The IMF takes a look in the mirror, sort of.

A recent working paper from researchers at the International Monetary Fund makes painful reading for anyone familiar with the IMF’s long history of trying to compel countries around the world to follow whatever economic ideas are fashionable in elite circles in the West.

The paper analyses a list of key terms used in thousands of the IMF’s reports to identify the “economic narratives” which have infused its thinking since between 1978 and 2019 – that is, the period of the emergence, dominance and recent decline of free-market dogma.

The paper doesn’t try to assess why these particular narratives became dominant when they did. Nor does it acknowledge the influence of the IMF itself in pushing its favoured narratives onto numerous countries with too little concern for their social consequences. (The authors may well be aware of this criticism, to be fair, but only so much can be said in a paper published by the IMF itself).

Nonetheless, the paper’s analysis of key terms in IMF reports usefully underlines what has been obvious to the IMF’s many critics for decades: that the Fund jammed a cookie-cutter of policies onto very different countries with the aim of making them safe for “growth”, commonly meaning the enabling of profit-seeking private investment. It’s also useful to focus on the concept of “narratives” – i.e. to recognise that ways of talking about a topic are constructs which arise at a specific time and place, for particular reasons – as a counter to the epic flows of ex-cathedra bullshit that we’ve had to endure over the years from free-market economists.

Until the mid-1990s, the paper says, the dominant narrative in IMF reports was about “economic structure”, which was concerned with individual sectors of the economy and their relationship with each other. This narrative went into decline from the early 1980s, when the IMF lost interest in industrial policy, and the narrative of “structural reforms” started to pick up.

By the 1990s the Washington Consensus of privatisation, shrinking of states and market opening was dominant. The IMF played a central role in normalising such policies which continued to hold sway even after the Fund’s own concerns had to some extent evolved. Again, this is nothing new but it’s interesting to see the role of the Fund in normalising economic narratives being acknowledged here.

By the 2000s a new cluster of terms were dominant including “doing business” and “corruption”, alongside “competitiveness” and “foreign direct investment.”

It had become clear by this time that the Washington Consensus was failing to transform many countries in the way that policymakers in the West had assumed it would. A concern arose for “governance”, which was a coded way of complaining that poorer countries were too corrupt and badly run to make proper use of the private capital which was flowing in.

(I worked for an anti-corruption NGO at that time and I have to admit that we played into this framing of large-scale corruption as a flaw in modern globalised capitalism rather than a feature of it. I didn’t agree with the Washington Consensus at all, but at the time it seemed so powerful that it could only be tweaked at the edges. With hindsight, I should have been braver.)

The governance agenda looks now like an attempt to try and clean up a mess fermented by the Washington Consensus without challenging the latter’s basic premises. This agenda commonly portrayed corruption as an impediment to the efficient flow of private investment across borders. But the modern forms of corruption which we were trying to fight – systematic bribery by multinationals and the looting of state funds and assets on a huge scale by politicians – were themselves fostered by the policies promoted by the IMF, its allies at the World Bank and their backers among powerful Western governments.

Privatisation created a stream of valuable assets for politicians and their cronies to steal, while the liberalisation of capital flows made it far easier for bribes to flow in and stolen funds to flow out. At the same time, the possibilities of accessing profitable natural resources and markets, in settings which were weakly policed and sometimes quite chaotic, made it enticing for multinationals to pay bribes and commit other financial abuses with little risk of being held to account.

It’s not remotely a coincidence that offshore tax havens – used by corporations to dodge tax and by corrupt officials to hide their gains – began their great expansion around this time. The human cost of these abuses, in terms of lost public revenues and the enrichment and entrenchment of some terrible people in power, has been enormous.

Since the 2000s the Washington Consensus itself has given way to what the authors call the “Washington Constellation” – a ragbag of unrelated ideas including “doing business”, access to finance, reducing inequality and promoting tourism. Industrial policy, barely mentioned in IMF papers for twenty years, has made a comeback since 2010.

This incoherence is probably due to the fact that the financial crisis of 2007-2008 dealt a blow to free-market dogma which now looks mortal, but a new orthodoxy has yet to emerge in its place. What the new orthodoxy will look like doesn’t seem clear yet, though the efforts of Big Tech to cosy up to governments offer a hint of what the currently dominant business elites would like it to be.

There are other interesting findings in the paper. For example, the IMF was far more concerned about services than other sectors of the economy, even though the authors point out that manufacturing has often been the way that economies get bigger. In low-income countries, where much of the population still works on the land, the term “services” got more than twice as many mentions in IMF reports as agriculture. Cookie-cutter indeed.

The IMF publishes a copious stream of these working papers but they often seem to have little or no influence over what the Fund actually does. Still, it’s good to see recognition from at least one part of this gargantuan institution that economic orthodoxy, at any given moment, is a construct built by powerful interests and not a God-given truth to be blindly imposed at any cost.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s