IMF Report finds that "trickle down" economics do not work.

Just a little Samba

So the IMF released a report last Monday (available here) which basically confirms what everyone with a brain already knew. Trickle down economic ideology doesn't work and unfettered capitalism leads to greater income inequality.

The report also states that globally, government policies should focus on "raising the income share of the poor, and ensuring there is no hollowing out of the middle class" and further states that "in advanced economies, policies should focus on raising human capital and skills and making tax systems more progressive".

For the IMF to publish a report with this sort of language is extraordinary and flies in the face of their own policies and demands of they make of governments whom they extend credit to.

Sand

Just a little Samba wrote: »

For the IMF to publish a report with this sort of language is extraordinary and flies in the face of their own policies and demands of they make of governments whom they extend credit to.

Does it?

Trickle down economics might be an easy and agenda driven narrative, but so is thoughtless IMF bashing. They tend to be called in where government economic and fiscal policies have completely failed. They're extending credit to junkies - its no mystery that they expect an earnest effort to resolve those failed economic and fiscal policies. If you're bankrupt, the first thing to do is to stop the spend and spend policies that made you bankrupt in the first place. The IMF is generally speaking, sensible. They exist as a boogeyman only in easy and agenda driven narratives.

Just a little Samba

Sand wrote: »

Does it?

Trickle down economics might be an easy and agenda driven narrative, but so is thoughtless IMF bashing. They tend to be called in where government economic and fiscal policies have completely failed. They're extending credit to junkies - its no mystery that they expect an earnest effort to resolve those failed economic and fiscal policies. If you're bankrupt, the first thing to do is to stop the spend and spend policies that made you bankrupt in the first place. The IMF is generally speaking, sensible. They exist as a boogeyman only in easy and agenda driven narratives.

Yes, it does and it's not IMF bashing, it's an observation of reality.

I never painted the IMF as any sort of Boogeyman, your reactionary post is actually quite baffling.

MightyMandarin

Just a little Samba wrote: »

Yes, it does and it's not IMF bashing, it's an observation of reality.

Well you're basically pointing out supposed contradictions in their policy making.

Just a little Samba

MightyMandarin wrote: »

Well you're basically pointing out supposed contradictions in their policy making.

Not really. It's jue pointing out something from a new report which flies in the face of their usual policies.

MightyMandarin

Just a little Samba wrote: »

Not really. It's jue pointing out something from a new report which flies in the face of their usual policies.

How?

Their policies are usually providing some sort of bailout or financial assistance, with strict requirements on paying their debts, reducing budget deficits and ensuring they learn from the mistakes of the past. How does helping Govts. to become more efficient mean that they support 'trickle down economics'?

Brian?

MightyMandarin wrote: »

How?

Their policies are usually providing some sort of bailout or financial assistance, with strict requirements on paying their debts, reducing budget deficits and ensuring they learn from the mistakes of the past. How does helping Govts. to become more efficient mean that they support 'trickle down economics'?

In fairness, since it's foundation the IMF has had a huge influence from the Friedmanite Chicago school of economics. It's usual plan of action is to reduce government spending drastically, sell state assets and reduce taxes (or in dire straights, not increase them) on the wealthy.

Sometimes these policies work in the short term to solve a crisis but they're not sustainable in the long term. I think that's what this report is showing.

hatrickpatrick

MightyMandarin wrote: »

How?

Their policies are usually providing some sort of bailout or financial assistance, with strict requirements on paying their debts, reducing budget deficits and ensuring they learn from the mistakes of the past. How does helping Govts. to become more efficient mean that they support 'trickle down economics'?

Because they almost always demand things like privatisation, which essentially opens the door to "unfettered capitalism" which they criticise.

Just a little Samba

As above. The IMF has for the last several decades, asked the governments which they extend credit to to carry out programmes of spending cuts in human capital (education, healthcare, social services, etc), deregulate markets and reduce tax to corporations and the wealthy while increasing the overall tax take.

This isn't painting anyone as a boogeyman, the IMF is a business and they are in the business of making profit not acting as a charity, until now their prevailing logic model was that of trickle down economics, enriching corporations and and allowing the wealthy to spend more to boost economies. They aren't the only business who pushed this agenda, The World Bank operates along the same ideology and both have every right to set whatever conditions they see fit for the loan arrangements they make with governments and those governments have to choose whether or not to accept these terms.

All that said, this report (it's only 30 odd pages, give it a read, it's quite interesting) completely goes against how they have operated and if they decide to change their policies going forward (I don't see it happening any time soon to be honest) it would be a seismic shift in how they operate.

But the point of the post wasn't to "paint them as a boogeyman" or have a go at the IMF, which two rather reactionary posters seem to suggest, it was to highlight the report itself which is extremely interesting, especially given it's source.

