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IMF report like the government has no stimulus plan, just inequitable cuts and bad bank bailouts – Morgan

3 July, 2009


Speaking in the Dáil this afternoon during a debate on the recently published International Monetary Fund (IMF) report on Ireland’s economy Sinn Féin Economic Spokesperson Arthur Morgan TD said; “there is no stimulus plan contained within the IMF report on the Irish economy, just proposals for more inequitable cuts and bad bank bailouts.”

The Louth TD said:

“If the recommendations of this report were to be implemented, we would see this economy spiral into depression. There is no stimulus here, just slash and burn policies. It is what we have come to expect from the IMF and this government.

“When the IMF was set up it was meant to monitor free markets and keep them from going astray. However very quickly, it developed a speciality for seeing financial crises as opportunities to push a right-wing free-market agenda. It became and advocate and tool for the likes of Margaret Thatcher and Ronald Reagan in the 1980s.

“I make this point because we have to look at this report in the context of who and what the IMF actually is. This is not a body any government should either be looking to for advice.

“At the time of the first emergency budget Sinn Féin stated that we could not tax or cut our way out of this situation. We pointed out that if job losses continued to mount and jobs weren’t created for those already unemployed, the situation would deteriorate further.

“Now, we have a contracting economy. Sinn Féin has been proved correct – earlier this week we saw the levels to which the economy has shrank and they are the worst since the 1960s. The measures this government continues to pursue with Bord Snip Nua will contract the economy even further.

“It’s important what the IMF does not say about the lead-up to this crisis. It focuses on how wages are allegedly too high and on how that has impacted on our competitiveness. It doesn’t point out that we have had soaring energy bills. It doesn’t point out that we don’t have universal broadband.

“It doesn’t point out that our infrastructure, from schools, to hospitals to rail and roads, has been described as third world because this government chose to invest tax breaks in private property development rather than useful assets for the state. All of these things and more have led to our loss of competitiveness.

“The orthodox line being pushed by the IMF, IBEC and their ilk, that wages and social welfare payments must be reduced is a very strategic, very cynical attempt to target the vulnerable not just in this crisis, but for years to come. This approach is short sighted and reverts to type.” ENDS

Full text of Deputy Arthur Morgan’s speech:

Ceann Comhairle, I welcome this opportunity to contribute to this debate here today.

Much of what is in this IMF report regarding the history of the economic crisis is correct. But for a moment I want to highlight what exactly the IMF is and its own economic history. It is important to do this so the government does not get away with using the recommendations of this disreputable body as cover for its own right wing agenda. If the recommendations of this report were to be implemented, we would see this economy spiral into depression. There is no stimulus here, just slash and burn policies. It is what we have come to expect from the IMF and this government.

Ironically, when the IMF was set up at Bretton Woods after the Second World War, it was meant to monitor free markets and keep them from going astray. John Maynard Keynes, an economist I subscribe to, was a proponent. However, very quickly, the IMF developed a speciality for seeing financial crises as opportunities to push a right-wing free-market agenda. It aligned itself to powerful country’s ideologies and became advocates and tools for the likes of Margaret Thatcher and Ronald Reagan in the 80s.

The IMF is a product of Milton Friedman’s and the Washington Consensus philosophy – the same economist who is behind, in spirit, the current banking crisis.

The IMF’s agenda entails low taxes, expenditure cuts, minimum government intervention and privatization.

The kind of ‘structural adjustment’ that the IMF advocates had a devastating impact on Latin American, Africa, Russia and Asia.  In one example, Argentina, Domingo Cavallo’s IMF backed plan sold off virtually all the riches of the country. By 1994, 90% of all state enterprises were gone and 700,000 public workers had been fired. Eventually half the country was pushed below the poverty line, and it became too expensive for indigenous industries to make goods in the country.

I am making a point of all this because we have to look at this report in the context of who and what the IMF actually is. This is not a body any government should either be looking to for advice or receiving criticism from. It is certainly not a body you should become economically dependent on, and this government presses us a step further in that direction each day.

As I said at the start, some of the basic facts set out in this report are correct. However, a lot of what the IMF says about what went wrong with the economy includes policy decisions that they would have advocated at the time. The property taxes that were constantly increased and expanded by government, the lack of regulation of the banking sector, these are both ideological positions that the IMF subscribes to. In the same way that both these policies failed and caused an economic crisis, the solutions offered by the IMF and currently being pursued by the government – expenditure cuts and economic contraction – are also destined to fail. Last October, in the first emergency budget brought by the government, Sinn Féin stated quite clearly that we could not tax or cut our way out of this situation. We pointed out that if job losses continued to mount and jobs weren’t created for those already unemployed, the situation would deteriorate further. The government did not share our view, choosing instead to engage in a book balancing exercise, the kind favoured by the IMF and ECB. Now, we have a contracting economy. Sinn Féin has been proved correct – earlier this week we saw the levels to which the economy has shrank and they are the worst since the 60s. The measures this government continues to pursue with Bord Snip Nua will contract the economy even further.

It’s important what the IMF does not say about the lead-up to this crisis. It focuses a lot on how wages are allegedly too high and on how that has impacted on our competitiveness. Surprise, surprise. It doesn’t point out that we have had soaring energy bills because the government has steadily increased indirect taxes like VAT on utility bills. It doesn’t point out that we don’t have universal broadband because the government privatised the main communications line provider and then left us at their mercy for broadband communication. It doesn’t point out that our infrastructure, from schools, to hospitals to rail and roads, has been described as third world because this government chose to invest tax breaks in private property development rather than useful assets for the state. All of these things and more have led to our loss of competitiveness. The orthodox line being pushed by the IMF, IBEC and their ilk, that wages and social welfare payments must be reduced is a very strategic, very cynical attempt to target the vulnerable not just in this crisis, but for years to come. It is also short-sighted and economically naïve. Our economy is contracting. Taking money out of people’s pockets so that they cannot consume, while we still have a heavy dependence on indirect taxes such as VAT, will contract it further.

Sinn Féin is not blind to the problems facing the country with regard to competitiveness, or indeed employers with regard to wages bills when they are barely able to keep things going, let alone turn a profit. That is why in our jobs retention and creation document last March we focused on ways to help employers through a subsidised jobs retention fund. We want to see the cost of doing business reduced and have made several proposals on how to do this. Slashing wages and social welfare won’t lift us out of this crisis. Making the right choices on budget day – going after those who can afford it – investing in infrastructure and public jobs, helping businesses keep afloat, stimulating the economy, will right this mess.

There is a way out of this crisis. Neither the IMF, nor this government, can see it. They are reverting to type. They want to strip the country of all economic activity, of all wealth, of all hope. Be careful Minister, reducing a deficit in a time of recession has rarely worked. Try to see some sense for all our sakes.

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