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Empire: IMF on Trial
Marwan Bishara
Hello and welcome to Empire. The International Monetary Fund is no stranger to criticism. In recent months it's been in the international headlines for all the wrong reasons. But as well as enduring embarrassing personal scandals, the fund has much bigger problems. From across the political spectrum it's faced accusations of exploitations and favouritism almost since the day it was founded. But in the last three years the global economy has undergone a seismic shift and the financial world is still reeling. The old divides between north and south have become blurred. Emerging economies and new democracies in the Arab world and elsewhere are taking a look at what the IMF has to offer and are increasingly saying thanks, but no thanks. Is the IMF up for a change? Can it reform itself? Or is it still beholden to western geo-economics?
Joining me to discuss these issues are economist Dr George Corm. Former Lebanese Minister of Finance. He's advised the World Bank, UNDP and the European Commission among others. The author of the New Global Government.
Dr Ann Pettifor the executive director of Advocacy International and Prime. Also research in macroeconomics. She is the author of the Real World Economic Outlook and The Coming First World Debt Crisis. Dr Mario Blejer, former Governor of Argentina Central Bank. Former Director of the Centre of Central Banking Studies. At the Bank of England he's held various senior positions at the International Monetary Fund and the World Bank. And last but by no means least, Professor Alex Callinicos, Director of the Centre of European Studies at King’s College, London. He is the author of Bonfire of Illusions on the economic crisis among many other titles.
Our starting point is Europe.
The IMF is riding to the rescue of the economy why are these people so angry?
For more than a year now scenes of widespread Greek protests have grown commonplace but out on the streets the focus of their fury has increasingly been aimed at institutions like the IMF.
Greek Protestor
Wherever the IMF gives aid the measures it imposes lead to deep recessions and great unemployment. Already the problems here are great. They will become greater.
The anger towards the Fund isn't restricted to Greece. It's taking place right across Europe in nations at the economic periphery.
Portuguese protestor
For each Euro they are lending us they are taking two and so we are rejecting this plan of austerity and we are rejecting the intervention of the IMF.
Irish protestor
We don't want the IMF in here. The IMF create the situation and they're in for money and they don't care about the future. They don't care about Ireland.
The problem lies in the fact that the plan put forward to remedy the Eurozone crisis is designed to protect banks and major financial institutions first and foremost. Not the taxpayers. And this plan is partially funded and fully endorsed by the IMF. What makes it worse is that these economic interventions are often justified in profoundly arrogant ways.
Dominique Strauss-Kahn
I understand that there maybe demonstration against IMF. People saying very well known IMF go home. I won't say I'm happy with that but really you're better off with us here than at home.
Marwan Bishara
But who is better off? When we compare the intervention, this Eurozone remedy, is remarkably similar to the bailout programme now underway in the United States. Yet again the banks are being saved with taxpayers money even though those banks are the very institutions responsible for the crisis in the first place.
This way of thinking lies at the heart of the IMF criticism and has since it was founded. At the end of the Second World War the IMF and the World Bank were set up to prevent the economic conditions which precipitated the war ever happening again. And at the time there was no question that the only model to follow was Western liberal economics. But the past few years have demonstrated to the world the shortcomings of this system. So given its role shouldn't the IMF be the institution at the forefront of change? That become clear when the IMF faced a crisis a few months when their director was forced to resign after becoming embroiled in a sex scandal. Many saw this as the perfect opportunity for the fund to promote a new leader from the emerging world. But the West looked at the candidates and chose one of their own.
Angela Merkel
In principle we know that in the medium term emerging countries could have a claim for top IMF jobs. However, with the current situation in Europe, there are strong reasons for Europe to have good people ready.
Marwan Bishara
And because of that decision the Empire strategy towards the Greek bailout and the wider Eurozone crisis suddenly starts to make sense.
Narrator
History suggests that if this were happening to a poor country the rich countries would have voted against it.