Brian Shanahan

Just a little Samba wrote: »

For the IMF to publish a report with this sort of language is extraordinary and flies in the face of their own policies and demands of they make of governments whom they extend credit to.

Big difference between the IMFs policies units and their research units, and has been for years. The research arm of the IMF has been putting the lie to the policies the IMF forces countries to implement when they come cap in hand to them since at least the 90's and it's only when the researchers get big or well known enough to stymie the policy arm, like with Joseph Stiglitz, that they are turfed out of the building.

This dichotomy comes from the fact that the IMF usually hires the best and the brightest to do economic research, whereas the US appoints the Chicago School's "best and brightest" (i.e. the ones most likely to cheerlead right-wing murdering dictators) to run the giving out of the money from the IMF.

Sand

Brian Shanahan wrote: »

Big difference between the IMFs policies units and their research units, and has been for years. The research arm of the IMF has been putting the lie to the policies the IMF forces countries to implement when they come cap in hand to them since at least the 90's and it's only when the researchers get big or well known enough to stymie the policy arm, like with Joseph Stiglitz, that they are turfed out of the building.

This dichotomy comes from the fact that the IMF usually hires the best and the brightest to do economic research, whereas the US appoints the Chicago School's "best and brightest" (i.e. the ones most likely to cheerlead right-wing murdering dictators) to run the giving out of the money from the IMF.

The IMF when providing aid to a bankrupt, failed economy has to work within what is realistically possible within fiscal and political limits. Theoretical, laboratory conditions don't exist. Its not surprising that the theory and the practise diverge.

Its obvious to anyone that the 2010 bailout in Ireland was needlessly punitive and involved a large degree of dictats by the ECB and Eurozone over the IMF. It was actually the IMF that was the most sane and sensible about getting Ireland back on its feet quickly. But within the political limits imposed by the ECB/EU and a laughably amateur Irish government they did what they could.

Trickle down economics has no relation to any IMF policies. Trickle down economics is a view on how to run a successful economy. The IMF works to jumpstart failed and failing economies who ask them for help. By the time the arguments get back to "trickle down economics" the IMF has exited, job done.

Godge

Sand wrote: »

Does it?

Trickle down economics might be an easy and agenda driven narrative, but so is thoughtless IMF bashing. They tend to be called in where government economic and fiscal policies have completely failed. They're extending credit to junkies - its no mystery that they expect an earnest effort to resolve those failed economic and fiscal policies. If you're bankrupt, the first thing to do is to stop the spend and spend policies that made you bankrupt in the first place. The IMF is generally speaking, sensible. They exist as a boogeyman only in easy and agenda driven narratives.

You hit the nail on the head here.

The IMF get called in a crisis. There is no alternative but to cut spending and increase taxes. That is a short-term issue.

Yet, even in the Irish bailout they were looking to some of the long-term issues. They wanted to cut and/or tax Child Benefit because it was a universal benefit and not directed at the poor. It was the Irish politicians who resisted that. They wanted to liberalise pharmacy, GP and lawyer cartels. It was the Irish politicians who resisted that.

I don't see a clash.

Permabear

This post has been deleted.

Brian?

Permabear wrote: »

This post had been deleted.

So you don't disagree with the substance of the report? Excellent, we're all in agreement.

johnnyskeleton

Brian? wrote: »

So you don't disagree with the substance of the report? Excellent, we're all in agreement.

No, he didnt say that. He said it is not the IMFs official position.

Mod: Deliberately misconstruing another poster to provoke a response is trolling and is a bannable offence. I will give you the benefit of the doubt on this occasion that it was a genuine misunderstanding

K-9

It would be great if we could discuss the paper a little bit you know, rather than putting each other in boxes as anti IMF or whatever.

Permabear

This post has been deleted.

K-9

Just a little Samba wrote: »

As above. The IMF has for the last several decades, asked the governments which they extend credit to to carry out programmes of spending cuts in human capital (education, healthcare, social services, etc), deregulate markets and reduce tax to corporations and the wealthy while increasing the overall tax take.

This isn't painting anyone as a boogeyman, the IMF is a business and they are in the business of making profit not acting as a charity, until now their prevailing logic model was that of trickle down economics, enriching corporations and and allowing the wealthy to spend more to boost economies. They aren't the only business who pushed this agenda, The World Bank operates along the same ideology and both have every right to set whatever conditions they see fit for the loan arrangements they make with governments and those governments have to choose whether or not to accept these terms.

All that said, this report (it's only 30 odd pages, give it a read, it's quite interesting) completely goes against how they have operated and if they decide to change their policies going forward (I don't see it happening any time soon to be honest) it would be a seismic shift in how they operate.

