IMF Report Admits IMF's Obsession with Capitalism Is Killing Prosperity
"By releasing this report, the IMF has shown that 'trickle-down' economics is dead; you cannot rely on the spoils of the extremely wealthy to benefit the rest of us."
IMF Report Admits IMF's Obsession with Capitalism Is Killing Prosperity
By Jon Queally / commondreams.org
Jun 16, 2015

In light of how the International Monetary Fund has spent most of its existence parading around the world telling governments to make their economies more friendly for multinational corporations by suppressing wages, restricting pensions, liberalizing industries, and more or less advocating they ignore the popular will of workers and the less fortunate—all in the name of market capitalism and endless economic growth—a new report released by the IMF on Monday contains an ironic warning: stop doing all that.

"This reinforces Oxfam’s call on how we need to reduce the income gap between the haves and have-nots, and scrutinize why the richest 10% and top 1% have so much wealth. By releasing this report, the IMF has shown that 'trickle-down' economics is dead; you cannot rely on the spoils of the extremely wealthy to benefit the rest of us."
—Nicolas Mombrial, Oxfam International

Though it perpetuates the idea that economic growth is the master to whom all should bow, the new research—conducted by the IMF's own economists and submitted under the title Causes and Consequences of Inequality (pdf)—argues that many of the policies promoted by the IMF have actually harmed nations by exacerbating widespread economic inequality. As many have noted, current disparities between the world's richest and poorest represent a nearly unprecedented level of global inequality which the report described as the "defining challenge of our time."

In order to strengthen economies, the report declares, nations should admit that "trickle-down" theories of wealth and prosperity do not work. In lieu of those, the study recommends raising wages and living standards for the bottom 20 percent, installing more progressive tax structures, improving worker protections, and instituting policies specifically designed to bolster the middle class.

"Fighting inequality is not just an issue of fairness but an economic necessity," said Nicolas Mombrial of Oxfam International in response to the report. "And that’s not Oxfam speaking, but the International Monetary Fund."

This is not the first time the IMF's own research has bolstered the arguments of its biggest critics. According to the International Business Times, the new analysis on inequality "echoes previous IMF research that show that redistributive policies have a positive effect on countries’ economic output."

But as the Guardian's economics editor Larry Elliott notes, the new paper creates obvious "tension between the IMF’s economic analysis and the more hardline policy advice" it continually gives to countries seeking foreign assistance or development funds. With Greece as the most obvious example, Elliott cites details from the report and writes:

During its negotiations with Athens, the IMF has been seeking to weaken workers’ rights, but the research paper found that the easing of labor market regulations was associated with greater inequality and a boost to the incomes of the richest 10%.

“This result is consistent with forthcoming IMF work, which finds the weakening of unions is associated with a higher top 10% income share for a smaller sample of advanced economies,” said the study.

“Indeed, empirical estimations using more detailed data for Organization for Economic Cooperation and Development countries [34 of the world’s richest nations] suggest that, in line with other forthcoming IMF work, more lax hiring and firing regulations, lower minimum wages relative to the median wage, and less prevalent collective bargaining and trade unions are associated with higher market inequality.”

The study said there was growing evidence to suggest that rising influence of the rich and stagnant incomes of the poor and middle classes caused financial crises, hurting both short- and long-term growth.

No one should be fooled into thinking that the new research aims to alter the IMF's central commitment to advancing the financial interests of the global elite.

In fact, part of the argument presented in the paper is that such enormous levels of global economic inequality could seriously undermine the institution's public defense of capitalism's overall supremacy.  "For example," the paper states, "[too much inequality] can lead to a backlash against  growth-enhancing economic liberalization and fuel protectionist pressures against globalization and  market-oriented reforms."

According to a recent report by Oxfam International, almost half the world’s wealth is owned by one percent of the population, while the bottom half of the world’s population owns the same wealth as the richest 85 people in the world. For Oxfam's Mombrial, who heads the international anti-poverty group's office in Washington D.C., the IMF's report is a welcome development that should put a nail in the coffin of the austerity-driven policies prescribed by governments and powerful financial institutions like the IMF, World Bank, and others.

"The IMF proves that making the rich richer does not work for growth, while focusing on the poor and the middle class does," Mombrial said. "This reinforces Oxfam’s call on how we need to reduce the income gap between the haves and have-nots, and scrutinize why the richest 10 percent and top 1 percent have so much wealth. By releasing this report, the IMF has shown that 'trickle-down' economics is dead; you cannot rely on the spoils of the extremely wealthy to benefit the rest of us. Governments must urgently refocus their policies to close the gap between the richest and the rest if economies and societies are to grow."

