do with us average, salaried, harassed, commuting, tax-paying types who are struggling with food inflation and fuel cost hikes and mortgages and loans that break our backs? Are they talking to our governments and our municipalities, who are worried about their budgets and their projects and their jobs too?

Here are a few answers from working class Asia. Let’s start with restating a couple of trendlines. One, the era of growth in the West is over. Growth is Asia is what is keeping the MNCs and their investors and bankers and consultants interested, and this means China and India (also Brazil, Russia, South Africa, Indonesia). Two, the environmental consciousness which began in the 1970s to spread quickly in the West led to many good laws being framed and passed. These were responses to the industrial and services growth in the Western economies. As globalisation took hold, people in less industrialised countries – ordinary citizens – saw what had happened in the West and learnt from their experiences with industrialisation. Green movements took root all over Asia and South America, protests were common, confrontations just as much, and global capital found itself being questioned again, even more fiercely.

These are the two major trends. The forces of production want to move much further into what used to be the ‘developing’ world, but want to meet much less resistance. That’s why they appeal to the consumer minds of China, India and the other target countries – you need jobs, homes, nice cars, big TVs, cool vacations, credit, aspirations, and lifestyle is what the messages say, whether they’re from telecom companies or condominium salesmen. But it’s hard to market all this stuff – real stuff, virtual stuff – to people who are still struggling to make ends meet.

This was after all the old 'green economy'. A late 19th century painting in a maritime museum near Mumbai, India

That’s where the ‘new, green economy’ tagline and its earnest-sounding philosophy comes in. “The main challenges to jump-starting the shift to a green economy lie in how to further improve these techniques, adapt them to specific local and sectoral needs, scale up the applications so as to bring down significantly their costs, and provide incentives and mechanisms that will facilitate their diffusion and knowledge-sharing,” said one of these recent reports. Look at the text which contains all the right buzzwords – ‘scale up’, ‘jump-start’, ‘applications’ (that’s a favourite), ‘knowledge-sharing’, ‘local’.

This makes the ‘old economy’ sound good but changes nothing substantial on the ground, or on the factory shopfloor or for the tens of thousands of little manufacturing units that do small piecework jobs for the bigger corporations up the chain. The world’s business philosophy has changed drastically even without the impact of environment and energy. To drive home this point, it has been a long time since we heard anything like ‘industrial relations’, and that alone should tell us how far the dominance of capital has reached, when labour, whose organisation gave the West its stellar growth rates in the 1960s and 1970s, has now become all but ignored. This is because the dominant interests associated with capital have insisted, successfully for investors and for pliant governments, that the manufacturing firms break loose from the industrial relations moorings they had established. The restructuring of firms to emphasise leaner and meaner forms of competition – as the ruthless management gurus and greedy consulting agencies instructed – was in line with market pressures that are viewed by the powers-that-be as crucial to the revitalisation of the economy.

Read their greenwash carefully and the control levers are revealed. “Further innovation and scaling up are also needed to drive down unit costs. Technologies will need to be ‘transferred’ and made accessible, since most innovation takes place in the developed countries and private corporations in those countries are the main owners of the intellectual property rights covering most green technologies.” So says ‘World Economic and Social Survey 2011: The Great Green Technological Transformation’ (UNESCO, Department of Economic and Social Affairs). Rights and access are built in from the start, as you can see.

And yet it is this very system of production, of the arrangement of capital and of the effort to weaken working regulations that is now talking about the ‘green economy’. Why do they even imagine we should believe them? They are the ones who have remained locked into the fossil fuel economy and who have partnered the enormous influence of the finance markets, who have followed every micro-second of the way the dictates of capital flows and what the market investors want in their endless quest for greater profits in ever-shorter cycles of production. For the major business of the world, ‘green economy’ is yet another route to super-profits and the consolidation of both forces of production and masses of consumers. The difference between now and the 1970s is that today they are able to successfully enlist the apparently authoritative inter-governmental organisations with their armies of economists and social scientists and engineers, to support this new profiteering. Only now, the cost is planetary.