But the point of the post wasn't to "paint them as a boogeyman" or have a go at the IMF, which two rather reactionary posters seem to suggest, it was to highlight the report itself which is extremely interesting, especially given it's source.

Plenty to discuss there Tbh.

I can edit the OP post if its causing problems.

Just a little Samba

There's 30 odd pages of the report itself to discuss too...

Permabear

This post has been deleted.

Brian?

johnnyskeleton wrote: »

No, he didnt say that. He said it is not the IMFs official position.

Apologies, I was being fascetious.

I think an honest discussion of the merits of the report would be great. Not a point scoring exercise which seems to be going on, picking at the minutae of posts and not actually presenting a decent rebuttal to the findings of the report.

I am not arguing with the mod instructions, I deliberately deleted them to be clear I accept the comments and am genuinely contrite.

For Reals

Sand wrote: »

Does it?

Trickle down economics might be an easy and agenda driven narrative, but so is thoughtless IMF bashing. They tend to be called in where government economic and fiscal policies have completely failed. They're extending credit to junkies - its no mystery that they expect an earnest effort to resolve those failed economic and fiscal policies. If you're bankrupt, the first thing to do is to stop the spend and spend policies that made you bankrupt in the first place. The IMF is generally speaking, sensible. They exist as a boogeyman only in easy and agenda driven narratives.

The Trickle down effect is a narrative borne of the free-market and it's financial institutions. The working poor don't sell that line of drivel let alone buy into it. It's the universal go to for those with a vested interest in maintaining the status quo. The IMF are pretty good at what they do, however the IMF are not the sage protectors of a nations finances and general well being, they are in place to keep a flawed system afloat. A system which is sold as self perpetuating but as the numerous world wide booms, busts and bailouts show, simply doesn't work, well not for everyone, just those who praise the IMF.

ardmacha

Both right and left wing zealots share a lack of actual analysis of problems, because analysis debunks dogma. The IMF do believe in analysis, not a perfect approach perhaps, but a useful one nonetheless.

Sand

For Reals wrote: »

The Trickle down effect is a narrative borne of the free-market and it's financial institutions. The working poor don't sell that line of drivel let alone buy into it. It's the universal go to for those with a vested interest in maintaining the status quo. The IMF are pretty good at what they do, however the IMF are not the sage protectors of a nations finances and general well being, they are in place to keep a flawed system afloat. A system which is sold as self perpetuating but as the numerous world wide booms, busts and bailouts show, simply doesn't work, well not for everyone, just those who praise the IMF.

I've more sympathy for that argument than you might imagine. However free markets do not promise everyone wins, all the time. The old saying is markets can stay irrational longer than you can stay liquid.

However, my original contention with the OP remains. The IMF does not set economic policy for healthy economies. It does not decide how to divide the wealth in prosperous economy. It is called in (usually by the subject itself) to try stabilise and regenerate a failed economic/fiscal situation. The IMF does not deal in "trickle down economics" so its not surprising that thinkers within the IMF disagree with the concept. The OPs view is based on a mythology of the IMF as being some anti-socialist enforcer. They're not. They are economic/fiscal paramedics.

Sand

Sand wrote: »

By the time the arguments get back to "trickle down economics" the IMF has exited, job done.

Godge wrote: »

The IMF get called in a crisis.

Sand wrote: »

The IMF does not set economic policy for healthy economies... They are economic/fiscal paramedics.

Is nobody aware that roaming bands of IMF economists are constantly crossing and re-crossing the globe undertaking Article IV missions?

The IMF visits most countries on an annual basis as part of these missions, scrutinises public accounts & economic management, and issues fiscal and economic policy recommendations.

Here is the IMF's most recent Article IV report for Ireland:
https://www.imf.org/external/pubs/ft/scr/2015/cr1577.pdf

You shall find the IMF's views and policy recommendations on pp 13-21.

The only country in the civilised world which is not subject to IMF missions, to my knowledge, is Argentina.

IMF opinions tend to be the subject of media attention, and it would be churlish to deny that their opinions inform or influence national policies.

I do think the Income Inequality paper in the OP is relevant, and I sincerely hope it does influence Article IV exercises into the future, as well as the broader range of IMF activities.

Sand

A Tyrant Named Miltiades! wrote: »

issues fiscal and economic policy recommendations.

Oh reports, with recommendations...

You could probably build a life size replica of the Taj Mahal with the reports and recommendations issued to and completely ignored by the Irish government. Let alone other governments.

The IMF only has actual influence when it comes to their economic paramedic role - that's when they have the money the government needs. In every other situation they have about as much say as Greenpeace.

Boskowski

A word on trickle down...

http://www.politico.com/magazine/story/2014/06/the-pitchforks-are-coming-for-us-plutocrats-108014.html#.VZfvWHhtuZY