Marwan Bishara
The Western powers simply have too much invested in their grand Euro project to let it fail.
Guido
It is much more than just a coin. It is for my point of view it is a political project.
Marwan Bishara
And maintaining that project requires the West to use the mechanisms at its disposal to maintain the system at all costs.
Herman Van Rompuy
When European leaders say that we will do everything what is required to save the Eurozone it is very simple. We mean it.
Marwan Bishara
Voices from within the IMF itself insist the bailout isn't really about Greece at all. It’s about saving European banks exposed to Greek debt. To salvage the entire Euro experiment itself.
Narrator
Greece is not having an easy time. The mostly European private creditors of greece have had an easy time.
Marwan Bishara
This then explains why these people are so angry. Those inside t he club take care of their own. Those outside the club have to pay for it all.
Ann why don't you start us off? How do you think the IMF handled the Greek crisis and Europe in general?
Dr Ann Pettifor
The IMF continues I think, as your report rightly suggests, to act as if you like a carbuncle on the side of this great giant vampire which is creditor interests around the world, ie: the financial interests that have captured in a sense European assets and that have lent money to governments recklessly and now expect taxpayers to bail them out. But what they then did was to insist, together with their allies in academia and the media, on imposing austerity. And what austerity does to Greece and to the rest of Europe and to the United States is to squeeze the public finances. To make it harder to bail out the banks. And yet they continue to demand that. So there's a deep, deep contradiction at the heart of the IMF strategy on behalf of its friends in the banks.
Marwan Bishara
You've worked with the IMF Mario, why the contradiction?
Dr Mario Blejer
The first reaction of the Fund to the financial crisis of 2007/8 was quite correct in my view. It was expansionary policy. It really promoted fiscal expansion at the beginning of the crisis and that helped during that period. Then it turn around and this programme actually in Greece, in Portugal, in Ireland particularly the Greek programme is very badly designed. Very badly designed. Even for the Fund it's badly designed in the sense it's based on the wrong assumption. The assumption was that Greece will be able to come back to the voluntary market, to the credit market, in 2012, next year. This is impossible. So the programme was not financed. In addition to that even if you really, really stick to the austerity as Ann mention all these countries – Greece, Portugal and Ireland – will see even if you stick to all the conditions and you fulfil everything that has been required from the IMF in 2015 the debt of the GDP will be higher than today. So obviously that's unsustainable.
Dr Alex Callinicos
It's not a rescue of the countries concerned. It's a rescue of their creditors. And that in combination with the austerity policies that has been part of the price of the so called rescues makes them extremely dubious from not simply an economic but also a moral perspective. But the IMF isn't acting on its own in Europe. It's acting as part of the Troika so called of the European Commission and the European Central Bank. And if you listen to Greek political discourse for example the peoples ire is directed against the Troika. Personally I think that the IMF is becoming of increasingly marginal importance.
Dr Ann Pettifor
In the Eurozone what the IMF is dealing with is not just the protection of creditors and bankers but the protection of the Euro which is a deeply flawed monetary framework but it is the framework. It's not just a programme. It's the framework that the IMF promoted everywhere including in Argentina when they encouraged the dollarisation of those economies. So just as Argentina had to borrow at a rate of interest set by Mr Alan Greenspan in New York and at a currency level that suits the Americans so the Greeks have had to deal with a currency that suits the Germans. Maybe and the French and the North Europeans. But it doesn't suit the poor countries of Europe.
Dr Georges Corm
I don't think that the IMF change at the beginning of the crisis. When Mr Strauss-Kahn said yes we shouldn't go to austerity measures too soon. Europe and the US should maintain liquidity in the system etc but if you look at what happened underground because we didn't mention that the IMF was called for Hungary and then for Romania and for other countries. Latvia and Latonia. The same kind of mess. And today what do you have in Hungary? Extreme riots is going up with all the misery that has come with the IMF programme. And I wouldn't say that it's being marginalised. It was marginalised before the crisis. Totally. Out of business.