The IMF, its directeur général, and a New York hotel maid

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Friday afternoon, South Asia

"Do you really think I've nothing better to do?"

The business zine ‘Emerging Markets’ has reported that French finance minister Christine Lagarde “has emerged as the frontrunner to succeed Dominique Strauss-Kahn as IMF chief as the chances of former Turkish politician Kemal Dervis receded”. Apparently, there were hopes that Kemal Dervis would become the first emerging market politician to head the IMF, but these have faded Lagarde emerged as frontrunner to succeed DSK.

The zine has said that “senior policy officials” consulted by it said they were backing the French finance minister (pic left) in the wake of Strauss-Kahn’s dramatic resignation. A key ally of former Turkish economy minister Kemal Dervis, a leading contender for the role, acknowledged that his chances of clinching the top job had receded.

Asked whether Dervis woud become managing director Homi Kharas, a deputy to the former Turkish finance minister now at the Brookings Institution in Washington, told Emerging Markets: “Unfortunately I think it’s unlikely.” He said Lagarde’s appointment could undermine the IMF’s legitimacy if her candidacy is secured solely through a political deal among rich nations. “Major countries at the end of the day are prepared to forgo the principle of technocratic appointments for the short term expediency of having a politically trusted friend and that seems to be the way that the world is currently governed.”

The result will be a revolt against the Fund by developing countries, he added. “What we will see from the emerging nations is that they will vote with their feet. “Developing nations can make [international financial institutions] less relevant as global institutions and restrict them to being essentially institutions that play in the arena of the spheres of influence of the rich countries. That is what is happening more and more.”

Wednesday evening, South Asia

The IMF is obviously very slow to learn, or chooses not to, or has jettisoned Strauss-Kahn. Following its first bland, utterly non-committal and quite unconcerned statement about l’affaire DSK, it has come out with a second which, if possible, bests the first at idiocy in the face of a massive loss of moral face.

Here is the statement:

The IMF logo seen during a news conference in Bucharest, March 2009. Photo: Reuters/Bogdan Cristel/Files

“The following can be attributed to William Murray, an IMF spokesman, in response to questions regarding contact with the Managing Director and on speculation in media about his status: ‘We have not had contact with the Managing Director since his arrest in New York. Obviously, it will be important to be in contact with him in due course. We are aware of widespread speculation about the Managing Director’s status. We have no comment on this speculation, other than to note, as we did earlier this week, that the Executive Board was briefed informally on developments regarding his arrest in New York. We continue to monitor developments. Meanwhile, Mr. John Lipsky remains acting Managing Director, and the Fund continues its normal work’.”

This sounds a lot like the IMF is saying – “well it’s just one of those things, let’s just say not very much out of the ordinary is happening and let’s assure you that we’re still doing what we do best, which is wreck the lives of people in developing countries”.

Under Francois Mitterrand, Strauss-Kahn served as a minister, then became a corporate lobbyist in the 1990s. As finance minister in the 1997-2002 Jospin “Plural Left” government, Strauss-Kahn privatized several public firms—France Télécom, Crédit Lyonnais bank, and defense firm Thomson-CSF. After resigning as minister in 1999 in a bribery scandal, he remained a major figure inside the PS and corporate circles, taking the IMF post after being nominated by Sarkozy in 2007.

As IMF chief, he has overseen deep social cuts impoverishing workers in many indebted countries—Greece, Ireland, Latvia, Hungary, Romania, and Pakistan—in exchange for IMF loans. He recently oversaw financial negotiations with the military dictatorship in Egypt, as it tries to combat the resistance of the working class following the departure of Hosni Mubarak.

Zhu Min, Group Executive Vice-President, Bank of China, speaks during a session at the World Economic Forum Annual Meeting of the New Champions in Tianjin, China 28 September 2008. Photo: World Economic Forum

The ‘Letter from China’ blog in The New Yorker points to some of the turmoil over leadership of the IMF, and what is slowly being seen as Asian pressure over what has so far been Western dominance of the Fund and Bank senior positions.

