EUROPE: IMF Returns a Dubious Gift

By Julio Godoy Reprint | | Print |

Julio Godoy

PARIS, Oct 22 2004 (IPS) - After 13 years of producing policies that ranged from dubious to disastrous, former IMF director Michel Camdessus is offering them to his home country France.

The neo-liberal International Monetary Fund (IMF) recipes that came to be known as ‘The Washington Consensus’ brought much poverty and unemployment to countries as varied as Argentina, Russia, Mexico and Senegal. Now Camdessus wants these policies brought home to France.

"France is in decline," he said in a report circulated earlier this week. His cure is to transform all work contracts for long-term employment into "flexible" ones that facilitate lay-offs. Camdessus argues that the 10 percent unemployment currently reported in France is due to "rigidities" providing protection for workers.

Camdessus also wants government work privatised. He has produced all of 110 recommendations for "a new leap for new economic growth."

Another ill he sees was the move of the previous socialist government to reduce the working week to 35 hours, a move the present government is undoing. That more than a million jobs were created with introduction of the 35-hour week is another matter.

The new government is more than sympathetic to the Camdessus report. Finance minister Nicolas Sarkozy calls it "my favourite new reading."

But the report is not everyone’s favourite. Gerard Dupuy, commentator with the Liberation daily declared it "a lethargic catalogue of old, long-known measures."

Dupuy says that as IMF director from 1987 to 2000 Camdessus proved to be "the inept surgeon" of the world economy. "Financial crisis in south-east Asia in 1997, repeated monetary storms in Mexico, Argentina, Brazil and elsewhere in Latin America, endemic poverty in Africa: in all cases IMF director Camdessus dreamt of being the healing architect of the world economy. But he was at best a fireman, at worst a pyromaniac."

What Camdessus is recommending for France is also what has been failing in Germany.

The governments of former right-wing Christian Democrat chancellor Helmut Kohl until 1998 and of Social Democrat Chancellor Gerhard Schroeder have applied the IMF brand of policies to German economy. They have reduced corporate taxes, frozen workers’ wages, reduced benefits for the unemployed and pensioners, and increased workers’ contributions to health and social welfare programmes.

"All these measures have been presented as aimed at improving economic growth and employment," Albrecht Mueller, author of the bestseller ‘The Lies of Reform’ and a member of the ruling Social Democratic Party told IPS. "But the results of these policies are exactly the opposite; German economy has been stagnating for years, and unemployment has been rising."

Mueller said it is "curious" that instead of leading to a revision of policies, these failures "lead to a more rigid programme of deregulation and privatisation."

Mueller says the main burden on German economy is the continuing cost of reunification in 1990. More than 1.52 trillion dollars (a trillion is a million million) has been spent since then on the eastern part of the country. The money is being paid through a 5.5 percent surcharge on income tax.

Mueller says that "describing a country as deep in crisis is an essential part of the attack on social welfare programmes." His book makes a strong case that neo-liberal policies are failing.

Financial journalist Marc Brost wrote in the prestigious Die Zeit weekly that real wages for workers have stagnated since 1997, while they are asked to pay more for public and health services and face a substantial reduction in pensions when they retire. "No wonder Germans are plagued by fear of the future, and they refuse to consume, to save money for frightening times to come."

Most German economists and leaders, he said, are like "doctors prescribing medication to kill the patient, until the patient dies."

An example, he said is the new labour reform Hartz IV named after manager Peter Hartz who prescribed three sets of labour reforms earlier.

The ‘reform’ will bring sharp cuts to unemployment benefits. The government sees this as an incentive to seek employment. But six leading German economic institutes said in a report this week that the reform will have "negligible effect on economic growth and employment."