In an earlier article, we wrote that the International Monetary Fund (IMF) has been doing some kind of neoliberal revisionism. It has softened its dogmatic neo-liberal stand on capital liberalization, a key component of the triple neo-liberal agenda of trade and investment liberalization, economic deregulation, and privatization. In a 2016 article entitled “Neoliberalism: Oversold”, leading IMF researchers wrote that capital controls are sometimes needed to stop speculative vultures in damaging markets. The newly-elected Malaysian Prime Minister Mohamed Mahathir, who openly quarreled with the IMF at the height of the 1997-1998 Asian financial crisis on the importance of having these controls, must be chuckling.
However, leaders of heavily-indebted countries whose economies contracted as a result of the IMF’s liberalization dogma must be cursing. The Philippines had one too many contractionary episodes in the past as a result of a one-sided IMF prescription of peso devaluations sans any program leading to smooth recovery and industrial growth. These include the devaluation of the peso in the mid-1960s under the Macapagal Administration, the “floating peso” devaluation in the early 1970s under the Marcos Administration and the series of hyper devaluations in the first half of the 1980s, when the economy went into a recession and later, into a depression.
Now it appears that IMF has been doing more re-thinking and revisionism of some sorts. It has been tackling socio-economic issues that were once verboten in the halls of IMF: inequality, gender, corruption, climate change and social protection. These are issues that were passionately discussed by select Asian non-government representatives in an IMF workshop held this June in Makati. These NGO representatives were quite blunt in criticizing the harsh social and anti-people impact of IMF-World Bank policy conditionalities under the traditional neo-liberal “structural adjustment programs” (SAP). And yet, the IMF representatives in the workshop, led by Yongsheng Yang, the IMF Resident Representative in the Philippines, listened quietly to what the NGOs had to say.
Moreover, they revealed that the IMF, once singularly focused on the fiscal side of the economy and the application of the dreaded belt-tightening austerity program for countries experiencing balance of payments deficits, has been debating the social impact of SAP and other fiscal measures drawn up with the involvement of the IMF. The IMF Managing Director, Christian Lagarde, is now talking of the “human face” of economic adjustment and the importance of assessing the social dimension or the “macro-critical” impact of any adjustment. Thus, to IMF, corruption, which was hardly mentioned in past IMF papers (called in the 1990s as “moral hazards”), is “macro-critical”. Lagarde spoke as follows:
“…systemic corruption undermines the ability of states to deliver inclusive growth and lift people out of poverty. It is a corrosive force that eviscerates the vitality of business and stunts a country’s economic potential.”
Example:
“Think of a government spending taxpayer money on a glamorous, but unnecessary new convention center, whose ulterior purpose is to generate kick-backs.
“A year after construction begins, it turns out that funds in the social service coffers are somehow no longer available for their original beneficiaries.
“Over time, the money diverted from education or health care perpetuates inequality, and limits the possibility of better paying jobs and a better life.”
Why is the IMF, decades after its foundation after the end of World War II, is now tackling the social dimension of fiscal adjustment programs? The answer is obvious. The Washington Consensus ideology, worshipping on the altar of free trade and unvarnished neo-liberal economics, is under attack even within the United States and Europe. IMF’s twin, the World Bank, was the first to react, in the 1990s, when the Bank tried to market structural adjustments that address the displacement concerns of workers. At the turn of the millennium, the Bank even abandoned its obsession to promote the privatization of government-run social security systems, thanks partly to the objection of then Chief Bank Economist Joseph Stiglitz. Later, the Bank came up with a number of “social safety net” programs, the most significant of which is the “Conditional Cash Transfer” or CCT.
The IMF has been supporting the CCT initiative of the World Bank. It also asked its “Independent Evaluation Office” (IEO) to assess further IMF involvement in the area of “Social Protection” (SP). In 2017, the IEO recommended a deepening of the IMF role in “assessing the distributional and social impact of policy reforms on different groups of the population, particularly the poor and the vulnerable”. Along this line, the IEO also took the position that the IMF should maintain the IMF’s policy of supporting the CCT and other SP programs that specifically target the poor.
However, the IMF has expressed anxieties over the growing audacity of the World Bank to depart from this “targeting” framework in the delivery of SP to society. It noted that the Bank joined the International Labor Organization (ILO) in 2015 in declaring support for “universal and sustainable social protection”. The latter is close to the heart of trade unions and NGOs, which have been arguing that social protection is a basic human right that should be enjoyed by all and should, therefore, be designed to benefit all, without any exception. The IMF does not subscribe to the rights-based and universal social protection because the IMF is still tied to issues such as “cost efficiency” and “fiscal space” in support of any social program.
Obviously, more debates on the social and human dimension of structural adjustments and globalization are waiting in the study halls and board rooms of the IMF and World Bank, the leading promoters of the Washington Consensus in the 1980s-2000s. But one thing is clear: neo-liberalism, once reigning supreme in these institutions, is crumbling.