As pressure builds on Strauss-Kahn, said the blog, today’s Huanqiu Shibao is decidedly less cautious: “If a Chinese person takes the post”—of managing director—“it will greatly promote economic exchange between China—the country with the largest trade volume and holdings of foreign reserves—and the international community.” Another Huanqiu article referred to speculation in the Western press that China’s top official at the IMF, Zhu Min, a Johns Hopkins-and-Princeton-trained economist, is among the oft-mentioned candidates. The story concluded gloomily that Western reports generally see Zhu as insufficiently experienced, and likely to reach only a deputy managing director “this time, in part because “Europe and America will oppose the appointment of a Chinese person to lead the IMF.”

Monday evening, South Asia

Dominique Strauss-Kahn, head of the International Monetary Fund, is lead from a police station Sunday, May 15, 2011 in New York where he was being held. Photo: AP

In Europe and in the multilateral financial institutions, positions are cautiously being taken over the Strauss-Kahn case. So far, the Euromedia has focused a great deal on the effect l’affaire DSK is having on the French presidential election and the challenge to Sarkozy. But what about the IMF and World Bank? Silence. What about the men and women who run these enormously powerful and influential organisations – what do they have to say about this case and its reflection on their collective values? More silence.

We have heard from The Economist, which has long been a staunch ally of the Fund and the Bank. “Whatever the fall-out on French politics, Mr Strauss-Kahn’s arrest has left the IMF reeling. One insider called it a ‘disaster’,” the commentary noted. “Although he had been expected to leave within a couple of months, Mr Strauss-Kahn, unless quickly exonerated, will now presumably be forced out far sooner. That leaves the fund without a political heavyweight at the top in the midst of important negotiations with European policymakers over Greece’s debt crisis.”

What is noteworthy is the ways in which these institutions are discussed by the biggies of global and international economics. Only 10 days ago, Joseph E Stiglitz is University Professor at Columbia University, a Nobel laureate in Economics, and the author of ‘Freefall: Free Markets and the Sinking of the Global Economy’, had this to say about the IMF and DSK.

“For progressives, these abysmal facts [growing inequality, recession, unemployment] are part of the standard litany of frustration and justified outrage,” wrote Stiglitz. “What is new is that the IMF has joined the chorus. As Strauss-Kahn concluded in his speech to the Brookings Institution shortly before the Fund’s recent meeting: ‘Ultimately, employment and equity are building blocks of economic stability and prosperity, of political stability and peace. This goes to the heart of the IMF’s mandate. It must be placed at the heart of the policy agenda.’ Strauss-Kahn is proving himself a sagacious leader of the IMF. We can only hope that governments and financial markets heed his words.”

I really wonder what Prof Stiglitz thinks of his encomiums now. Reality outside the cozy models of macroeconomics can be startlingly, starkly different.

Sunday evening, South Asia

Le Nouvel Observateur's website on Sunday was entirely Strauss-Kahn.

The Sunday lurched on about L’affaire DSK and in my view the most confused reactions have come from the media in France. They seem confused about what they ought to feel and say. There are some responses concerning the blow to the honour and prestige of France dealt by the sordid allegations, but there is also a sense of bemoaning the end of a challenger to Sarkozy, and quite a few mutterings that this is a dreadful plot to trap Strauss-Kahn.

Here is a selection of the reaction and early views on the impact of L’affaire DSK.

Euronews has reported that lawyers for Dominique Strauss-Kahn, the head of the International Monetary Fund, said on Sunday that their client will plead not guilty to accusations of trying to rape a maid at a New York hotel. “A spokesman for the New York Police Department said Strauss-Kahn faces charges of a criminal sexual act, attempted rape and unlawful imprisonment. The IMF chief does not have diplomatic immunity and was set to appear in court later on Sunday.”

Business Insider has quite bluntly said that ‘IMF Throws Dominique Strauss-Kahn Under The Bus’. “The IMF is not exactly standing up for the man,” they wrote, referring to the bland and shifty IMF statement issued today. “The IMF has already had to investigate and apologize for one Strauss-Kahn sex scandal (an affair with a subordinate). Strauss-Kahn survived that one, after apologizing publicly to the IMF and his wife. His surviving this one, at least with his job intact, seems unlikely.”

