The IMF has a rather extensive history throughout the whole globe. In this second instalment we shall summarise some of its principal bailout programmes in Europe, Africa and Asia.
The Greece case and benefit for the bank
In 2010, Greece fell into a serious crisis, which led it to resort to the ‘magic formulae’ and neoliberal conditions of the IMF (and of the European Central Bank and the European Commission. These three are known collectively as ‘the troika’).
Since that date 3 ‘bailouts’ have occurred: in 2010, 2012 and 2015. Greece has been in recession for 9 years, and salaries have lost 30% of their purchasing power. The unemployment in April 2010 stood at 12%; in April 2019, at 17.6%, its lowest rate since 2011.
If there is one thing set in stone for we who believe that there exists a dominant economic power with the ability to affect the entire population in one way or another, it is that those behind this power are managed through explicit coalitions.
This means that a manoeuvre occurs of protecting one another in favour of preserving and defending its privileges within the system. There is a clear dynamic which involves running to the aid of any element that belongs or is within this enormous power mechanism.
As such, many of the programs that the IMF developed have involved bailing out banks. That is exactly what happened in the Greece case. The IMF’s first disbursement was not intended for the bettering of the economy, nor even for helping the Greek people, but for saving the banks.
And not only Greek banks, but foreign banks: French, German and Dutch banks that had made loans to the public and private sector of Greece, that among them owned 70% of all Greek debt, without any guarantee or precautionary measures. Of course, all this took place with the approval of the government at the time.
Since Greece belonged to the euro zone (it adopted the euro as official currency), the IMF said that it was impossible for Greece to become competitive again by devaluing the currency and, with that justification, an internal devaluation was made; the devaluation of wages and social subsidies.
The IMF, foreign banks and the government were the only beneficiaries of the loan; the Greek citizens themselves were not. Greek society saw itself directly affected by these so-called ‘austerity’ measures.
Besides unemployment, rising poverty, and inequality, the Greek populace faced other consequences at the health level. Several studies report that there was an increase in infant mortality.
There was also an increase in mortality rate of the elderly, a higher rate of suicide and depression, a reappearance of diseases believed to have been eradicated, increased HIV and increased drug use.
Ireland and ‘success’ without the people
In Ireland, the government of Prime Minister Brian Cowen, in power between 2008 and February 2011, bailed out private banks by investing 60,000 million euros; obviously, this emptied the state coffers, producing an obligation to turn to the IMF and the European Union in December 2010 for money to the tune of 85,000 million euros.
The bailout lasted three years (2010-2013) and – for the IMF – it was a success, since this agency measures the success of its recommendations by a country’s ability to pay its debt and not by the welfare of the population; the same population who had to face unemployment that reached 12.5% in 2013. In addition to the tax increase, there were cuts in services and a reduction of pensions.
Portugal and the anti-adjustment policies that improved the population
In the case of Portugal, despite the situation not being as traumatic as the one raised in Greece, it certainly was harmful to its citizens. The IMF program for an amount of 78,000 million euros was maintained from 2011-2014.
The then president Passos Coelho made significant cuts to education, health, pensions and social policies. Working hours were extended, salaries were frozen, wages were reduced up to 30% and taxes were raised. Unemployment exceeded 15% in 2014, which generated a 4% emigration between 2008 and 2016.
In 2016 the socialist Antonio Costa became president and his decisions afforded him a direction radically opposed to the recommendations of the IMF and the troika, which he stopped applying. He came to power hand in hand with communists, who brought revolutionary and anti-neoliberal ideas.
Salary cuts were reversed, working hours returned to 35 hours per week, pensions were recovered and the minimum wage was increased. In 2017 Portugal grew to 3% and unemployment fell to 10%. Tourism and exports are also its greatest strengths.
Africa and the geopolitical hand of the FMI
As is already known, the African continent is the poorest on the planet. In the 80s and 90s it faced a serious crisis; it had to turn to the IMF and the World Bank who, as expected, demanded political and economic reforms.
Among the conditions stipulated were the elimination of subsidies for industry and agriculture, trade liberalisation, tax reduction and the privatisation of public companies. The results were not successful at all; on the contrary, inequality increased and economic growth was stalled.
The structural reforms reduced, as a corollary, Arican agricultural producers’ participation in the market supply. By opening markets they were unprotected by their governments when faced with international competition. When competing with agricultural products from North America and Europe, of course with high subsidies, they were inevitably stunted.
There was an increase in the prices of products in the basic basket. Chis generated a rising hunger rate in the African continent. As a result, there were huge popular rebellions in countries such as Egypt, the Ivory Coast and Senegal.
In this continent the IMF demonstrated plainly its position as a geopolitical instrument in favour of the United States.
When the Republic of Congo, in 2007, reached a mutually beneficial mining agreement with China, the IMF resorted to pressure by means of blackmail. With the justification of defending governance and avoiding over-indebtedness, the IMF forced the country to review the terms of that agreement which displeased the West. It promised to ‘heal’ old debts in exchange for the continued privatisation of public services and strategic sectors such as mining.
In 2012, Nigeria, an oil country, faced a similar situation. Like other underdeveloped countries, it imports all petroleum products for transportation and industry use. In order to protect the population from the high import costs of gasoline and other refined fuels, the central government kept subsidised prices. However, without prior notice and after a meeting with the IMF director, Christine Lagarde, the government of Goodluck Jonathan abruptly eliminated the subsidies, which generated waves of protests across the whole country.
In 2010, China had signed a $28.5 million contract with Nigeria for the construction of 3 refineries, an instance that did not fit with the IMF’s plans, since this meant putting aside Anglo-American oil companies for the benefit of the country, in order to export derivatives and reduce imports. Then the US and the IMF pressed to eliminate the fuel subsidy and thus maintain the corrupt import system from which the NNPC (Nigerian National Petroleum Corporation) profits and at the same time block and sabotage the construction of the Chinese refineries.
If the IMF were truly interested in the welfare of Nigerian citizens, it would have supported the refinery construction initiative, so that the government can use these resources for health, education, etc. But since their function only obeys geopolitical interests, they act solely on these.
Indonesia, support for the dictatorship and worsening crisis
In the Asian crisis of 1997-1998, Thailand, Indonesia, Malaysia and South Korea turned to the IMF which, in exchange for emergency loans, required the application of its typical and drastic austerity measures. However, these countries found themselves unable to pay their foreign debt by speculatively lowering their currencies.
After the IMF intervention, the Asian countries faced permanent monetary devaluations, a large number of bankruptcies, crashes in all economic sectors, the real estate market dropped, unemployment increased and so did social unrest.
In Indonesia, towards the end of 1998, 50% of the population lived below the poverty line. True to its explicit rescue policy, the IMF and the World Bank pressured the government to convert banks’ private debt into public debt.
The same public debt that before the IMF’s intervention was 23% of the GNP increased, reaching 93% of the GNP in 2000. Real wages plummeted, losing 25.1% of their value in 1998.
The Asian population reacted, enraged, when the measures failed to improve their situation. Suharto, dictator of Indonesia, eliminated subsidies on commodities, and the prices for domestic fuel, electricity and gasoline increased by 70%.
This amplified the immense popular mobilisation. After 15 days, abandoned by the USA and the IMF and denounced by the people, Suharto had to leave power, after 32 years of dictatorial regime.
This article was translated by Etta Selim of @RevolutionFore6.