Monday, 20 April 2009

Loan recipients risk a Friedmanite tourniquet, cutting off their economic lifeblood

Polly Toynbee on the IMF and developing nations – ‘Wall Street wounded Ghana.  IMF tonic could hurt it more’ 
Small but steady growth has been undermined by a banking crisis far away.  Now is a test of whether G20 aid will really help [...]

This is a good place to survey what Wall Street and the City did to the world.  Ghana, which has met its millennium goals on children in primary education and cutting poverty, has been an economic and political success story, with high growth.  A centre-left government has just taken over after hard-fought but peaceful elections.  It is better protected than some, the prices of its gold and cocoa holding up in the recession.  Offshore oil will flow in a few years.

But last year world food and oil prices soared.  […]  Oxfam economists point out that this was not caused by profligacy, but by external events last year.  A further source of bitterness: if rich countries had kept their 2005 Gleneagles promises, as Britain did, Ghana would have received $1bn, with no need to borrow at all.

Where should Ghana turn?  To the IMF, of course, now the G20 has swelled its treasury.  But there is deep political and public resistance after previous bad experience.  Remember how humiliated Britain felt going cap in hand to the fund in 1976.  Ghanaians know how World Bank and IMF largesse came with neoliberal quack remedies.

Cutting public services, making the poor poorer, putting cash crops and trade before welfare was the old IMF way.  It was the IMF that insisted on meters for Ghana's water supply, demanding full cash recovery for the service, steeply raising costs for the poorest.  The World Bank insisted on a private insurance model for Ghana's health service that has been administratively expensive and wasteful.  The new government rejects it, promising free healthcare for children.  The IMF wants subsidies for electricity removed, again hitting the poorest hardest.  A market policy of making individuals pay full cost for vital services instead of general taxation has made the IMF hated; Ghana has now voted for more social democratic solutions.  Freedom from the IMF feels like a second freedom from colonialism to many countries.  […]

Arnold Mcintyre, the IMF's representative in Ghana, insists that it would be entirely up to the government to propose its own measures.  This is, to put it politely, disingenuous.


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