The New York Times has pronounced in a headline, ‘Arrest Throws French Politics Into Disarray’. This is hardly so. What has thrown France and its suffering workers into disarray is not such conduct, but the imperial ambitions of Sarkozy in Africa and his government’s ramshackle social spending at home. “For months, France has been buzzing with speculation that Dominique Strauss-Kahn, the popular chief of the International Monetary Fund, would quit his job in Washington to take on President Nicolas Sarkozy in next year’s presidential elections,” the NYT said. “On Sunday, French politicians and media met news of his arrest in New York for alleged sexual aggression with stunned disbelief and expressions of national humiliation. The incident threw Mr. Strauss-Kahn’s political party, the Socialists, into confusion and set the stage for a new political calculus that could allow the National Front, the far-right party led by its founder’s daughter, Marine Le Pen, to become a more dominant force during the election campaign.”

The Guardian has got to the point. “The allegations threaten to severely damage the standing of the IMF, where Strauss-Kahn was leading the response to the global financial crisis.” The newspaper reported that Strauss-Kahn had been on his way to Europe to discuss the worsening European debt crisis. A meeting in Berlin with Angela Merkel scheduled for Sunday has been cancelled. He was also scheduled to meet European financial ministers on Monday and Tuesday and was to have discussed how best to tackle Greece’s debt crisis and finalise Portugal’s €78bn bailout package. The British newspaper also provided the information that the Sofitel hotel in New York where Strauss-Kahn was staying is in the heart of the theatre district, and he had a US$3,000 (£1,850) a night suite.

In Paris, France Soir asked in disbelief: “Accusé d’agression sexuelle, DSK est-il victime d’un complot? DSK est-il victime d’un complot, d’une manipulation? Quelques heures après le coup de tonnerre et l’annonce de l’arrestation du patron du FMI, les déclarations en ce sens sont de plus en plus nombreuses.” Melodrama apart, what this means is that France Soir has said that Strauss-Kahn could well be the ‘victim of a conspiracy’ and the ‘target of manipulation’.

A more bizarre response has come from Liberation, which usually seems to have its finger on the pulse of things. “Pour 2012, DSK semblait le mieux armé pour répondre au désarroi des Français, épuisés par la crise et désorientés par le règne foutraque de Sarkozy: l’expérience internationale, la crédibilité de l’économiste, la fibre sociale, le savoir-faire d’un négociateur hors pair leur laissaient penser qu’il saurait mieux que tout autre défendre leurs intérêts et ceux de la France.”

Roughly translated, this means: “For 2012, DSK seemed best equipped to respond to the distress of the French, who are exhausted by the financial and social crisis and disoriented in the reign of Sarkozy. With his international experience, the credibility of being an economist, his knowledge of the social fabric and negotiating skills left them thinking that he would defend their interests and those of France.” What exactly is Liberation talking about? Perhaps it’s not a good idea to get their writers to consider anything serious on a Sunday morning.

The New York Daily News on the IMF head

[Earlier post] It’s too early to tell the whys and wherefores, but here’s a small selection of reportage about the astounding Strauss-Kahn incident. The French media have lots to say too, since the IMF head is/was expected to run for president of France.

Update: The IMF has released a very short statement on the bizarre affair. Here is the text from the IMF website:

Ms. Caroline Atkinson, Director of External Relations at the International Monetary Fund (IMF), issued the following statement today: “IMF Managing Director Strauss-Kahn was arrested in New York City. Mr. Strauss-Kahn has retained legal counsel, and the IMF has no comment on the case; all inquiries will be referred to his personal lawyer and to the local authorities. The IMF remains fully functioning and operational.”

The Boston GlobeThe head of the International Monetary Fund was taken into custody and accused of a sexual assault yesterday, just before he was to fly to Paris from John F. Kennedy International Airport, authorities said. Dominique Strauss-Kahn was accused of attacking a maid earlier in the day at a Times Square hotel, authorities said.

