Debtor Colonies, Democracy and International Finance

The Greek / Euro debt crisis has elicited strong editorial writing in places such as The Guardian where George Monbiot argued:

The IMF is controlled by the rich, and governs the poor on their behalf. It’s now doing to Greece what it has done to one poor nation after another, from Argentina to Zambia. Its structural adjustment programmes have forced scores of elected governments to dismantle public spending, destroying health, education and all the means by which the wretched of the earth might improve their lives.

The same programme is imposed regardless of circumstance: every country the IMF colonises must place the control of inflation ahead of other economic objectives; immediately remove barriers to trade and the flow of capital; liberalise its banking system; reduce government spending on everything bar debt repayments; and privatise assets that can be sold to foreign investors.

Using the threat of its self-fulfilling prophecy (it warns the financial markets that countries that don’t submit to its demands are doomed), it has forced governments to abandon progressive policies. Almost single-handedly, it engineered the 1997 Asian financial crisis: by forcing governments to remove capital controls, it opened currencies to attack by financial speculators. Only countries such as Malaysia and China, which refused to cave in, escaped.

Consider the European Central Bank. Like most other central banks, it enjoys “political independence”. This does not mean that it is free from politics, only that it is free from democracy. It is ruled instead by the financial sector, whose interests it is constitutionally obliged to champion through its inflation target of around 2%.

Alex Tsipras has successfully broadened an economic debate into a broader debate about democratic self-determination in the context of financial crises that are created by unrealistic lending by banks and private investors guaranteed by IMF bailouts that effectively socialize debt and take over the risk incurred by private financial corporations.  cites Matthias Matthijs and Mark Blyths’ The Future of the Euro in making a similar argument about the people versus the global financial elite:

“There are no sustainable technocratic solutions to the euro problem, which is an inherently political one, and will need political solutions. Democracy is not a mere error term in the non-linear regression of governance.” That is a lesson the eurozone elite has yet to learn.

From the usurous rates of credit cards and loan companies,  to bank fees, to the encouragement of consumer driven economic expansion, the unequal terms of banking have been apparent to the retail public for several decades.   Current debates over austerity policies have eroded the certainty of Thatcherite penny-wise logic of sustenance style economics.   Are we at a historical moment when the moral authority of banks and bankers is decisively questioned and the international financial system is unveiled as a form of colonialism that is global rather than being limited to regions – The “Asian” financial crisis, “African” debt and so on.

Rob Shields (University of Alberta)