Autopsy of IMF programs in Africa (2)

Cheikhna Bounajim Cissé, the emergent officer.

1- An oversold and cracked neoliberal ideology.

In this new column on the relationship between African states and the IMF and entitled “Why African countries must stop programs with the IMF?”, The emerging Cheickna Bounajim Cissé, economist, essayist and expert on African banking markets, discusses the second part of his analysis devoted to the autopsy of IMF programs on the continent. Without evasiveness and with factual elements, it deals, successively, with all the terms which radiate the controversy around the policies of the Bretton Woods institution in Africa: « neoliberal », « austerity », « poverty », « growth « , » Debt « and » aid « .

On February 10, 2003, Kenneth Rogoff, then Economic Advisor and Director of the Research Department of the International Monetary Fund (IMF), published an article under the martial title “The IMF’s response [1]”. In incipit, he set the scene: « Vilified by anti-globalist protesters, politicians in developing countries and some Nobel laureates in economics, the International Monetary Fund has become the main scapegoat on the world stage … as if its economists had the double monopoly of infamy and error. It’s time to set the record straight (…).  »

Curious jacket reversal for this world-class chess player who has passed over the apron! After a whirlwind start, his eyes riveted on the rear-view mirror, the IMF’s chief economist tempered his response: “these criticisms are, in some respects, justified, even if their authors (including myself at the time I was a university professor) tend to exaggerate the seriousness of the problems; others, on the other hand, are unfounded and only aim to heat things up.  » He nevertheless said he was dismayed to see the staff of his institution accused of being neoliberal to the point of refusing « to listen to John Maynard Keynes [even] if he telephoned them from beyond the grave to give them his opinion [2] ».

The end of the article is as dazed as its prologue. For Kenneth Rogoff, even if the « poor countries » decide to do without « the specific macroeconomic expertise of the IMF, they will need something very similar to it [3]. » Professor Joseph Tchundjang Pouemi, with proven firmness and rigorous reasoning, presented the International Monetary Fund as the « citadel of monetary knowledge [4] »; but the Cameroonian economist was careful not to denounce the Osian institution of the arrogance of his American counterpart.

In 1750, faced with the enormous outcry aroused by his work “De esprit des lois”, the French writer Charles Louis de Secondat, alias Montesquieu, took the side of the reply by publishing another text (Defense of the Esprit des lois), in the form of a right of reply. He invited his scorners and slayers to observe a rule of common sense: « Natural fairness demands that the degree of proof be proportionate to the magnitude of the accusation. » Three centuries behind this wisdom, our argument will try not to stand out from it, while making sure to observe the rigor required at necropsy. Iconic British Prime Minister Winston Churchill once said: “Criticism can be nasty, but it is necessary. It’s like pain to the human body: it calls attention to what is wrong.  » For us, it will therefore be a question of exploring the tenants and dissecting the determinants of the programs implemented by the Washington institutions in Africa by giving the floor to all the speakers (laudatory, dubious and reluctant), through at least six terms that radiate the controversy: « neoliberal », « austerity », « poverty », « growth », « debt » and « aid ».

Washington Consensus

Let’s get into the thick of it. What does neoliberal ideology cover? In an astonishing, almost explosive article, published in its review Finances & Développement of June 2016, the IMF gives us its own understanding of the concept: “The neoliberal program rests on two pillars. The first, intensifying competition, involves deregulation and opening up of domestic markets, including financial ones, to foreign competition. The second is to reduce the role of the state by carrying out privatizations and limiting government prerogatives in terms of budget deficit and debt [5] « .

Who decides on the programs of African countries with the IMF? Here is the response from former chief economist and senior vice president of the World Bank Joseph Stiglitz: “Plans, as a rule, are dictated from Washington, and shaped during brief missions from senior officials: Getting off the plane, they immerse themselves in the figures of the Ministry of Finance and the central bank and, for the rest, reside comfortably in the five-star hotels of the capital [6].  »