WNYC News Blog – NYPD Deputy Commissioner Paul Browne confirmed that Strauss-Kahn, the 62-year-old managing director of the International Monetary Fund, was being questioned by detectives from Manhattan’s Special Victims unit about an alleged sexual assault said to have taken place around 1 p.m. Saturday at the Sofitel Hotel. “The 32-year-old maid reported that Strauss-Kahn emerged from the bathroom naked and sexually assaulted her,” said Browne.

Update: Al Jazeera has carried a brief and generally unflattering profile of the IMF head. It has called him an architect of France’s economic recovery in the late 1990s, Strauss-Kahn, popularly known in France as “DSK”, served in a Socialist government as finance minister between 1997 and 1999. He cut the public deficit to qualify France for the euro and took steps that led to the privatisation of some state firms.

The profile has said that Strauss-Kahn, 62, was forced to resign from Socialist prime minister Lionel Jospin’s government in 1999, after he was caught up in a corruption scandal, but a court later cleared him. A former professor of economics at the Institut d’Etudes Politiques de Paris, Strauss-Kahn has come in for criticism over his luxurious style, seen by some as inappropriate for someone who wants to become the leader of the French left. Despite being based in Washington, he has continued to spend a lot of time in France, and the New York Post newspaper reported that he had a deal with Air France to get on any flight. New York police pulled him off a Paris-bound flight on Sunday night.

Some early reactions from the press in France:

Dominique Strauss-Kahn, popularly known in France as 'DSK', served in a Socialist government as finance minister between 1997 and 1999. He cut the public deficit to qualify France for the euro and took steps that led to the privatisation of some state firms. Photo: Al Jazeera/AFP

Le Parisien – En Direct.  DSK arrêté à New York pour “tentative de viol” présumée – Dominique Strauss-Kahn était venu au siège du Parisien-Aujourd’hui en France pour y rencontrer des lecteurs. Le patron du FMI et favori des sondages pour la présidentielle 2012 en France.

Le Monde – Le directeur général du Fonds monétaire international (FMI), Dominique Strauss-Kahn, a été arrêté samedi 14 mai à l’aéroport JFK de New York et placé en garde à vue pour une agression sexuelle présumée dans un hôtel de la ville.

RTL.fr – Le mot utilisé et qui fait parler tout Internet est “sodomy”, qui signifie avant tout “agression sexuelle”. Le directeur général du FMI, Dominique Strauss-Kahn, 62 ans, a été placé en garde à vue samedi à l’aéroport JFK, à New York, où il est interrogé.

nouvelobs.com – Le directeur général de l’institution avait fait l’objet d’une enquête concernant une liaison qu’il avait eu avec une subordonnée. Le directeur général du FMI Dominique Strauss-Kahn, arrêté samedi à New York suite à des accusations d’agression sexuelle.

Le Monde – L’arrestation samedi 14 mai à New York de Dominique Strauss-Kahn, accusé d’agression sexuelle, pourrait donner un coup d’arrêt à la potentielle candidature à la primaire socialiste pour la présidentielle de 2012 du directeur général du FMI.

It looks very like prescience for, on 6 April, Bretton Woods Project published an article titled, ‘Heading for the right choice? A professional approach to selecting the IMF boss’. This said: “In 2009, the IMF agreed to ‘adopt an open, merit-based and transparent process for the selection of IMF management’. It was a commitment that was long overdue. The informal ‘gentlemen’s agreement’ made at the end of World War II that European governments could select the head of the IMF so long as the US got to choose the World Bank boss had long been regarded as outdated and illegitimate.”

The impression that the rich governments which have run the IMF have dragged their heels on this enormously important issue is hard to avoid. “It matters who the head of the IMF is, and it matters how they are chosen. It matters for the legitimacy of an organisation that, through the stringent conditions often attached to its loans, has a powerful hand in economic policy making – and hence politics – in many countries, particularly poorer ones.”

