The Nation’s Confused IMF Conspiracy

Dec 29th, 2010 | By | Category: The Nation

International Monetary Fund (IMF)

The Nation logoIt was only two days ago that the IMF approved a nine-month extension of Pakistan’s Stand-By Arrangement. Which means that it took The Nation less than 36 hours to invent a new conspiracy to explain how the decision is a tool of American hegemony and government corruption.

The Nation makes several accusations against both the IMF and the government. Most notably by impugning the IMF’s rationale for supporting Pakistan’s economy.

…the IMF’s wider agenda, that of ensuring that the USA’s will is done, should not be lost sight of.

But China is an IMF member country. So is Saudi Arabia. And while the US has the largest quota of a single country, the EU has a combined vote of 32% – almost twice that of the US. In fact, historically the IMF’s managing director has been European, not American, the present Managing Director being Dominique Strauss-Kahn, a Frenchman. For the IMF to be a blatant tool of American interests, one would have to accept that the US was controlling China, Russia, Venezuela and other nations that traditionally oppose or resist American interests. It’s simply beyond reason.

The newspaper goes on to suggest that the US via the IMF is using “the charge of corruption…as a stick to beat the government into obedience”. Ironic considering one of the key themes of The Nation has been cries of rampant corruption in the government. Should we surmise from this, then, that The Nation too is a puppet of American interests?

What makes the claim particularly ironic, however, is that The Nation actually accuses the government of devising the RGST scheme to protect its own corruption!

The plea that is used by the IMF for the RGST is the improvement of the tax:GDP ratio. If that is the case, why would the IMF want the imposition of a tax that would only cause inflation, while the Pakistani state left a major sector, that of agriculture, untaxed. The problem is that agricultural incomes appertain to those in the legislatures, on both sides of the political divide, and they use these positions to prevent any tax being levied on the incomes which enable them to live a life of leisure enlivened only by politics.

If The Nation is correct (which is certainly disputed by many economists) that the RGST will cause inflation in affected sectors, isn’t it also possible that the government did not apply the tax on agriculture in order to protect the common people from price hikes on food essentials?

Regardless of one’s position on the proposed RGST, claiming that it is a conspiracy by the US to keep Pakistan’s cooperation in the war against terrorist militant groups is just silly. Development economists from various nations have made critical analysis of the IMF and its policies in the past. Some of those critiques have resulted in changes to IMF structure and policies as the economic firm adapts to more effectively aid nations hit by economic downturns and natural disasters.

Reading The Nation, however, one could easily believe that the newspaper would rather the economy sink just to spite the present government. Whatever its intentions, though, the logic and analysis of its editorial page is deplorable.

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  1. […] post: The Nation's Confused IMF Conspiracy « Pakistan Media Watch This entry was posted in Media and tagged decision, explain-how, imf, media, nation, […]

  2. Your criticism of ‘The nation’ is pretty reasonable but sometimes you go overboard on the other side.

    The IMF is a tool used to support US foreign policy. The USA has a disproportionate influence in it. And the US foreign policy is by extension EU foreign policy. EU countries are not strong enough to draft an independent foreign policy & on most matters tow the US line.

    Here is what Chomsky has to say about the IMF (and remember it is Noam Chomsky who is a very widely respected intellectual & not a conspiracy theorist by any stretch):

    As for the IMF, it is not an independent institution. It’s pretty much a branch of the U.S. Treasury Department — not officially, but that’s pretty much the way it functions. The IMF was accurately described by a U.S. Executive Director as “the credit community’s enforcer.” If a loan or an investment from a rich country to a poor country goes bad, the IMF makes sure that the lenders will not suffer. If you had a capitalist system, which of course the wealthy and their protectors don’t want, it wouldn’t work like that.

    For example, suppose I lend you money, and I know that you may not be able to pay it back. Therefore I impose very high interest rates, so that at least I’ll get that in case you crash. Then suppose at some point you can’t pay the debt. Well in a capitalist system it would be my problem. I made a risky loan, I made a lot of money from it by high interest rates and now you can’t pay it back? Ok, tough for me. That’s a capitalist system. But that’s not the way our system works. If investors make risky loans to say Argentina and get high interest rates and then Argentina can’t pay it back, well that’s when the IMF steps in, the credit community’s enforcer, and says that the people of Argentina, they have to pay it back. Now if you can’t pay back a loan to me, I don’t say that your neighbors have to pay it back. But that’s what the IMF says. The IMF says the people of the country have to pay back the debt which they had nothing to do with, it was usually given to dictators, or rich elites, who sent it off to Switzerland or someplace, but you guys, the poor folks living in the country, you have to pay it back. And furthermore, if I lend money to you and you can’t pay it back, in a capitalist system I can’t ask my neighbors to pay me, but the IMF does, namely the US taxpayer. They help make sure that the lenders and investors are protected. So yes it’s the credit community’s enforcer. It’s a radical attack on basic capitalist principles, just as the whole functioning of the economy based on the state sector is, but that doesn’t change the rhetoric. It’s kind of hidden in the woodwork.

    You can read the entire interview here: “http://www.fpif.org/articles/chomsky_understanding_the_crisis_markets_the_state_and_hypocrisy”

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