Greece: IMF Claims Ignorance of Basic Economics

The International Monetary Fund admitted it didn’t realize how damaging the draconian Greek bailout austerity measures it imposed would be to Greece’s economy.

The 2010-imposed austerity measures in the first bailout helped Greece avoid bankruptcy but also caused the country’s economy, already in recession, to plummet, the IMF said in an internal report made public after its contents were reported by The Wall Street Journal.

In contrast to publicly stated high hopes of the first bailout of $144 billion put together by the “troika” of the IMF, European Commission and European Central Bank in May 2010, “market confidence was not restored, the banking system lost 30 percent of its deposits and the economy encountered a much deeper-than-expected recession with exceptionally high unemployment,” the report said.

…But there is another — more sinister — way in which the IMF’s belated mea culpa is nothing new. The fact of the matter is that these type of self-critical reports by the Fund have been a permanent feature of its management of international financial crises ever since the 1980s. For some reason, every time a debt crisis strikes, the IMF moves in to impose the same short-sighted bailouts, austerity measures and market reforms — and then, several years later, comes to the conclusion that it made major mistakes in its handling of the crisis. Yet it never changes tack: when the next crisis hits, it simply reproduces the same old script: stabilization, privatization, liberalization. Nothing else will do to satisfy the markets, and so the debtors simply have to bend over backwards to satisfy the orthodox neoliberal prescriptions of structural adjustment. …

If these wholesale economic collapses and the consequent destruction of the livelihoods of millions of Latin American and Asian citizens were truly just “mistakes”, resulting from faulty baseline assumptions and flawed econometric modelling, one would expect an international institution staffed by hundreds of Ivy League and Oxbridge PhDs to eventually learn from these mistakes and come up with a somewhat more credible alternative. Wrong. Following the 2001-’02 Argentine financial crisis, the Fund once again admitted to making a series of “mistakes” of historic proportions, culminating into the largest sovereign debt default in world history. As former IMF managing director Michel Camdessus recently recalled, “we probably made many silly mistakes and committed errors with Argentina.” As a result, 60 percent of Argentinians fell into poverty as the country experienced the deepest economic depression in its history.

Over the past thirty years, the world has experienced over a hundred financial crises. So far, the IMF has responded to practically every single one of them with the same defunct policy prescription of rapid fiscal contraction, firesale privatizations and far-reaching neoliberal market reforms. In the vast majority of cases, this orthodox policy response contributed to a deepening of the recession, the loss of millions of jobs, and a humanitarian tragedy of unspeakable proportions. If you make the same mistake a hundred times over, can it still be considered a mistake? Or are we looking at the deliberate reproduction of an ideological script that narrowly serves the interests of private creditors by shifting the burden of adjustment squarely onto the shoulders of the poorest and weakest members in the debtor countries?

See “Confessions of an Economic Hitman” and “The Shock Doctrine” if you want a dose of reality.  These people really have no shame.  Typical psychopaths.

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