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Elite hauteur: Greece, Niger and the IMF

It may be time to remind ourselves of the parallels between today's IMF-Merkel-Cameron package for Europe’s nations in the red, and the structural adjustment policies of the 1980's. Meanwhile, the centre has everything to gain from the misery of the periphery if only everyone can be persuaded to hold their nerve.

Ash Amin
12 June 2012

In her widely cited interview with The Guardian on 26 May, the head of the IMF Christine Lagarde demanded that Greece should pay back the debt it owes, forget about defaulting, and put its house in order by getting people to pay their taxes.  She swept aside the suggestion that Greeks might be suffering real hardship by choosing to side with the plight of the genuinely poor in beleaguered countries such as Niger.  She added to the chorus of elite opinion circulating for some decades now that failing states in need of support be treated like errant children, taught to become responsible, learn to follow instructions, recognise their misdeeds, abandon past habits.  Infantilising governments and peoples is the precursor to reform in the image of the authorising centre.  

This is how third world countries that found themselves heavily in debt during the 1980s were treated, and later Central and East European countries trying to revive their economies in the early 1990s after the collapse of state socialism and in the face of the IMF dismantling the state while instituting deep austerity cuts, along with a group of East Asian and Latin American countries that suffered deep currency crises in the early 2000s.  Today, it is the turn of weak Eurozone countries such as Greece caught out by bad debts and stilted growth.  Disturbed by market instabilities in an interdependent global economy, but also ready to pounce on opportunity, the richer market economies and their ideologues and bankers such as the IMF have worked hard over the last forty years to caricature countries that don’t tow the line or play the market game in their own way. 

Moral evaluation is the means by which expanding elites seek to discipline the operating environment, reassert their authority, and position themselves for future gain.  And this, above all during periods of economic turbulence and uncertainty, when the balance between crisis as opportunity or threat hovers around stories of good and bad governance that guide institutional and financial allocations.  If we see Lagarde’s comments in this light, that is, as the play of the powerful to rearrange the chessboard and rewrite its rules, the comparison between Niger and Greece rings hollow, since one script of moral adjudication of economic worth endures. 

In the 1980s, after a decade of liberal investment by cash-rich transnational banks to a plethora of developing countries including Niger to fund the greed of wasteful local elites but also modernisation programmes and market openings that would ultimately favour transnational corporations and exporting nations, donors and their natural allies in the west began to fret about getting their money back.  The loans were huge and the interest rates high and long-term, while the recipients scrambled around or borrowed more to service mounting debts at a time of world economic contraction playing into the hands of global corporations, the strongest economies and a small number of newly industrialising countries.  In 1980, the total debt of developing countries stood at US$ 567 billion, and though by 1992 some US$ 16662 billion had been paid back, the owed debt stood at US$ 1419.  Rising interest rates were forcing the debtor countries to take out new loans to avoid bankruptcy.  A swathe of developing countries attempted to default or renegotiate but were not allowed to do so.  Wall Street, the banks, the International Financial Institutions and the US Federal Reserve kicked in to restructure the debt, but also to restructure debtor economies to ensure that over the next 20 years they would pay and repay.  This outcome is pertinent to Greece, which will be bled dry by the same or similar actors such as the European Central Bank and the German Treasury. 

What started out as a process of world economic expansion with elite approval, ended up as a fiasco with elite condemnation of the outcome, typically blaming the borrowers and not the willing lenders.  In the midst of neoliberal reform and austerity-cum-autarchy measures led by Thatcher and Reagan, the IMF, World Bank and other international organisations responded to the problem of the ‘failing’ state with the medicine of  ‘structural adjustment’.  Any new loans or aid came with stringent conditions, tied to privatisation, deregulation, ‘good governance’, pro-market reform, state withdrawal, and cuts in social expenditure, all directed towards creating a lean and mean economy able in the long term to compete its way out of stagnation, and a polity willing and able to repay its debts.  The result in the short term was widespread social misery and disenchantment in the bailout countries as public expenditure and economic growth dried up, and inevitably the misery became long-term as markets either failed to form or by passed the needs of the poor, states struggled or abused their power, civic energies sapped, and lender dogmas persisted.  

As summarised by Herbert Jauch of the Labour Resource and Research Institute in Namibia, between 1980 and 1992 developing countries lost 52% of their export income due to deteriorating prices; domestic manufacturing often collapsed; and imported consumer goods replaced domestic production; key national assets were bought up by international companies; tax reforms hit middle and low-income groups; high interest rates made most goods unaffordable to the majority; elimination of price controls and subsidies, coupled with devaluation led to punitive price increases; cuts in public sector employment coupled with bankruptcies of local companies led to a hike in unemployment; cost-recovery programmes led to cuts in primary health care, education and other areas of welfare; and liberalisation of the labour market pushed down wages along with encouraging the informal and illegal sector.    

There is something eerily prescient about these outcomes, which the likes of the IMF blame on insufficient implementation of structural adjustment and enduring corruption and cronyism, while many others including NGOs on the ground and economists such as Joseph Stiglitz, once Chief economist of the World Bank, trace to the strictures of structural adjustment.  Either way, decades of growth, wellbeing and equality were wiped out.  Arguably, Niger’s economic, social and political woes today (the country is second bottom on the UN’s human development index), along with those of many a developing country, can be traced to the debt-structural adjustment nexus of the 1980s and 1990s, an outcome conveniently ignored by Ms Lagarde.  But then, elites with a moral mission are not known to reflect on the truths of past practice, which is why the parallels between structural adjustment and today’s IMF-Merkel-Cameron package for Europe’s nations in the red can be conveniently forgotten.  Willing money poured into the fast expanding European periphery, there was a financial collapse, growth was halted, the debts were exposed, and the nations have been instructed – in exchange for bailout capital – to privatise, introduce market reforms, reduce the state, raise taxes, cut back social expenditure, govern responsibly.  

If Africa’s and Latin America’s experience of structural adjustment ended social mobility and wellbeing until states renegotiated the debt burden and embarked on socially-centred and expansionary economic policies, so too will Europe’s structural adjustment policies, until states defect and regain a measure of economic autonomy.  For neoliberal elites, crises are a way of reaffirming the cause, proclaiming against all the evidence that structural adjustment (and ‘shock therapy’ in East and Central Europe after 1989 based on almost identical policy proposals) worked.  Why?  Because the centre has everything to gain from the misery of the periphery if only everyone can be persuaded to hold their nerve.  This is why telling the story as one of winners, losers, insurgents, and deserving subjects turns out to be so important.  This is why telling the Greeks to get on their bikes is thought of as the best thing a parent should tell an errant child.

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