Most governments were fed up. I remember as a minister I was always saying keep away from me. I never go through a standby agreement with you. In spite of the fact that Lebanon was heavily in debt.
Dr Mario Blejer
You know if you look at the numbers today the programmes for Greece, Ireland and Portugal are 66 per cent of the total amount of commitment of the fund. Two thirds are only going to these three countries. And if you had all of Europe, including Eastern Europe, it's 83 per cent. 83 per cent of the total commitment of the fund have gone to Europe. So I think that this is not an International Monetary Fund it's a European monetary fund.
Professor Alex Callinicos
Let's discuss why its role has changed and I think that the decisive event was East Asia and in particular the role that the IMF played in the so called rescues of countries like South Korea and Indonesia.
Marwan Bishara
When you say so called but they didn't actually help with $60bn in South Korea?
Professor Alex Callinicos
Well South Korea they still refer to the crisis of the late 1990s as the IMF crisis because they see the IMF as essentially the collection agency for the western corporations. There's a photograph that was taken I think in early 1998 of Camdessus who is then the Managing Director of the IMF standing over the Indonesian president, Suharto, as he signed the Articles of Agreement with the IMF.
Dr Ann Pettifor
Shocking.
Professor Alex Callinicos
And I thought at the time this is an incredibly stupid thing to do because it's an arrogant declaration of Western supremacy over Asia. And that was stupid because so much economic power was shifting to Asia. So every Asian politician looked at that photograph and thought I'm going to make sure I'm never in a position where that could happen to me. The IMF the IMF power depended upon it being a supplier of scarce capital to countries that were in trouble who were usually on the periphery of the world economy. But now a section of the periphery has risen and has said it's not going to be subject to that power.
Marwan Bishara
Georges you're asking for an answer.
Dr Georges Corm
No I was saying that in fact the IMF was totally marginalised before the crisis. Came back into the spotlight because at the first G8 summit in 2008 the leaders of the big Western countries of the G8 say you have no idea. We don't understand what has happened. Let us ask the IMF to study the situation. And this is how IMF came back to the limelight.
Professor Alex Callinicos
October 2007 they issued a world economic overview which said that the world economy was becoming more stable.
Dr Georges Corm
No, no and the drama here is that whenever a year later they allow the breakdown, the big emerging economies to raise their share in the equity capital of the IMF. They say we have reformed the IMF. While the entire staff structure, the way of thinking of the IMF, especially when it comes to those standby programmes and imposing conditions on countries it’s the same.
Dr Ann Pettifor
But that's the dangers of intellectual capture you see. I think that the G8, The ECB, the EU and the IMF all are engaged in group think and they can't think outside that box.
Dr Mario Blejer
But the big problem is the way that these programmes are designed and implemented and they do not solve the problems. And today I think the whole institution has been captured basically by the European problem. The fund has 28 programmes at this moment. Twenty-eight programmes which are called poverty reduction and growth. OK. Now all these 28 programmes all the commitments on these 28 programmes are ten per cent of the Greek problem. All the 28 is ten per cent of the Greek problem.
Marwan Bishara
But their effect on these countries is huge. Underdevelopment in those countries.
Dr Ann Pettifor
I think we need to get away from the IMF here because actually what we're talking about is the profession, if I may say so to my distinguished colleagues here, of economics.
Professor Alex Callinicos
Oh I'm not an economist thank God.
Dr Ann Pettifor
What we have here is an economic orthodoxy which the IMF is simply a spokesperson for. And they just mouth these incredibly flawed economics. And I want to blame the academics who are responsible for these crazy policies which are so impoverishing people and now wrecking both the Eurozone, damaging the US and you know causing a global social as well as economic and political ...
Marwan Bishara
Georges you have a whole chapter in your book about grooming an entire new generation of economists.