I am sure that those who have long been calling for IMF reform will be wondering about this week-end’s events concerning Strauss-Kahn. They are: ActionAid, Afrodad, Bond, Bretton Woods Project, Cafod, CRBM, Christian Aid, CIDSE, 11.11.11. Halifax Initiative, Eurodad, Jubilee Debt Campaign, Forum Syd, New Rules for Global Finance, The Norwegian Forum for Environment and Development, Oxfam, The Social Justice Committee of Montreal, SLUG, WDM, TWN and Weed.

The climb to food price peak in two charts

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These charts describe the 12-month rise in two indices: FAO’s Food Price Index, whose all-time high is the cause for so much alarm, and the IMF’s commodity index for food, which is less often referred to for food price burden impacts, but is no less important.

The FAO Food Price Index, comparative rise over 12 months for 2010 Feb to 2011 Jan and for 2007 Jul to 2008 Jun.

The FAO Food Price Index, comparative rise over 12 months for 2010 Feb to 2011 Jan and for 2007 Jul to 2008 Jun.

We see the index movements until the 2008 peak and the current peak of the FAO index and of the IMF food index (below). Over a year’s rise they are similar, but the worrying factor is the base for the 2010-11 rise, which is higher in both.

The IMF Commodity (Food) Price Index, comparative rise over 12 months for 2010 Feb to 2011 Jan and for 2007 Jul to 2008 Jun.

The IMF Commodity (Food) Price Index, comparative rise over 12 months for 2010 Feb to 2011 Jan and for 2007 Jul to 2008 Jun.

Written by makanaka

February 4, 2011 at 15:00

Gauging China’s influence on the world-IMF

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Salesperson in a textile shop in Beijing, China. Photo: IMF/Finance & Development

In an article in the International Monetary Fund magazine ‘F&D’ (Finance & Development), Vivek Arora and Athanasios Vamvakidis discuss the ramifications of China’s opening-up policy. They said that the effects are well documented but even so, “the facts are astonishing”. From relatively poor beginnings three decades ago, the authors have said, China’s economy is now second in size only to that of the United States of America.

“Real gross domestic product (GDP) has grown by about 10% annually, implying a doubling every seven to eight years. The resulting 16-fold increase in a major economy’s national income during a single generation is unprecedented.”

China’s opening up has meant increasing linkages with the rest of the world, as reflected in its rising share in world trade, global markets for selected goods, and capital flows. China’s stronger linkages with the global economy have also led to a growing use of its currency, the yuan, abroad, as well as closer correlation of market sentiment in China and the rest of Asia and, more recently, the world. China’s share in world trade has increased nearly tenfold over the past three decades, to about 9 percent, while its share in world GDP has risen to 13% from less than 3%.

“The increase in China’s share of world trade is particularly striking in the markets for certain products. China now accounts for nearly one-tenth of global demand for commodities and more than one-tenth of world exports of medium- and high-technology manufactured goods. China’s rising share in world trade over the past three decades is underpinned by a rise in its share in the external trade of every major region (chart). China’s share is, perhaps unsurprisingly, largest in the trade of other emerging Asian economies (13%), and this share has seen a striking increase over time. But its share of African trade is almost as large, and its share in trade with the Middle East, the Western Hemisphere, and Europe has increased several-fold in recent decades.”

To quantify the effects of China’s growth on the rest of the world, Arora and Vamvakidis conducted an empirical analysis using data from the past few decades (the details are to be found in the paper this article is based upon). Shifting to the longer term, they estimated the impact on the rest of the world of long-term changes in Chinese growth, smoothing over the short-term fluctuations associated with the typical business cycle and focusing on longer-term fluctuations. Their results, based on data for the past two decades, suggest that a 1 percentage point change in China’s growth sustained over five years is associated with a 0.4 percentage point change in growth in the rest of the world (coincidentally the same amount as for the short and medium term).

Written by makanaka

January 25, 2011 at 15:10

Spring fiction by the Bank-Fund troll

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Vendor at Mapusa market, Goa

"Bank? Fund? Do they have a clue about livelihood?"

