Is the IMF’s Neoliberal Base Unraveling?
Former financial regulator Bill Black discusses the significance of the criminal charges faced by IMF head Christine Lagarde and its economists preaching stimulus over austerity
JESSICA DESVARIEUX, TRNN: Welcome to the Real News Network. I’m Jessica Desvarieux in Washington. And welcome to this edition of the Bill Black Report.
Now joining us is Bill Black. Bill is an associate professor of economics and law at the University of Missouri, Kansas City. He’s also a white collar criminologist and former financial regulator and author of the book, the Best Way to Rob a Bank is to Own One. And of course he’s a regular contributor to the Real News.
Thanks for joining us, Bill.
BILL BLACK: Thank you.
DESVARIEUX: So Bill, lot of news coming out of the IMF this week. What have you been tracking exactly?
BLACK: Okay, so here’s the 30 second background. IMF stands for International Monetary Fund. It’s an international group that is supposed to assist countries that are suffering an acute financial crisis as opposed to the World Bank which is supposed to help folk more generally in development. And by tradition, the World Bank is run by an American and the IMF is run by a European. In this case by a series of French Politicians, currently Madame Lagarde and it’s the IMF and she have gotten into a series of major embarrassments recently.
First, she is being charged with a crime while she sits as head of the IMF and this crime is under French law. From her role earlier as a minister in the French government where there was a suit emerging against a bank and that bank got into enough economic trouble that it was bailed out by the French government, became a public bank and Lagarde allowed claimants against this bank who were political allies of her and her party to sue the French government. Not in court with the normal defenses you would have but through an arbitration system where unsurprisingly the French lost big time. This is ultimately reversed by a court. But this is seen as a scandal in which she attempted to bailout a major creditor by intervening to help them take an action that she should’ve been moving exactly the opposite direction to protect French funds. So it’s a weird crime from US perspective and the charge is negligence as opposed to deliberate crime. But it’s still obviously a major embarrassment.
Second big thing. The IMF has long been criticized, including by a Nobel Prize winner in economics, as being staffed, and I quote, “by third-rate economists”. And has been traditionally, while supposedly helping nations in economic crisis, it has been a very neoliberal hammer that says, hey actually we’re going to force your head of state out of state. And hey we don’t like a whole bunch of policies that you have that we think are not good for other European nations and such and so you are going to change all those policies.
DESVARIEUX: Like what they did in Greece?
BLACK: Like what they did in Greece. But even worse in not–in literally 60-70 different nations. And this is very tied in with the Washington consensus as well. You know pushing all these nations towards very right wing policies. Anyway, so IMF with all those problems has at least had a standing doctrine that says you can’t hammer the government in this way without giving it–and force it into position where it is in a long run debt trap where it can’t get out. Cause that’s just stupid right? And so when it came to Greece and the European Union wanted the IMF involved in the supposed bailout of the Greeks which is really a bailout of mostly German but not exclusively German banks. And they had to ignore this requirement.
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