Dr Georges Corm
Yes I mean millions of MBA or of economics based on mathematical modelling which is out of touch with reality has been produced in the world is an army of just people with one eye or half an eye. It's terrible.
Professor Alex Callinicos
I don't want to dismiss the complicity of the academics but the IMF exists and has played the kind of role that it has particularly in the neo liberal era because it's proved useful to the dominant powers in the world. Since economic power is shifting eastwards will the new spectrum of dominant powers find the IMF as useful an institution as the West has?
Dr Ann Pettifor
And has taxpayer resources.
Marwan Bishara
Why are the likes of China and Brazil getting in on the business of the IMF? Why are they so interested to be part of that?
Dr Mario Blejer
Are they interested to be part of it because they would like to have a voice in the international arena?
Marwan Bishara
So it's not so useless then the IMF?
Dr Mario Blejer
No. We have been discussing so far all the issue of the programmes and the financial role of the IMF but the IMF have other roles and in some of the roles they've been useful.
Marwan Bishara
Such as?
Dr Mario Blejer
Interchange of information you get quite a lot of good statistics and quite a lot of good analysis that has not been practise if you want.
Marwan Bishara
But Dr Blejer they did get it wrong so many times. And they have been surprised each and every crisis.
Dr Ann Pettifor
Absolutely.
Dr Mario Blejer
No, no they did.
Dr Ann Pettifor
Mexico 95. South East Asia 98. They kept issuing ...
Dr Mario Blejer
The whole profession got it wrong.
Dr Ann Pettifor
But I think it goes further. I think that all of these institutions and academia have been captured by a very small financial elite.
Professor Alex Callinicos
I wish you'd stop pointing at me whenever you refer to academia. It's like being resisting these ideas.
Dr Ann Pettifor
I beg your pardon.
Dr Mario Blejer
I have a different question I want to give back about the role of China and Brazil and India and all the emerging markets. You mentioned that there was some reform and increase their share.
Dr Georges Corm
No there isn't a reform in my view. This was sold as being the reform of the IMF.
Dr Mario Blejer
But what we have to see is that not happened really and one of the reforms that was supposed to take place that the next managing director does not have to come directly from Europe and that didn't take place. So it means from the governance point of view the IMF has a big problem.
Professor Alex Callinicos
I think it was useful for them to make a big fuss about another European being appointed but to let it go ahead and that I think partly is because I think the battle over the directorships of the IMF and all that kind of thing are a symbolic struggle. It's important for China and Brazil etc to be more recognised in global forums. Doesn't mean that the IMF itself is that.
Dr Mario Blejer
When I was in the IMF I work very much in china. A lot in China. Used to go every month. And what's extremely important for them to have a voice there. They consider to have a voice in the IMF a very important world recognition of their status.
Dr Georges Corm
But there was this initiative by Japan in the crisis in 97 to create an IMF or facility for Asia and then the American government went out of his mind. Forbidden.
Professor Alex Callinicos
It would be much harder for them to do that now. But the Asians don't need it now. That's one of the great ironies of history.
Marwan Bishara
It seems that most of the problems are coming from the so called neo liberal economic policies and yet the IMF is the arm of established neo-liberalism around the world. How do you expect the IMF give the prescription for the sort of problems that its own ideology creates?
Dr Mario Blejer
No I already made it clear that I don't believe that the IMF design of programmes is going to be the solution to the problem. But I am just saying there are some problems in the world that come from different issues.
Dr Ann Pettifor
If you look at economic growth or economic activity in Africa 1945 to 1980 it's fairly healthy. You look at it after 80 when the IMF arrives Africa goes backwards and there's a direct correlation between this period, which is essentially a period of [Cainesian] policies and the neo liberal polices post 1980
Marwan Bishara
This is a very important but we're going to have to address it when we come back from the break but before we take a news break we're going to take a look at what happened in Argentina sometime ago to look to see if the IMF has ever learned its lessons.