Pay no attention to the announcements coming from the World Bank and the International Monetary Fund during what the troublesome twins call their ‘spring meetings’ of 2010 (an annual, very expensive, exercise in financial fiction, but an exercise which has disastrous consequences for many in developing countries). The global big media were inertly supportive, as usual, and had this to say:

Business Week: “The World Bank, created after World War II to eradicate poverty, received shareholder backing for two separate capital increases that will provide a combined $5.1 billion. The 186 member countries agreed to pay $3.5 billion for the bank’s unit that lends to governments, the first general increase in 22 years, the International Monetary Fund’s development committee said in a statement today.”

The New York Times provided a clue about the machinations behind the scenes to maintain US control over the World Bank: “Under the changes, China will become the bank’s third-largest shareholder, ahead of Germany, after the United States and Japan. Countries like Brazil, India, Indonesia and Vietnam will also have greater representation. Mr. Zoellick carefully devised the capital increase and voting changes to be adopted together. The $5.1 billion in so-called paid-in capital, which the bank can use for day-to-day operations, will bring the bank’s cash on hand to about $40 billion. Of the $5.1 billion, developing countries will contribute $1.6 billion in connection with a shift in representation that will give them 47.19 percent of voting power, up from 44.06 percent. The actions fulfill a pledge the bank’s members made in Istanbul in October.”

The Financial Times: “A package put to ministers at the World Bank’s meetings in Washington yesterday increased the bank’s $11bn (€8.2bn, £7.1bn) paid-in capital by $5.1bn in return for reforms to voting rights, which would mainly see a transfer of votes from smaller European countries to emerging markets such as China, India and Brazil. Robert Zoellick, the bank’s president, last year began campaigning to increase its capital in response to the global financial crisis. The bank increased lending by $100bn to combat the effects of the crisis on poor countries, helping to overcome the scepticism of countries such as France and the US. “This is a once-in-a-generation request to address the impact of a once-in-a-generation crisis,” Mr Zoellick said.”

Bahrain's Finance Minister and Chairman of the Development Committe Ahmed Al Khalifa (L) gives his opening remarks to the Development Committee at the World Bank April 25, 2010 in Washington, DC. Finance Ministers and Bank Governors around the world are attending the IMF/World Bank Spring Meetings this weekend in Washington, DC. IMF Staff Photo/Stephen Jaffe

Rhubarb, rhubarb

As predicted just before the ‘spring meetings’ by the Bretton Woods Project, the capital increase and voting rights hogged most of the headlines. “The G20 group of the world’s biggest economies promised a 3 per cent shift in voting share towards ‘developing and transition countries’,” the Project had commented. “The Bank will proclaim success in achieving this, despite the fact that it fudged the definition of what is a ‘developing country’ so that the category included many countries that have achieved high-income status. With further reform being delayed until 2015, rich countries seem to have stemmed the surge of demands from the large emerging markets for deeper reform.”

The World Bank has asked its members to put up more money, as it had stretched itself to its limits to lend more during the financial and economic crisis in 2009. After a big debate over the size of the capital increase, the Bank has secured a US$60 billion nominal boost to its capital, which means it will receive about US$5 billion in actual cash (the rest is ‘callable capital’ that members would provide if ever asked by the Bank). Said the Bretton Woods Project: “This is a relatively small boost that will only allow the Bank to return to lending the same amount it did before the crisis. It also means that rich countries again rebuffed the large emerging markets who wanted a much larger capital boost and offered to pay for it entirely out of their own coffers.”

The point is that all these reforms and discussions have been kept completely out of the public eye until now. There have been no consultations with stakeholders and little discussion with most of the Bank’s members. That the rich countries won’t budge on governance issues was highlighted in a March report by a US Senate committee. The US is the largest shareholder, with an effective veto over any changes to the Bank’s governance. The committee called on the Obama administration to maintain “United States voting shares and veto rights at the international financial institutions” and questioned existing reforms to the selection of the World Bank president by demanding preservation of “United States leadership of the World Bank and senior level positions at the other IFIs.”