Has the application of neoliberal-inspired programs been beneficial or harmful to African countries? Here is the staff’s response: “There are many facets of the neoliberal agenda that deserve praise. The development of world trade has saved millions of people from the most extreme poverty. Foreign direct investment has often made it possible to transfer technology and know-how to developing countries. The privatization of companies has in many cases resulted in a more efficient service delivery and a reduction in the budgetary burden [7]. « Certain components of the program, underlines the IMF’s Research Department, have not produced the expected results: » The examination [the liberalization of the capital account and the consolidation of public finances] leads to three disturbing conclusions: (i ) the benefits in terms of growth gains seem very difficult to determine at the scale of a large group of countries; (ii) the costs associated with increasing inequalities are significant. They bear witness to the need to arbitrate between the effects on growth and on equity induced by certain aspects of the neoliberal program; (iii) widening inequalities in turn influence the level and sustainability of growth. Even if growth is the only or the main objective of neoliberalism, supporters of this program must remain alert to the distributional effects. [8] « Supposed to ensure the stability of the international monetary system, the IMF is accused of being a » weapon for the expansion of liberalism and capitalism. [9] « And this is not totally wrong as long as we refer to his round table. The United States, with 17.44% of the quotas and 16.51% of the voting rights [10], is the main contributor to the IMF and has a de facto right of veto over the most important decisions of the institution. During his hearing in the French Senate on April 21, 1999, the senior official Jean-Pierre Landau, former administrator for France at the IMF and the World Bank, declared: “The IMF had given the impression, during its recent interventions, that it was the bearer of certain values, in particular the economic model American, considered superior, and that its actions consisted in implanting it in the depths of the companies of the States rescued [11].  » No comments !

The overly rigid and restrictive policies that the IMF is pursuing in Africa are essentially based on the ten commandments of the « Washington Consensus », as listed: budgetary discipline, redefinition of public expenditure priorities, tax reform, liberalization of rates interest rate, competitive exchange rate, trade liberalization, liberalization of direct investment from abroad, privatization, deregulation and property rights.

This corpus of precepts of neoliberal ideology was revealed to the public following the publication in 1989 of a note from the pen of economist and scholar John Williamson, its originator. On closer inspection, the work leading to the “Washington Consensus” is strongly inspired by the old theory of Friedrich Hayek. This British economist, winner of the Nobel Prize in economics in 1974, was one of the most influential advocates of ultra-liberalism. One of its biggest slayers is Joseph Stiglitz, Nobel Prize for Economics (2001). In his work La Grande Désillusion (2001), this American economist, nicknamed the pope of neo-Keynesianism, shot red bullets on the policies inspired by the “Washington Consensus”: “In all the countries which have applied them, development has been slow, and where there has been growth its benefits have not been shared equally; crises were poorly managed. […] Those who have followed the prescriptions and endured the austerity ask themselves: when will we see the fruits? « .

In October 2013, Professor Joseph Stiglitz gave an interview to the Tribune in which he takes us to his height: “The truth is that Hayek’s vision, which states that the market operates perfectly on its own and self-regulates, was false. . […] The fundamentals of economics taught in universities speak of a market that regulates itself by supply and demand. But today, that is not the case. All over the world, people want to contribute to society, want to work, but cannot do so, resulting in wasted resources. Likewise, in the United States, millions of Americans are homeless, while there are many empty houses. In reality, the invisible hand supposed to regulate the market is invisible … because it does not exist [12].  »

In an article with the evocative title « A reform package turned into a hackneyed label [13] », published in September 2003 in the IMF’s Finance & Development magazine, John Williamson put the cover back by deploring that his reform program dubbed « Consensus of Washington ”could become“ a war cry in ideological debates ”. He felt that « the term has become so hopelessly equivocal that it interferes with thinking. He castigated the « populist » interpretation that is made of his reform package described by its detractors as neoliberal (« the most right-wing version of a liberal program » in his words) with a « minimal state (which does not exist). responsibility neither to correct income inequalities nor to internalize externalities) ”. He said the « Washington Consensus » was intended only for Latin America in 1989 and should not be « a recipe for all countries and all times. »

Straitjacket

But the catch, what John Williamson does not say – and yet is not unaware of – is that his « miracle » recipe has become a straitjacket that the International Monetary Fund, « temple of monetarism and ‘neoliberal orthodoxy [14] ”, has committed all the African states under program. Whatever their structure and measurements, it is almost the same ration for everyone.

With a hint of mockery, how can I not remember the story of this grandfather from my region who answered the call under the tricolor during colonization, with bare feet and boots entwined around his neck. The colonist, puffed up at the sight, peeked at his XXXL feet (shoe size 50 at least!). He immediately signed a certificate of exemption. The recruiting officer by dismissing the miraculous « demobilized » nonetheless assures him: « It will be for next time! « It is true that if he did not have a pair of shoes to suit his size, all he had to do was adjust the grandfather’s feet to the boots. This terrible alternative was also worth a dispensation in combat. Let’s close the parenthesis and continue!