Narrator
It all looked so good in the 90s. Argentina was the IMF's star pupil and did everything they asked. Free market reforms. Privatisation. It even pegged its currency to the dollar. But the economy went into recession.
Protestor
The people are hungry.
Argentine protestor
My husband is unemployed and I can't feed my children.
Argentine protestor
This can't go on, we have to obey the IMF.
Narrator
So Argentina went back to the IMF doctor who upped the austerity dose. It slashed public spending. It raised taxes and interest rates and of course took plenty of IMF loans.
George Bush, former president
The key for Argentina is to get her fiscal house in order. Get monetary policy in order. It'll all be done through the IMF.
Narrator
Yet the cure ended up being worse than the disease and the combination of cuts and taxes almost killed the patient.
Professor Alan Cibils
Prescribing these fiscal spending cuts and cuts to the salaries of state workers and of the retired means that the economy is going to contract because there is going to be less spending in the economy. And so if the economy contracts then fiscal revenues are also going to continue to contract and so you're in a downward spiral.
Narrator
It was a vicious circle. The government needed $22bn a year just to service its debt so the IMF loans were only prolonging the agony.
Domingo Cavallo
In the next two or three days we're going to work intensively with the IMF.
Narrator
What followed was enormous capital flight and a run on deposits. And with its currency pegged to the dollar Argentina had no room for manoeuvre and it became insolvent.
Eduardo Duhalde
I think following the IMF prescriptions has been part of the problem.
Narrator
At a $132bn it was the biggest default in history.
You'd think that it would be a salutary lesson so why is the IMF prescribing the same to
Greece.
Part 2
Marwan Bishara
Welcome back. The Arab world and Africa have had their own share of political and economic turbulence over the last few months and years and IMF wasn't far from the epicentre of the storm. Critics of the IMF are plentiful but are their arguments a bit too simplistic? After all the IMF is not about restoring economic prosperity it's about avoiding economic calamity. Two very different things but here's the catch. What happens when a country's leadership isn't interested in achieving prosperity for its people? When it comes to dictatorships is the IMF a reformer or an enabler?
Narrator
In the days before the Libyan revolution began Tripoli appeared calm. For Western institutions like the IMF nothing seemed out of the ordinary. In fact a mere 48 hours before people began risking their lives in protest the fund issued a report. "The outlook for Libya's economy" it said "remains favourable".
In Egypt the work of the revolution has at last exposed to the world what the IMF has long known. That the Mubarak dynasty has ruthlessly exploited its own citizens for decades and yet just last year the IMF was praising the Egyptian government for its "careful fiscal management".
In Tunisia disgraced former leader Zine El Abidine Ben Ali has already been found guilty in absentia of embezzling more than $25m. And yet somehow just months before he fled the IMF credited the Ben Ali regime with "sound macroeconomic management".
This praise was little comfort to a young Tunisian man desperate enough to set himself on fire or the millions of his fellow countrymen to live in economic destitution. Already the transitional Egyptian government has rejected a new IMF loan preferring instead to institute reforms itself. That's forced the new director of the fund to defend its work.
Christine Lagarde
The IMF never forces programmes down the throat of anybody. The IMF only offers services if it is asked.
Narrator
And she says she understands why Egypt is choosing to go it alone for now.
Christine Lagarde
If the country determines that it can actually organise its economic situation this is great. But if it can't and if it needs outside support and funding then it should really think of the Fund as an institution that is available.
Narrator
It could be argued that the IMF simply misread the Arab script badly underestimating the will of the people. But this logic falls apart when different examples are brought to bear and a pattern starts to emerge.
These countries all suffered under dictatorships and all of them were given massive IMF loans. After the Duvalier's fled Haiti realised 80 per cent of its total debt was owed to the IMF. The same story in South Africa at the end of apartheid. Malawi more than 80 per cent. Somalia more than 90. Paraguay, Congo, Sudan, Indonesia. The legacy of corrupt leadership matched by the legacy of crippling IMF debt.
