Vampire Prejudice

Ezra Klein has an excellent post on Simon Johnson who was a former chief economist at the IMF and has now become a prominent analyst of the Great Recession.

Ezra believes he deserves this prominence as do I and Johnson's definitely doing the country a service by trying to help everyone understand what is going on.

When reading the prolific Johnson's analysis of the G-20 conference or the Geithner Plan or whatever, my mind inevitably recalls that great quote Doug Henwood made early on:

The IMF, which was off the scene for many years, is, like a vampire salivating at sunset, returning to action. It's already developed a program for Iceland, which is being put through the austerity wringer; apparently being white and Nordic doesn’t earn you an exemption. It's likely to lend some money to some countries that it deems virtuous on easy terms - among them Brazil but not Argentina. More on all this in the coming weeks. (emphasis added)

The IMF pushes bankrupt nations to enact Structural Adjustment Programs (SAPs) in return for loans. Critics say SAPs often involve austerity measures which are very hard on the average citizen and rather lenient on foreign investors and local oligarchs.

Johnson touches on this in his Atlantic piece:

Squeezing the oligarchs, though, is seldom the strategy of choice among emerging-market governments. Quite the contrary: at the outset of the crisis, the oligarchs are usually among the first to get extra help from the government, such as preferential access to foreign currency, or maybe a nice tax break, or-here's a classic Kremlin bailout technique-the assumption of private debt obligations by the government. Under duress, generosity toward old friends takes many innovative forms. Meanwhile, needing to squeeze someone, most emerging-market governments look first to ordinary working folk-at least until the riots grow too large.

Klein provides a link to an IMF critic, Dani Rodrik, who rightly notes:

And I find it astonishing that Simon would present the IMF as the voice of wisdom on these matters--the same IMF which until recently advocated capital-account liberalization for some of the poorest countries in the world and which was totally tone deaf when it came to the cost of fiscal stringency in countries going through similar upheavals (as during the Asian financial crisis).

Simon's account is based on a very simple, and I believe misguided, theory of politics and economics. It is an odd marriage of populist and technocratic visions. Countries fail because political elites always end up in bed with economic elites. The solution, apparently, is to let the technocrats (read the IMF) run your affairs.

But perhaps the IMF can learn and change as Bill Compton did in True Blood.