We could have stopped there, if the internal departments of the International Monetary Fund (IMF) had not also stepped up to the plate to add fuel to the wheels of criticism. Coming from an institution that is the guardian of global financial orthodoxy, it is a surprise to disbelievers. « When your dog catches the improbable, chatterers and musards will make your day to remember, » advise African sages.

In January 2013, the IMF’s chief economist Olivier Blanchard and one of his collaborators Daniel Leigh, co-authored a study entitled “Growth Forecast Errors and Fiscal Multipliers” (translated from its original title “Growth Forecast Errors and Fiscal Multipliers [ 15] ”). In their note, the two economists sharply recognize “an error in the anticipations of the consequences of fiscal consolidation on economic growth. (And that) the budget cuts have caused a stronger than expected decline in European growth [16]. To put it plainly, for them, « the use of the wrong calculation coefficient has led to an underestimation of the negative effects of austerity in Europe [17]. « Waste of time for political decisions taken, expert opinion! » Alfred Sauvy may be right: « Numbers are fragile beings who, by dint of being tortured, end up confessing everything we want them to say ». Phlegmatic British political leader, no less Nobel Prize winner for literature, Winston Churchill is more acerbic: “I never believe a statistic unless I have falsified it myself.  »

Neoliberal thinking at half mast

On May 26, 2016, three years after Olivier Blanchard’s mea-culpa, the IMF’s research departments did it again. Three economists, Jonathan D. Ostry, Prakash Loungani and Davide Furceri, respectively Deputy Director, Head of Division and economist at the IMF Research Department, published a shocking article in Finances & Développement, the institution’s benchmark review: “The is neoliberalism overrated? « . The authors questioned the effectiveness of certain « neoliberal » recipes used by their institution, particularly those focused on austerity policies and the opening of the capital market. They indicated that “instead of bringing growth, some neoliberal policies have increased inequalities at the expense of sustained expansion. They even insisted on the very high cost of austerity policies. “Since 1980, there have been around 150 episodes of massive capital inflows into more than 50 emerging countries; (…) in about 20% of cases, these episodes end in financial crises, most of the time linked to sharp drops in production, « stressed the trio of IMF experts. Yet Professor Jagdish Bhagwati, a recognized expert on international economic issues and presented as the « guru of globalization [18], » warned the IMF of its relentlessness to promote the free movement of capital. In their fall, the three

Washington economists were taking us in an unexpected direction, at least unexpected: “The countries and institutions that advise them, like the IMF, should not be guided by their convictions, but be inspired by recipes that have proven themselves. [19] « . That is what is said! It’s up to everyone to get on with it or to quit.

After his sharp remarks, it took no longer for social media to catch fire and the media to become entangled. The Web engulfs thick and spicy articles and commentaries on the subject. It is true that this study stood out in the very closed universe of the International Monetary Fund, « the beating heart of the Washington consensus and the dominant ideology [20] », resistant to any repentance on its programs in Africa.

On June 2, 2016, a few days after the publication of the controversial article, the chief economist of the IMF Maurice Obstfeld tried to moderate the analysis of his colleagues by making the exegesis of the controversial remarks: “This article was largely wrong interpreted and this should not be seen as a major inflection in the IMF’s approach. I think it is misleading to ask whether the IMF is for or against austerity. No one wants sterile austerity. We are for fiscal policies that support growth and equity over time. And these policies vary according to the particularities of each country and each situation. (…) This is a reality and not an ideological orientation [21].  » Wasted effort ! The blow was already gone! In his vein of attempting to demine the controversy, the IMF’s chief economist added an unusual layer to say the least: “Our mission is to advise governments on the optimal management of their fiscal policy, in order to avoid harmful consequences. Sometimes this leads us to recognize that there are situations where excessive budget cuts can run counter to growth, equity, even the very sustainability of public finances ”before adding:“ There are has limits to the suffering that countries can or must endure [22].  » No comments !

It is now clearly demonstrated that neoliberal policy has been oversold by African countries. Often times they have been served a pale copy of the free market. This unprecedented and unexpected maneuver by the IMF, coming from the depths of its bowels, had surprised many. What was the point of this sudden awareness molded in lucidity and empathy? It is true that these exits of the IMF experts, out of step with the doxa, were certainly not a self-repudiation, but they remained a mass of « criticisms in order of the deregulation policies carried out everywhere in the world for forty years. , under the aegis… of the IMF [23] ”. Brought to a boil, the press had made it their fat.