These statistics may come as a shock to many in the West but they might also help explain why the Arab revolutionaries had no choice but to take matters into their own hands.
And this also helps to explain why the IMF is beginning to accept the growing global criticism.
Christine Lagarde
What I see as significant change in the last few years has been the ability of the Fund under the leadership of its Managing Director to make the approach more comprehensive. To address the employment slash unemployment issues. The social fabric of society. As opposed to looking exclusively and in a sort of sanitised way at numbers.
Narrator
This question of addressing the social fabric of society lies at the heart of the IMF criticism. The challenge for the fund and its new leader is whether the IMF is at last ready to listen to what emerging economies have been saying for years.
Marwan Bishara
Georges you've known Madame Lagarde from before what's wrong with what she just said?
Dr Georges Corm
The IMF in the last ten years almost 15 years have been absent from the Arab world. Almost all Arab countries maybe the exception of Yemen or Mauritania was having the standby with the IMF.
Marwan Bishara
That's what Mario said before one of its main job is evaluations.
Dr Georges Corm
Again being minister I was asking the IMF to down turn his appraisal so positive of the banking system in Lebanon. I said I cannot make any reforms of the banks and I need to reform them.
Marwan Bishara
Why do they do that?
Dr Georges Corm
Ah it's the financial elite. Our five six big banks who really control the economy of the country are of course very close to the IMF, to the World Bank, to the G8 leaders, to this and to that, it's a club.
Dr Mario Blejer
I don't think this is the case. This is missing the situation, missing the crisis, is not only in the Arab countries. I mean if you look at the report on Iceland two weeks before the crisis.
Dr Georges Corm
They don't have contact with the real economy.
Dr Mario Blejer
It's incredibly positive. Now why did this happen? I don't think this is a conspiracy because the Fund is a political organisation and there is always the need, as regarded by the Board or the Fund, or the staff of the Fund, to please the government in charge.
Marwan Bishara
I see so there's a complicity between the leadership of the IMF with the governments.
Dr Mario Blejer
The leadership and the staff too. We work in these countries and you always want to please the
governments of these countries. You will find very rare cases where there is criticism.
Professor Alex Callinicos
That can be very harsh.
Dr Georges Corm
Especially if you have a Minister of Finance which is not politically correct or economically correct.
Dr Mario Blejer
That is correct that the country has no power in the Fund.
Marwan Bishara
Alex remember in 1991 when Yemen did not vote with the US and the Security Council. At the time the US Ambassador told the Yemenis that this is going to be a very costly vote for not voting for the war in Iraq and they did not get their IMF money.
Professor Alex Callinicos
But that's a very long standing pattern. In the early 90s the Financial Times published an internal IMF report which showed that they knew that the money the Fund was lending to Mubutu, the dictator of Zaire, was being misappropriated for the benefit of his family. The reason for that was that he was on the right side in the Cold War.
Marwan Bishara
Is that why they keep lending?
Professor Alex Callinicos
Yes. It's very clear from what Mario is saying.
Dr Ann Pettifor
Friendly to the banks. Friendly to the Western banks in particular.
Dr Mario Blejer
You will never find a report of the IMF the word this is non-democratic country or this is corruption. The word corruption doesn't appear in the reports of the IMF. These types of things does not appear.
Marwan Bishara
Never.
Dr Georges Corm
Transaction costs.
Dr Mario Blejer
The report of the Fund are usually sanitised but it's true what has been said. What you said could be harsh but it's harsh if there is a political interest within the Fund.
Professor Alex Callinicos
Sure if the West wants to whack someone.
Marwan Bishara
There is a bit of contradiction of what I'm hearing so far. So if the IMF is bad for your economy and you're in the third World and then they decide to punish you by not giving you money. That's good for you in the end.
Professor Alex Callinicos
It's not good not to have the money. The problem is that the money comes with very harsh conditions. That's the problem.
