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‘Payback time’: Lagarde’s Myths

posted 28 May 2012, 10:12 by Admin uk

By Mick Brooks       

Christine Lagarde, the managing director of the International Monetary Fund (IMF) was interviewed by the Guardian (26.05.12). The interview was treated by Lagarde as part of the unremitting pressure being put on the Greek people from the international establishment to vote for the parties supporting the 2012 bailout in the coming elections in June.      

Greece has seen its economy collapse by 20% since the world crisis struck. The country is deep in debt and creditors are demanding the Greek people shoulder further hardship as the price of their ‘rescue’. The troika (the IMF, European Central Bank (ECB) and European Commission), who have been imposing the austerity programme, are demanding further wage cuts, pension cuts, cuts in public spending and faster privatisation as the price of the latest bailout.

Billed by the Guardian as “the smiling assassin” Lagarde’s heartless remarks about the Greeks are typical of the myths being spread by the representatives of world capitalism to get people in Greece and all over the world to accept penury as necessary and inevitable. Lagarde treats Greece as a spoiled and wilful child that has to be made to take its nasty medicine ‘because it’s good for you’. 

In fact Greece is a country divided, like Britain, the USA and France, along class lines. When asked about the cuts in public services that the IMF insists on imposing, she blames the Greek people, declaring repeatedly, “They should also help themselves, by all paying their tax.” Is that it? Is the problem just that all Greeks are tax dodgers?

 Workers employed in a public or private sector workplace in Greece pay income tax automatically, just like British, American or French workers. They have no choice. It is deducted at source. When they buy goods in a shop, they pay the Value Added Tax (VAT). How can they not pay?

Greek millionaires do not pay tax. Instead they employ expensive accountants to dodge their obligations. This is very expensive for the Greek state. Because the rich don’t pay their share it also means that the resulting restricted budget spending imposes hardships upon poor Greeks, who are at the sharp end of cuts in public services.

This tax dodging by the rich is not a Greek characteristic. It is a characteristic of the rich and of big business. Vodafone and Amazon in the UK for instance are notorious tax dodgers. The Tax Justice Network estimates that the British Treasury loses £120bn a year in the ‘tax gap’ – more than £25bn in taxes avoided, £70bn evaded (a criminal offence) and £28bn uncollected.

Lagarde was asked what Greek children could have possibly have done so wrong that the IMF is punishing them so that their mothers now can’t afford the services of midwives and the price of life-saving drugs. She replied as follows: “I think more of the little kids from a school in a little village in Niger who get teaching two hours a day, sharing one chair for three of them, and who are very keen to get an education.”

This is emotional blackmail. It is also tommy rot. The IMF is not an institution that has ever lifted a finger to help poor kids in sub-Saharan Africa. On the contrary. In the 1970s the IMF sought to impose Structural Adjustment Programmes (SAPs) upon the people of the poorest countries, including almost the whole of Africa. These countries were in debt, you see, just like Greece now. The SAP policies were abandonment of food subsidies and price controls, no protective tariffs or subsidised fertilisers for local farmers, open house for international business to come in and drastic slashing of public services (including education). Does this remind you perhaps of the troika’s ‘cure’ for Greek debts?

The result of the austerity was hundreds of ‘IMF riots’ (as they were called) all over the less developed world. Some achieved their goals. In 1987 President Kaunda of Zambia was forced to reintroduce price controls on food prices. The World Bank concluded, “The early demise... of the adjustment package imposed by the IMF resulted from an unrealistic ...assumption that the majority of middle and lower income urban Zambians would tolerate pauperisation.” Isn’t it also an unrealistic assumption that the Greek people will tolerate pauperisation at the hands of Lagarde and the rest of the gang?

The Guardian put to Lagarde that the Greeks have had a nice time and it was now payback time. “That’s right,” she agreed completely. This the essence of the case put by the defenders of capitalist austerity. The Greeks, and other feckless South Europeans, partied away on loans funded by the industrious North Europeans. Now it’s payback time. This is racist caricature posing as political analysis. In fact, of course, Greeks have on average much lower living standards than Germans and other North Europeans, and work longer hours.

Here is the reality. The crisis of capitalism from 2008 caused a drop in government revenues and a steep rise in outgoings all over the world (not just in countries bordering the Mediterranean). Many of the loans from French and German banks in particular went to subsidise a Greek government debt swollen on account of this capitalist crisis. Greek government debt stood in 2012 at an insupportable 166% of Gross Domestic product (GDP). The crisis was not caused by the Greek government. It was precipitated by the greed and stupidity of the global banks.

International financial institutions also lent to Greek banks so that Greek consumers could borrow more. The banks did so, it goes without saying, in order to make money. In fact they were panting with greed at the time. Many Greeks lost their jobs on account of the Great Recession (triggered by the banking crisis, don’t forget) and couldn’t pay their debts to the banks. In other words the banks screwed up. Tough, you might say.

Now the banks want us to bail them out again. If anyone is behaving like a spoiled child it is them. They learned in 2008 that they can blackmail capitalist governments to rescue them with taxpayers’ money. So they’re back for more. The international financial establishment is desperate to bail out the banks. It is they who are really being rescued. That’s what it’s all about. They do not care about the welfare of the Greek people. They can go to hell.

Occasionally there is a glimmer of recognition that this is the case. Here’s the Guardian leader (28.05.12): “If this is a morality tale, it is not Ms Lagarde’s yarn about northern v southern Europe – but about out-of-control banks, for whom the rest of us are now having to pay.”

The pity is that the leader stops there. It doesn’t ask the obvious question. Why should we have to pay, and keep on paying? Why can’t we stop the banks being out-of-control? The obvious answer: take them over and run them as a public service.

It should not be a surprise that the head of the IMF is a heartless hypocrite. Lagarde was a member of the French Tory government before her present appointment. As the finance minister she complacently watched as the easy money flowed south, and did nothing. Now shje singas a different tune.

Stanley Fischer administered capitalism’s dirty work at the IMF before her. Money from the banks poured in to East Asia till the bubble burst in the crisis of 1997. The IMF then imposed bailouts on East Asian countries; these inflicted hardship on the masses there and pulled the chestnuts out of the fire for the world’s banks at the same time. The price paid for the rescue was the same as in Africa in the 1970s – open up to international capital – and in Greece now – sell off public assets as fast as possible. Then Fischer swanned off to a lucrative berth at Citicorp – job well done for, the banks at least.

All these people are cut from the same cloth. This is not about a mistaken analysis. It is about the naked class interests of the capitalists and their determination to make the working class and the poor pay for their crisis. Let’s make sure we don’t let them get away with it.