Unable to resist the attraction of a strong image, the Belgian essayist Paul Jorion, professor at the Catholic University of Lille and former professor at Cambridge, said that “the history of the IMF is a history of disasters. successive. So this is not an organization that has a very good reputation. He was almost always wrong. Why ? Because he did not analyze but followed an ideological program. [24] Even though the criticism is steeped in vitriol, it reflects an increasingly noticeable malaise in African public opinion.

In the May 2010 issue of Réalités Industrielles, the very confidential review of the Ecole des Mines, the dean of French economists Maurice Allais, also Nobel Prize winner in economics (1988), castigated neoliberalism in very incisive terms:  » Liberalism cannot be a

let it be ”. For him, unemployment is “the consequence of the reckless liberalization of international trade [261]. A former traveling companion of Hayek and Friedman, he recognized his own mistakes of the past and made his mea-culpa: « We have been driven to the abyss by constantly repeated but unproven economic claims. By an incessant bludgeoning, we were confronted with established truths, indisputable taboos, prejudices admitted without discussion. This doctrine affirmed as a scientific truth a link between the absence of regulation and an optimal allocation of resources. Instead of truth there has been, on the contrary, in all this, a deep ignorance and a simplifying ideology [27].  »

A trendy neokeynesian trend

In this chiaroscuro environment, Keynesianism is on the rise. With billions of dollars and euros, the West defends the « welfare state » – even if it is difficult to recognize it ideologically: massive intervention by the state to save the banks, creation of public banks investment, protection of the local market and “national champions”, presence of the State on the board of directors of private companies, caps on the remuneration of bank executives, etc. In short, everything is there to get your nose out of the water. Everything, except what is imposed on or chosen by African countries – it doesn’t matter which one of the two. And, we are not far from the handover between so-called « communist » China, which is becoming privatized, and so-called « liberal » Europe, which is socializing.

Huge amounts of money are invested in public spending. The deficit is skyrocketing and the debt is on the rise. For example, the Paulson Plan in the United States, named after former Treasury Secretary Henry Paulson, required a tidy sum of $ 700 billion, or 520 billion euros. This plan aimed to buy and manage certain toxic assets in the portfolios of financial institutions. The US federal state used 185 billion euros to invest in nine banks, including Citigroup, Wells Fargo, JP Morgan Chase, Bank of America. If we add to this the nationalizations of the mortgage refinancing agencies Freddie Mac and Fannie Mae, of the insurer AIG, the support for monetary funds and the guarantees from the Fed to the takeover of Bear Stearns, the rescue plan of the American financial system approached $ 1.2 trillion, or 8% of US GDP.

In Europe, the aid authorized by the European Commission to the financial sector (there are 8,000 banks on the Old Continent, of which 44 are large), totaled 5,059 billion euros (nearly three times the GDP of the African continent), of which around a third had actually been used (13% of European GDP), between the start of the crisis in October 2008 and October 2012. Most of this aid had been devoted to guarantees provided to banks private. The remainder was for their recapitalization, cash injections and the rescue of impaired assets. In France, the stimulus plan for the banking sector amounted to around 400 billion euros, or 20% of GDP. In the wake of post-crisis management, without firing a blow, the French government created on December 31, 2012 the Public Investment Bank (BPI).

This exceptional debauchery of energy by politicians in the West to save their banking system had made the late Venezuelan president, Hugo Chavez, say, ironically: « If the climate were a bank, we would have already saved it. The speech was certainly not without political ulterior motives, but the reality was bluntly declaimed. Therefore, how can we understand that African countries can be forced to adopt a “police state” posture, to remain on the periphery of development while leaving the hand to a weak and weakened private sector, while the rulers of countries that do so? take the medication, sign at home

under the pressure of a persistent crisis and an insistent street, the great comeback of the state in business?

Economist Paul Krugman, 2008 Nobel Laureate in Economics, threw a storm in the pond: “The IMF was less enthusiastic about austerity than the other big players. If he himself says he was wrong, it means that everyone else […] was even more wrong [28].  »

You have been warned, dear African leaders! When the doctor himself recognizes that he may have prescribed the wrong prescription, what ultimately remains for the patient, who has held his health as an extraordinary sling for almost four decades, wandering between chaplains in small shape and highway poachers?

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