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Current Affairs

What's Wrong With A $400 Room, IMF
By Rakesh Krishnan Simha, May 2011 [[email protected]]

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The IMF  dare not preach austerity after the antics of its sexual predator chief,  Dominique Strauss-Kahn.

Dominique Strauss-Kahn, the International Monetary  Fund's managing director, sexually assaulted a maid in a $3,000-a-night suite  at the luxury Sofitel hotel in New York. Isn't this the same institution that  preaches austerity to nations around the world?
   
The IMF has a long history of hypocrisy, so it's hardly surprising that at a  time when the global economy is passing through a difficult time. The Fund was  being headed by the champagne socialist, Strauss-Kahn, who according to the  maid dragged her from room to room in a violent sex attack.

What sort of economics could this French serial sex  offender have possibly offered? A $3K splurge on a hotel room is small change  for Strauss-Kahn who is married to millionaire art heiress Anne Sinclair, and  owns a $5.6 million Paris apartment.

The IMF most certainly paid for his room, but even  if it didn't, it begs the question: Does Strauss-Kahn even understand the  meaning of austerity? How can a person known to hang his suits in the shower  and run the hot water for half an hour to steam remove the creases, empathize  with those who can't even afford clean drinking water?

The IMF is constantly asking desperately poor  countries to tighten their belts another notch until they run out of notches.  How this man became the head of this organization is worth investigating if  only to get an idea of the old boys’ network that runs the IMF and World Bank.
   
Also, having a European in charge of an institution whose largest borrower is  Europe was like having a fox in charge of a hen house.
 
But hypocrisy is ingrained into the IMF's DNA. This was quite evident during  what came to be known as the IMF Crisis in 1997 when Asian economies collapsed  in a heap after implementing its policies.
 
In the 1990's, flush with victory against the Soviet Union, the IMF launched  "fast track capitalism." This involved among others, the elimination  of restrictions on capital inflows, the encouragement of privatization, and  implementing a high interest rate regime to attract foreign investors and bank  capital into the securities markets.
 
Of course, what happened was something a 9th grader could have predicted.  Prices for goods and services shot up due to inflation and the high rates of  interest imposed by the IMF. Country after another, Indonesia, Thailand,  Malaysia, Laos, were flattened by the economic tsunami.
 
Faced with a global-scale disaster, the IMF came up with a "rescue  plan." It offered new loans so the nations could avoid defaulting.  However, the deal was conditional.
 
Author John Perkins writes in The Secret History of the American Empire,  "In essence, each country was required to allow local banks and financial  institutions to fail, drastically reduce government spending, cut food and fuel  subsidies and other services for the poor, and raise interest rates still  higher. In many cases they were also told to privatize and sell more of their  national assets to multinational corporations."
 
For instance, the Russians, fairly new to capitalism, were told to let their  banks, factories and financial institutions close down, if they failed in the  market. Of course, the Russians didn't buy the Fund's line.
 
But in smaller countries in Asia and Latin America, as a direct result, an  untold number of people, especially children, died of malnutrition, starvation,  and disease. Many more suffered long-term consequences from lack of health  care, education, housing, and other social services.
 
According to economists, the countries that had refused to yield to the IMF  demands did best. China, for instance, took a very different course from that  advocated by the IMF. It channelled foreign investments into factories rather  than securities, thus insulating the country against future capital flight and  also providing employment and other spin-off benefits. India, Taiwan, and  Singapore defied the IMF; their economies remained robust.

These days, IMF economists are rarely welcome in Asia and Latin America, which  are in any case experiencing rapid economic growth through South-South trade.  Locked out of both these geographies, the Fund is attempting to stay in  business by peddling the same snake oil economics to other regions where its  image hasn't been ruined yet, such as the PIGS (Portugal, Ireland, Spain, and  Greece) and lately New Zealand.
 
When nations can lend each other and when very long-term loans are available at  low rates of interest, it begs the question: Who needs the IMF?
 
If that isn't convincing enough for you, listen to what Nobel Prize (Economics)  winner Joseph Stiglitz, ironically the former chief economist of the World  Bank, the IMF's twin sister, says in his book Globalization and Its  Discontents:

"To make the IMF's programs seem to work, to  make the numbers 'add up,' economic forecasts have to be adjusted. Many users  of these numbers do not realize that they are not like ordinary forecasts; in  these instances GDP forecasts are not based on a sophisticated statistical  model, or even on the best estimates of those who know the economy well, but  are merely the numbers that have been negotiated as part of an IMF  program."

Essentially, the IMF is cooking the books to suit  its agenda - enriching American and European businesses.

$400 can fetch you an awfully nice room in a great  hotel in New York. If the IMF believes that's too low brow for its honchos,  then it should not be in the lending business. At the very least, it should  stop preaching austerity.

About the  author: Rakesh Krishnan Simha is a features writer at New Zealand's leading  media house.

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