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Monday, December 27, 2004
HariWatch I

When Johann Hari praised to the skies the economically illiterate chapters of Francis Wheen's book How Mumbo-Jumbo Conquered the World, which attributed the high GDP growth of 1945-1973 to the Keynesian genius of such men as Harold Wilson and George Brown without so much as mentioning the period's high productivity growth, one got a sense that he was somewhat lacking in economic knowledge. It's a thought that recurs today.

"Why are we inflicting this failed market fundamentalism on Iraq?" he asks in the Independent, charging that the coalition's economic strategy is even more important than its military shortcomings in explaining Western failures in post-Saddam Iraq.

There are some odd moments, like his description of such policies as a 15 per cent flat tax on incomes as "not democracy ... [but] market fundamentalism" as if it's not possible to have both democracy and taxes which are modest and paid in proportion to earnings.

But central to the whole case is the idea that the operations of the International Monetary Fund are part of a right-wing obsession with laissez-faire capitalism, and that it is this obsession ultimately to blame for the failures of so many places where the IMF has recently intervened.

[The coalition has] imposed on Iraq a programme of ultra-neoliberal reforms that have brought economic collapse to every country they have been inflicted upon.

... [T]he economic model spread by the US and British governments - and their proxy, the IMF - cannot bring democracy. Indeed, it has been proven repeatedly to spread unemployment, disaffection and the hollowing out of meaningful self-government.

This is a common theme of anti-capitalist and anti-globalist rhetoric: when you want to discredit free trade and the reduction of regulatory and fiscal burdens, you attack the IMF as if the Fund is in free marketeers' pockets, and is somehow doing just as they wish. George Monbiot does it regularly, and did it at great length in The Age of Consent.

But for the life of me, I just cannot see who all these right-wing free marketeers who support and revere the IMF are.

By contrast, the list of full-blooded free-marketeers who have little but scorn for the IMF is long and eminent. In Why Government is the Problem, Milton Friedman derides the tendency of government institutions to find new roles for themselves after their original reason for existing disappears. His example? The way the IMF turned in the early 1970s from Bretton Woods manager to international lender of last resort. In Statecraft, Margaret Thatcher is a thorough scourge of the 'moral hazard' she says the IMF creates by making clear to irresponsible banks and governments that it is there to clean up any mess they make. She then explores various options for reducing the IMF's role - "There is, though, a strong case that it should simply be abolished" - talking up Alan Walters' proposal that it be prevented from lending money entirely. She concludes by saying that "The proposition which does not attract me at all is expanding the IMF's functions". Supply-siders like Jude Wanniski are infamous for their loathing of the IMF. And Paul Krugman has written matter-of-factly of the conservative tendency to view the IMF "as having a demonic ability to wreak economic havoc".

Fundamentally, the International Monetary Fund works to bail out governments that follow ineffective and unworkable policies and then suffer the consequences. It's not just a state institution, but an institution of an international state, which works to intervene in economies all over the world. What is right-wing about that? Where is the love of laissez-faire there? No wonder conservative scorn is so strong, and so comprehensive. There are 'market fundamentalists' who love economies national and international to be free, and then there are supporters of the IMF's very different operations, and rarely if ever the twain shall meet. For Johann Hari to base an article and his view of Iraq's greatest difficulties on the opposite assumption is a folly which even the least of research could immediately have corrected.

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