Dr Ann Pettifor
The IMF acts as the gatekeeper for the worlds capital markets. That means if I'm a landlocked country and I need to get dollars to pay for oil I have to rely on the IMF. So you can never win because it's not just their money that they stop coming. It's aid money. It's private money. Any kind of money is now blocked because they act as the gatekeepers.
Dr Georges Corm
But the creditor bankers will ask for a standby with the IMF before its scheduling the debt.
Dr Ann Pettifor
Yes guaranteed.
Marwan Bishara
Is this the central role of the IMF today? The gatekeeper of the international money.
Dr Ann Pettifor
It has been for many years.
Professor Alex Callinicos
Except that its ability to act as the gatekeeper has been weakened. Because the flow of capital historically it policed the flow of capital from the rich core of the world to the rest of the world. The problem is that the flows of capital have changed.
Dr Ann Pettifor
But I want to turn attention to the countries that have defied the IMF now because right now we have the example of Egypt. And I think the refusal to accept the IMF loan is incredibly courageous. I think it reflects the nature of the revolution and I hope that we can support the Egyptians in this.
Marwan Bishara
So you think it's correct?
Dr Ann Pettifor
It's not correct. It's going to be hard for them because the IMF and the creditors will punish them. They will punish them. But on the other hand they maintain their policy autonomy. Now the very interesting example is Iceland. Iceland went through this and then the President, who is a Democrat, had the courage to call for a referendum. He asked the people and the people said why should we pay for the private creditors big mistakes and for the British government's failure to regulate its own banks. We're not doing that. So then they have instituted a new regulation, laws, changes to their constitution which say we will pay our foreign creditors when we have a surplus but when in years we don’t have a surplus they won't get the money. So that stops the creditors from milking these countries.
Dr Mario Blejer
This is correct but this is with the approval of the IMF. They got exactly one billion four hundred.
Dr Ann Pettifor
The IMF was so disgraced.
Marwan Bishara
How much did they get?
Dr Mario Blejer
$1.4bn and they deserved it. So they took the money and did the right thing. I agree with you.
Dr Ann Pettifor
Iceland is a beautiful example because it's an example of a small country that exercised leverage against a powerful creditor. And as you say they got the money too but on their terms.
Marwan Bishara
And let's look to the south, why did Egypt refuse the money Georges?
Dr Georges Corm
Well because Egypt has bad records of going into too much indebtedness and this is one of the reasons why Egypt probably went to the first Gulf War with the US to liberate Kuwait. Because then almost 40 per cent of its foreign debt was relieved. Totally wiped out by the Western creditors. But Egypt had bad memories of IMF programmes, of people in the street because you've taken out subsidies to essential products and things like this.
Marwan Bishara
Do you agree with the conventional wisdom that there were no strings attached to this latest offer?
Dr Georges Corm
No, no, no that's not true. That's simply not true. No strings attached to so called bilateral aids from Europe and governments to Egypt. And this also is not true because I've been an evaluator of Europe in aid to disburse aid you always have a lot of conditionality that BLEEP to say that there is no strings attached.
Marwan Bishara
So Alex if this is such a useful tool, certainly a political tool, for the United States and the West, why would they ever give it up or give up its leadership?
Professor Alex Callinicos
Well I think they will be forced to make adjustments when it comes to the leadership. Maybe Madame Lagarde is going to be forced to resign for somewhat different reasons.
Marwan Bishara
What you mean the legal process in France?
Professor Alex Callinicos
Yeah and in that case I'm sure that the Europeans will try desperately to get another European in charge but over a longer period of time they're going to have to give up the Managing Directorship.
Marwan Bishara
What about the share in the board?
Professor Alex Callinicos
Yeah I'm sure they'll have to make adjustments.
Marwan Bishara
You think America will ever give up its veto?
Professor Alex Callinicos
Not if it can possibly avoid it but America is an increasingly embattled position because of the scale of the crisis that it now faces itself. It maybe forced to make concessions that it would prefer not to.
