The IMF has admitted that some of the decisions it made in the wake of the 2007-to-2008 financial crisis were wrong and that the 130 billion euro (US$171.5 billion) first bailout of Greece was “bungled.” Well, yes. If it had not been a mistake, then it would have been the only bailout and everyone in Greece would have lived happily ever after.
Actually, the IMF has not quite admitted that it messed things up. It has said instead that it went along with its partners in “the troika” — the European Commission (EC) and the European Central Bank (EBC) — when it should not have. The EC and the ECB put the interests of the eurozone before the interests of Greece, the IMF says.
The EC and the ECB, in turn, clutch their pearls and splutter with horror that they could be accused of something so petty as self-preservation.
The IMF also admits that it “underestimated” the effect austerity would have on Greece. Obviously, the rest of the troika takes no issue with that. Even those who substitute “kick up the arse to all the lazy scroungers” whenever they encounter the word “austerity,” have cottoned on to the fact that the word can only be intoned with facial features locked into a suitably tragic mask.
Yet, mealy-mouthed and hotly contested as this minor mea culpa is, it is still a sign that financial institutions may slowly be coming round to the idea that they are the problem.
They know the crash was a debt-bubble that burst. What they do not seem to acknowledge is that the merry days of reckless lending are never going to return; even if they do, the same thing will happen again, but more quickly and more savagely.
The thing is this: The crash was a write-off, not a repair job. The response from the start should have been a wholesale re-evaluation of the way in which wealth is created and distributed around the globe, a “structural adjustment,” as the philosopher John Gray has said all along.
The IMF exists to lend money to governments, so it is comic that it wags its finger at governments that run up debt. And, of course, its loans famously come with strings attached: Adopt a free-market economy, or strengthen the one you have, kissing goodbye to the “Big State.”
Yet, the irony is painful. Neoliberal ideology insists that states are too big and cumbersome, too centralized and faceless, to be efficient and responsive. I agree. The problem is that the ruthless sentimentalists of neoliberalism like to tell themselves — and anyone else who will listen — that removing the dead hand of state control frees the individual citizen to be entrepreneurial and productive. Instead, it places the financially powerful beyond any state, in an international elite that makes its own rules and holds governments to ransom. That is what the financial crisis was all about.
The ransom was paid, and as a result, governments have been obliged to limit their activities yet further — some setting about the task with greater relish than others. Now the task, supposedly, is to get the free market up and running again.
However, the basic problem is this: It costs a lot of money to cultivate a market — a group of consumers — and the more sophisticated the market is, the more expensive it is to cultivate them. A developed market needs to be populated with educated, healthy, cultured, law-abiding and financially secure people — people who expect to be well-paid themselves, having been brought up believing in material aspiration, as consumers need to be.