Above Photo: April 25, 2010. Washington DC., World Bank/IMF Spring Meetings. Developement Commitee
When you hear people saying that “even the IMF” is recommending economic actions that might help regular people, that’s a sign that something big is going down.
The International Monetary Fund (IMF) is known as a neoliberal organization that pushes privatization of public goods, austerity, cutbacks in public services, free trade, deregulation and other economic policies that generally favor elites over democracy. But earlier this month the IMF looked at what is happening to the world economy as a result of neoliberal economic policie and said, “Oh my God, what have we done?”
This OMG moment occurred in early June, when the IMF released a paper titled,“Neoliberalism: Oversold?” The report summarized itself saying, “Instead of delivering growth, some neoliberal policies have increased inequality, in turn jeopardizing durable expansion.” The paper noted that neoliberal policies have promoted inequality, and that, “Increased inequality in turn hurts the level and sustainability of growth.”
In other words, the IMF is realizing that economies stop working when not enough people are making enough to get by. It turns out that when you place the interests of wealth and corporate power over democracy you end up stripping regular people of their ability to make a decent living. When you cut back on government’s role in mitigating these effects, you just make things worse. As more and more people run out of money eventually the world economy stops working. (Also known as “Look around you.”)
Another “Oh My God, What Have We Done?” Moment
Now, the IMF is having another “Oh my God, what have we done?” moment. The IMF has released its annual review of the US economy, titled, “Article IV Consultation with the United States of America: Concluding Statement of the IMF Mission,” concluding that our country’s growth is threatened by increasing poverty and the shrinkage of our middle class. The report says, “There is an urgent need to tackle poverty. In the latest data, 1 in 7 Americans is living in poverty, including 1 in 5 children and 1 in 3 female-headed households. Around 40 percent of those in poverty are working.”
This report received alarming headlines, including,
● Time – “IMF Warns of ‘Urgent’ Need to Tackle U.S. Poverty”:
The report released Wednesday cited statistics showing that 1 in 7 Americans live in poverty, including 20% of children. The IMF recommended a higher minimum wage and a larger earned income tax credit.
● The Atlantic – “The IMF’s Warning to the US”:
The International Monetary Fund on Wednesday cut its estimate for U.S. economic growth for this year from 2.4 percent to 2.2 percent, and urged several measures to reduce growing poverty in the country.
● WSJ – “IMF Cuts 2016 US Economic-Growth Forecast to 2.2%”:
Declining labor-force participation, falling productivity growth, a widening income gap and high levels of poverty risks further constrain the ability of the U.S. to expand, the fund said.
Wow, “even the WSJ“…
So, the IMF is seeing the results of its neoliberal economic policies and is having regrets. The report says the resulting poverty and shrinkage of the middle class is killing the US economy. From the report itself:
[T]he U.S. faces potentially significant longer-term challenges to strong and sustained growth. Concerted policy actions are warranted, sooner rather than later. The latest IMF review of the U.S. economy—the 2016 Article IV Consultation—explores these policy challenges, focusing on the causes and consequences of falling labor force participation, an increasingly polarized income distribution, high levels of poverty, and weak productivity.
The IMF recommended policy actions, including:
● Increase state and federal infrastructure investment.
● Adopt comprehensive skills-based immigration reform.
● Expand the Earned Income Tax Credit combined with an increase in the federal minimum wage.
● Upgrade social programs for the nonworking poor.
● Deepen and improve family-friendly benefits including paid family leave and childcare assistance.
● Increase funding for training programs, vocational partnerships, and early childhood education. Raise the effectiveness of spending on science, technology, engineering and mathematics programs.
Being a fundamentally neoliberal organization, they also recommended cutting corporate taxes and passing the Trans-Pacific Partnership, thereby undoing any good the other policy recommendations might achieve. They just couldn’t help themselves.
Newshour IMF Interview
“The Newshour” reported on what they called a “squeeze on the middle class”, interviewing IMF Managing Director Christine Lagarde, in the segment Sobering IMF report on U.S. economy cites dwindling middle class, growing income equality (emphasis added, for emphasis):
If you look at the size of the middle class in 1975, it was roughly 60 percent of total population. If you look at the middle class today, it is about 50 percent. So, that’s a significant decline of the middle class. And it is an economic issue, because the middle class has always been the consumption force of this nation.
The upper class doesn’t spend as much. The lower class doesn’t have as much to spend. So, the maximum impact in terms of consumption is generated by the middle class.
… I would point to a couple of policies. One is support given to women. And, by that, I mean maternity leave policy that would help them face the decision of, do I stay or do I go? Second, child care support, and not just child actually, but the kind of support that would help families look after a child or look after an elderly, because, with aging, we will have to support more parents or grandparents.
… When the U.S. consumer consumes, there is demand, more demand, and, therefore, the U.S. manufacturers must manufacture more. If they have to manufacture more, they have to create more jobs. It’s a fairly simple virtuous circle that is generally initiated by consumption.
I wonder if anyone can imagine this Republican Congress actually passing things like fixing the country’s infrastructure, upgrading social programs, providing child care and family leave? Killing the US economy seems to be their mission.