Reflections on Change and Continuity at the IMF

Recently I got hooked on Progressive Economics Forum and while digging through their archives and generally browsing around their site found a gem: “Reflections on Change and Continuity at the IMF“. It’s the first time since I’ve read “Shock Doctrine” by Naomi Klein that I found economist going through the tectics and strategies of IMF/WB and picking them apart from scientific and political standpoints. This is not somebody who just sat on the sidelines watching – John actually was part of those events he describes and describes in great detail. In other words “Reflections on Change and Continuity at the IMF” is a great read with the view into the history bridge into today’s problems and an analysis of current state of IMF/WB. It’s a “must read piece” every thinking being should be aware of it and read through it carefully. It’s shorter than “Shock Doctrine”, less emotional, yet very telling.

Century of failed experiments

Analyzing last ~100 years (only to save some time by not digging deeper) it’s hard not to come to conclusion that we can mark that last century as a century of failed experiments. We have seen large scale experiments undertaken and all of them failed. Communism building in ex-USSR and later occupied countries, Fascism, Free Trade economics (with it’s sister Globalization). Not a single large-scale success? Not even a bit?

Looking at the aftermath left by each experiment it’s hard not to think that we’re a screw-up race and deserve to be wiped of the face of the earth as yet-another failed large-scale experiment. Reading Stanislaw Lem’s The Star Diaries and episode where aliens are charging some miscreants for dumping biological mass on Earth and mixing in some bodily substances in it as well started unsanctioned evolution one may get impression that there might be some truth to that – we’re failing big time. Every time we fail it gets bigger and bigger. Every single time we take lives of people, animals, plants, bacteria etc. One must believe in divine law and the right of human to do so to make any sense of it and not to be committed to psychiatric ward.

Long chain of events sparked my interest in Russian revolution, which lead me to some explorations of Fascism and I’ve been tracking Free Economy for some time already. There are more and more dots on my graph and it’s very tempting to draw the lines:

Until 1925, when the liberal economist Alberto de Stefani ended his tenure as Minister of Economics (1922–25), after having re-started the economy and balanced the national budget, the Italian Fascist Government’s economic policies were aligned with classical liberalism principles; inheritance, luxury, and foreign capital taxes were abolished;[28] life insurance (1923),[29] and the state communications monopolies were privatised, et cetera. Yet such pro-business enterprise policies apparently did not contradict the State’s financing of banks and industry.

On a wider scale the Fascist economic policy pushed the country towards the “corporative state”, an effort which lasted well into the war. The idea was to create a national community where the interests of all parts of the economy were integrated into a class-transcending unity. Some see the move to corporatism in two phases. first the workers were brought to heel over 1925-27. Initially the non-fascist trade unions and later (less forcefully) the fascist trade unions were eliminated…

Reading through the history it’s is hard to argue that Mussolini’s values at the time of ascending to power very very much like values of currently governing political elite in most developed countries:

Deputy Mussolini (with military, business, and liberal right-wing support) launched the PNF March on Rome (27–29 October 1922) coup d’État, to oust Prime Minister Facta, and assume the government of Italy, to restore nationalist pride, re-start the economy, increase productivity with labor controls, remove economic business controls, and impose law and order.[17]

As luck would have it I just recently heard of “tough on crime“, removal of economic business controls, and changes in electoral law. Latest piece of evidence: technocratic governments popping all over the place, which, just like in Italy and Germany scenarios bypasses democratic elections, and by coincidence places at helm people largely responsible for the meltdown: supporters of Free Trade school of thought.

It’s not that the current political powers are immediately fascist by nature, but at this stage they mimic fascism impressively well. Even the nationalism – fairly difficult subject at the time of globalization had to be re-invented but serves the same idea – unite country from the inside in a simplistic “us vs them” rhetoric. And that would be the same political force that advocates Globalization. Here’s a visual point of disconnect however under the surface it turns out connection is fairly strong. Current implementation of Globalization works on principle of exploitation of “other” markets. North American market exists due to cheap labour in other places of the world, Free Trade benefits largely North American-based multinationals that immediately dominate opened markets.

Another oddity is that Friedman’s roots are in:

the American economy’s “ultimate purpose is to produce more consumer goods.”

yet following some (admittedly not all) of Friedman’s recipes America produces less and less every year. This has been nicely summarized by Jennifer Egan in her novel “Look at me” (spotted in “Adbusters”):

…The narrative of industrial America began with rationalization of objects through standardization, abstraction and mass production, and has concluded with the rationalization of human beings through marketing, public relations, image consulting and spin…

As per Friedman’s advise, America (and the rest of the world) focused all of it’s attention on Monetary research/operations rather than social and technological.

Speaking of which: Technological vs Monetary is something that I really care about. In proprietary branch of IT industry huge amount of effort is spent on preventing others from using software, or limiting it’s uses – amount of effort that could’ve moved us forward significantly if applied in other areas but we keep slowing ourselves down with artificial blocks. Just like Friedman’s Free Economy software deserves to be free and uninhibited to be able to evolve into something new. However there is a clear distinction between Free Economy and Free Software – Free Economy dictates political regime, while Free Software transcends political regimes.Free Software does not impose political nor economic rules. You can still charge for your software, you can still be ruled by a dictator and you can still send people to prison for not agreeing with you.

Where does it leave us? As a race we have managed to avoid implementing democracies true to definition, we hate our neighbors  for unknown [to us] reasons and we keep on supporting models in which only selected few get to rip benefits while the rest is trying to create some space for themselves and at the time of crisis majority still clings to “ye olde ways”

 

#OCW

With the overabundance of information on #OCW movement one can’t help but think of it on a daily basis. People are fighting economic inequalities produced by current political/economic system.

While still composing black list of current government’s deeds this idea crystallized:

Society s not a function of economy, but rather economy is a function of society

With that idea things start fall into place. No matter how Chicago school economists are trying to present that economy comes first and everything should depend on it (thus it needs to be “pure” and “free”) and society has to arrange itself around that “free economy”. However society came first economic relationships came second. We first organized ourselves into the packs only after came economy with exchange of the goods etc. Economics was invented by us while society has made us who we are. It is natural thing then that economy should follow our social desires, and not the other way around.

So why does society in general and communities in particular have to bow to the power of “Free Economy” and set aside social responsibilities, ethics and the sense of community? Well they don’t. #OCW is all about that. Finally people who see through spoke up.