Tunisia, IMF and USA - Economic Theory and Practice, Revised

Hey Barry:

Sometimes I just have to talk about economics. I'll try to be clear, but it's important; so, pass it along to the econs if you want.

Pretty sure it is established in fact - not in theory yet, but absolutely in fact - that the NeoCon, Washington Consensus your predecessor used to run our government is dead, dead, dead.

Now just because something is actually dead does not mean that it has no influence. 'S like the old story of the dinosaur which was so big that he was dead for a week before his tail knew about it.

Well, the folks at the IMF are jes another example of the dinosaur's tail. I'll tell you why in a sec.

Back in the day when Keynes created the IMF, it was a pretty good idea. It was a simple idea back then: if a national government ran into a patch of difficulty with negative trade balances - importing more than exporting - then the IMF would provide a short term loan while the government did the necessary things to redress the trade imbalances. After all, if the government did not fix the trade balances, then the markets would correct the situation by devaluing the offending country's currency. And, since economic growth is helped when exchange rates are stable, it made sense to try and stabilize exchange rates.

Things the government could do included raising tariffs, installing quotas and so forth so that the trade imbalance went away.

Well, since then, the NeoCon dogma has held that governments can't fix trade imbalances with any interference in trading patterns. What happens to exchange rates is not considered important. The Holy Grail has become Free Trade. You and I know that Free Trade does not work, but there are lots of places where the facts of reality have not penetrated the cloister of theoretical purity.

Recently, government financial problems have morphed to include problems from too much borrowing. Governments need to borrow because they spend a lot on social problems like pensions, medical care and demand stimulus. Well, the IMF has stepped up and will sometimes lend to those countries as well, with the same requirements from their version of NeoCon Dogma: cut social programs and balance the budget regardless of consequences. It's a bad idea.

One of the places where NeoCon Dogma lives is the economics department of the IMF. They still cling to the Free Trade and Cut Social Programs Dogma like a starving dog to a bone.

Anytime a national government has a trade balance problem or borrowing problem and asks the IMF for help, the IMF requires that the country accept a STRUCTURAL ADJUSTMENT policy in order to get help. Since the IMF is the only place in the world countries can get help, then countries that need help are forced to install IMF policies.

Well, Barry, the problem is that the IMF Structural Adjustment policies are cookie cutter NeoCon dogma. And, since NeoCon dogma is dead, then the IMF continues to require that countries install wrong policies.

Imagine that. It's exactly the same as if George Bush and his crowd are running the economics department of many countries.

To see what that means in practice, consider Tunisia. Here is a country that underwent a people's revolution to overthrow a corrupt and brutal regime and is now trying to establish a democracy that shows respect to the Tunisian people.

But, Barry, wherever they look for help, all they get is more NeoCon dogma.

They get it from the IMF and they get it from the United States. Now, they know that it is wrong advice, but they don't seem to have a choice unless we, the United States of America offers some more realistic advice.

Below is a link to an in depth study of the impact of economic policies on the government and people of Tunisia. The study was written in June by a group of American lawyers who visited Tunisia and met with many of the important groups in Tunisia.

Please show the link to Hillary and to your econs - we need to understand how we can really help the people in all the countries rebelling against corrupt regimes.

Link: http://www.mkeever.com/tunisia2011.pdf

It is The Report of the March 2011 Delegation of Attorneys to Tunisia from National Lawyers Guild (US), Haldane Society of Socialist Lawyers (UK), and Mazlumder (Turkey) Published: June 2011

Your pal,