What has changed since the start of the external debt crisis in Latin America back in the 1980s that made us pay attention to the pernicious role of the policies of the International Monetary Fund and the World Bank in relation to financial stability and the international economy?
Very little, according to reports from both organizations during the so-called spring meetings held this week at their Washington headquarters, of the debate that the meeting provoked… and what happens every day.
In any case, one can hardly discern the clear realization by both organizations of how bad the planet is, and the worst that is yet to come: a decline in GDP (gross domestic product) at the global level compared to the modest recovery achieved in 2022 after the pandemic; a steady increase in inflation; and repeated calls for central banks to stop trying to counter rising prices by raising interest rates.
The news of the appointment is shocking because it is grim, and it comes after reports from the very organizations that have already warned of a fiasco. A few days before the meeting, the World Bank warned that this decade could be another “lost decade” and not only for Latin America, as happened in the 1980s, but for the whole world.
According to the document, “the speed limit of the world economy – understood as the maximum long-term rate at which it can grow without causing inflation – will fall to its lowest level in 30 years. As a result, he warned, between 2022 and 2030, average global GDP growth will fall to 2.2 percent a year, a decline of about one-third from the rate observed between 2000 and 2010.
Such portents were confirmed during a meeting in Washington in the presence of ministers, central bank directors of various countries and other high-ranking financial officials and explained in detail by the IMF.
A relapse will take this year 2023. According to the head of the Fund, Kristalina Georgieva, the global economy is expected to grow by only 3 percent compared to 3.4 percent last year, even below the average of 3.8 achieved in previous years.
The panorama was described by Georgieva as the failure of the “anticipated sustainable recovery,” which she blamed on inflation, despite its relative and minimal decline, which, in short, is another evil for poor countries: falling commodity prices.
It is true that the protracted conflict in Ukraine and the punitive measures of the United States and the West against Russia are largely responsible, among other things, for their consequences in the form of increased fuel and, transiently, food prices.
But what about the old politics imposed precisely by financial institutions that support unfair status quoresponsible for how the financial and economic world moves?
It is estimated that a large number of heavily indebted countries will go bankrupt due to the crisis, and after their debts will multiply due to rising interest rates.
The United Nations Conference on Trade and Development (UNCTAD) has just shown that this increase is causing “unprecedented levels of over-indebtedness” in developing countries and exposing them to significant financial risks.
As a result, these countries will have to “give back” much more than they received. Unctad claims that this phenomenon will cost developing countries more than $800 billion in lost revenue over the next three years.
Palliatives are not a solution
Of course, circumstances force international financial institutions to refine their discourse. During one of her speeches at the various panels and tables at which part of the meeting took place, Georgieva recommended that the countries of Latin America pursue a stricter fiscal policy, for example, raising taxes on the richest, so as not to affect – finally! — social spending items to help the weakest.
Of course, this measure, which is based on a concept of justice similar to how Robin Hood would have understood it, seems consistent, despite the conflicts with the middle class that its implementation may lead to. But the concern is not so much the risk of instability as the goals of the strategy, which, according to the owner of the fund, “would help curb domestic demand, which would allow interest rates to be cut faster.” Some fear it will affect household consumption.
In any case, palliatives are not the solution. They seem to be contained in demands, widely proclaimed and now with greater force, for a new international economic and financial order. Something has really changed in this environment over the last 40 years, apart from the new frankness of the IMF and the World Bank, and the colors they use to mask the same strategies. Also, what is egregious now is the proliferation of audible voices, official and unofficial, that speak out against their work and against the system in general.
The Ibero-American Summit, a forum that has so far not been characterized by very strong statements, at its last meeting in the Dominican Republic proclaimed a new international financial architecture in a special statement in which it proclaimed that the flow of resources destined for sustainable development, and to expand the access limit that the Ibero-American countries have in terms of funding.
“It is necessary to have innovative financial instruments with terms that facilitate sustainable debt in order to mitigate and / or reduce the effects of climate change and promote adaptation processes,” he pointed out among other signs of frustration.
Last January, UN Secretary-General António Guterres denounced the “morally bankrupt global financial system” and one created, in his words, “for the benefit of the rich and powerful.”
Even countries such as France and Germany are said to have advocated a reorganization of the mechanism. And national leaders like Argentine President Alberto Fernandez are at the helm of one of the most indebted countries that will be hit the hardest by this crisis because it is difficult and massive.
negotiating with the Foundation adds the aggravating circumstance of suffering from one of the worst droughts ever—shouted what so many others could have shouted: “We can’t let them choke us.”
- Global headline inflation will ease from 8.7 percent in 2022 to 7 percent in 2023 due to lower commodity prices, but core inflation is likely to fall even more slowly, reports say. In most cases, inflation is unlikely to return to desired levels before 2025.
- Highlighting the contradictions between what the IMF prescribes and what it does, the Oxfam report notes that while the institution proclaims an obligation for poor countries to spend more on public goods, the austerity measures it imposes quadruple the cost of recommended social assistance. investments.
- American organization
Action Aid says one of the problems with international financial policy is that it runs counter to climate protection and development goals.
- Many warn that the current global crisis threatens the achievement of the Development Goals.
Source: Juventud Rebelde