As Oxfam and other international campaigners have been saying it for decades, he concluded, "The IMF has set off the alarm for governments to wake up and start actively closing the inequality gap, not just between the rich and poor, but for the middle class too. Their message to them is pretty clear: if you want growth, you'd better invest in the poor, invest in essential services and promote redistributive tax policies."

4.2 ·
2
Trending Today
What Happens When You Rebel Against the Herd
Sofo Archon · 19,439 views today · Are You Truly Living Your Life? You live, but are you living the way you want to live, or the way others want you to live? You choose, but are your choices based on...
10 Words Every Girl Should Learn
Soraya Chemaly · 7,939 views today · "Stop interrupting me."  "I just said that." "No explanation needed." In fifth grade, I won the school courtesy prize. In other words, I won an award for being polite. My...
How Norway Avoided Becoming a Fascist State
George Lakey · 4,391 views today · Instead of falling to the Nazi party, Norway broke through to a social democracy. Their history shows us polarization is nothing to despair over.
How a Lack of Touch Is Destroying Men
Mark Green · 4,073 views today · Why Men Need More Platonic Touch in their Lives
Murdoch and Trump, Sitting at the Tee, S-C-H-E-M-I-N-G
Frankie Boyle · 3,919 views today · Say what you like about Donald Trump but he's already done things people said were impossible, like made Twitter worse. Looking back, the Harambe situation is the closest...
The Coming War on China
John Pilger · 3,906 views today · A major US military build-up – including nuclear weapons – is under way in Asia and the Pacific with the purpose of confronting China. John Pilger raises the alarm on an...
Artificial Ethics and the Search for Intelligence
5 min · 2,151 views today · How to stop a robot turning evil.  It's 2027 and Mental Endeavours Ltd has a problem with their flagship robot Günther. How do you program an intelligent machine not to...
Everything We Think We Know About Addiction Is Wrong
6 min · 2,131 views today · What causes addiction? Easy, right? Drugs cause addiction. But maybe it is not that simple. This video is adapted from Johann Hari's New York Times best-selling book 'Chasing...
Real Underground Kingdom That Has Existed for Millions of Years Went Unnoticed, Until Recently...
Kid Krunk · 1,906 views today · 28 Stunning Photos Of The World’s Largest Cave
What Would It Take to Stop the Raids?
CrimethInc. Ex-Workers Collective · 1,741 views today · Responding Effectively to the Immigration and Customs Enforcement (ICE) Attacks
Thich Nhat Hanh: How We Can Learn to Love Our Enemies
5 min · 1,203 views today · This is a short excerpt from Peacemaking. I often think about this story when I think about the kind of activism I would like to bring into this world. I want to help build a...
Your Lifestyle Has Already Been Designed (The Real Reason For The Forty-Hour Workweek)
David Cain · 1,196 views today · Well I’m in the working world again. I’ve found myself a well-paying gig in the engineering industry, and life finally feels like it’s returning to normal after my nine months...
Simple Social Experiment Shows We Are More Than The Boxes People Put Us In
3 min · 1,154 views today · We live in a time where we are quick to put people in boxes. Maybe we have more in common than what we think?
John Lennon's "Imagine," Made Into a Comic Strip
John Lennon. Art by Pablo Stanley · 1,066 views today · This is easily the best comic strip ever made.  Pabl
I Am Not Your Negro (2017)
3 min · 1,041 views today · In his new film, director Raoul Peck envisions the book James Baldwin never finished - a radical narration about race in America, using the writer's original words. He draws...
A Hauntingly Beautiful Short Film About Life and Death
5 min · 785 views today · The Life of Death is a touching handdrawn animation about the day Death fell in love with Life.
How Wolves Change Rivers
4 min · 757 views today · When wolves were reintroduced to Yellowstone National Park in the United States after being absent nearly 70 years, the most remarkable "trophic cascade" occurred. What is a...
Today I Rise: This Beautiful Short Film Is Like a Love Poem For Your Heart and Soul
4 min · 714 views today · "The world is missing what I am ready to give: My Wisdom, My Sweetness, My Love and My hunger for Peace." "Where are you? Where are you, little girl with broken wings but full...
What Makes Call-Out Culture So Toxic
Asam Ahmad · 688 views today · Call-out culture refers to the tendency among progressives, radicals, activists, and community organizers to publicly name instances or patterns of oppressive behaviour and...
Surviving Capitalist Depression
Michael Emero · 539 views today · We live in a toxic society filled with toxic people. Even the ones with the best hearts- including ourselves- have been raised in ignorance, with disinformation. Our examples...
Load More
What's Next
Like us on Facebook?
IMF Report Admits IMF's Obsession with Capitalism Is Killing Prosperity