On Buddleias, the IMF and Labour's 40-year Stockholm Syndrome

Just back from digging my garden, which is exploding with flowering Cistus, Paeony, Roses, Foxgloves and the very special Buddleja Alternifolia – loved by butterflies and bees.  With fingernails still dirty, found myself summoned to the BBC’s News Channel to comment on the letter that appeared in today’s Observer, signed by 47 economists and activists. I had not signed the letter, as it calls for tax increases – which in my view would exacerbate the harm done by the hike in VAT in the Chancellor’s last budget – but welcome the the main thrust of the letter….

So much happening. Joe Smith rightly draws my attention to the debate around the appointment of the IMF’s new Managing Director. He points us to this site – IMFBoss.org – which has some good commentary, especially from French activists who have direct experience of the front-runner Ms Christine Lagarde, France’s Finance Minister.  My wish is that the non-EU and US countries represented at the IMF get their act together and unite behind a candidate.  Having said that have severe reservations about Mr Agostin Carstens of Mexico…and note that he has not received the backing of Brazil.

I recollect vividly the very unhelpful role Mr Carstens played at an important IMF conference in 2003 on the need for a proper framework for the orderly re-structuring of sovereign debts –  initiated by the IMF’s Anne Kreuger. We at Jubilee 2000 had backed Kunibert Raffer’s proposal for such a just process, to be applicable to countries like Mexico (1982) Russia (1998) and Argentina (2001). As the conference progressed, we felt that there was hope for progress. Until Mr Carstens rose to intervene on behalf of Mexico.

Carstens made clear that Mexico had no wish to support a fair and just process that would require creditors to play by the rules of the free-market game: namely that they should  to assume risks for their lending to sovereign debtors.  While he was only speaking for Mexico – his intervention was taken as representative of the views of sovereign debtors – and the initiative was stopped dead in its tracks.  So I will not be backing Agostin Carstens for IMF chief. He after all suffers from a condition common amongst hostages (in this case sovereign debtors hostage to their creditors) that express empathy and have positive feelings towards their captors – Stockholm Syndrome.

This is the theme of a piece I wrote for Left Foot Forward on Labour’s long-term willingness to accept full culpability for the inflation of the 1970s – while ignoring the role played by bankers issuing easy credit – and thereby stoking inflation. A straightforward economic case of the private finance sector creating  ‘too much money’ which then chased ‘too few goods and services’ – but a case that Labour (hostage to the City of London) has never been able to bring itself to acknowledge, and condemn. You will see that I get a little carried away….and argue that:

“….it is intellectually fraudulent to blame the inflation of the 70s on an economist, Keynes, whose policies were directly                              opposed to the inflationary policies of Anthony Barber, Friedrich Hayek and Milton Friedman.”

Labour, victims of the private bank-fuelled inflation of the 1970s, instead

“embarked on a process of political self-flagellation – which delighted the bankers, not to mention the Conservatives. It                            certainly pleased Milton Friedman, as David Smith, the historian of monetarism has documented.”

You can read more of the article on Left Foot Forward, here. Happy week ahead!

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