Dr Ann Pettifor
And that crisis takes us back to the policies of the IMF. These policies are parasitic on the real healthy productive economy. This is the finance set if you like acting as parasite on the real economy where we make things and we grow things and we are productive. Now what has happened is that if you like these bloodsuckers, let's be very brutal about this, have starved the body of the real economy. This is hurting now. It’s beginning to hurt the United States. Its hurting Europe.
Marwan Bishara
Are you talking by the financial markets or are you talking about the IMF?
Dr Ann Pettifor
I'm talking about the policies that underpin the IMF. They effectively, because they act for creditors.
Marwan Bishara
Talk to us about Africa since you've known about this. Have the African economies got much worse with the IMF or they got better or are there exceptions to the rule?
Dr Ann Pettifor
Well I mean I've worked with the Nigerians. They were very interesting. You know the story if I owe the bank a £1,000 it's my problem if I owe them a million pounds it's their problem. Nigeria's debt was the IMF and the banks problem. And therefore Ngozi Okonjo-Iweala who was their Finance Minister at the time had a very strong leverage and very strong influence over the programme and so on and in that sense achieved $18bn of debt cancellation. But other countries in Africa that have less leverage did not do as well.
Marwan Bishara
I don't want to regionalise the discussion but I would also like to hear your perspective of the IMF in Latin America?
Dr Mario Blejer
Argentina had inflation of about 5,000 per cent when the peso was pegged to the dollar. And during four or five years the programme worked very well. not the IMF programme the programme of stabilisation. It was later on when the country started taking excessive debt and has huge deficit that is totally inconsistent with this peg and there is where the problem with the IMF occur.
Marwan Bishara
So you said the same thing about Greece. You said in the beginning it worked but then it didn't but isn't that the point, in the long term it works?
Dr Mario Blejer
No, no I just was saying at the beginning it has nothing to do with IMF.
Dr Georges Corm
I remember so many people came into me, sometimes academic authorities, Mr Minister in Lebanon do like Argentina.
Dr Mario Blejer
What I'm trying to say there were two periods here and the first period worked the second period didn't work because obviously it was badly managed and that was supported by the IMF.
Professor Alex Callinicos
You know there's so many episodes in which the role of the IMF and the kind of thinking that it represents were negative.
Dr Mario Blejer
It was largely political. Of course the United States wanted to support this particular programme. But the issue is that Argentina after this system was abolished defaulted on its own and paid back to the IMF and actually has no more programme. And in fact if you look at the list of programmes there are few Latin American.
Dr Ann Pettifor
Yes they're now independent of the IMF.
Dr Mario Blejer
They are completely out of it. My point is that you cannot claim that the problems in the world come from the IMF.
Marwan Bishara
No of course not.
Professor Alex Callinicos
It's an important part of the ...
Dr Mario Blejer
... to resolve problems.
Dr Georges Corm
It's only implementing the main trend economic throw. That you are looking at markets. Are markets free or not? Whether behind the freedom of markets you have a financial oligarchy, our productive economy is totally collapsing. The Fund and the World Bank and the EU doesn't care. They don't give a damn. As long as you liberalise your economy.
Professor Alex Callinicos
That's not just an intellectual error. That's an error that supports certain interests. For example look at the incredible record of Goldman Sacs in helps to set up for example the crisis in Greece and so on and so forth. So there's a confluence between a certain view of markets and so on and so forth and very powerful influence.
Dr Georges Corm
Academics economy. I wouldn’t blame your businessman who wants to maximise his profits
Dr Mario Blejer
But you have to also be balanced on that. If you want to know what the staff of the Fund thought about the Greek problem they thought it was a very bad programme and that it had to include a big default. That was what the staff believed. The board and the politicians that actually ruled it.
Dr Ann Pettifor
I think it's the board that makes the decisions and the board tries to stay invisible so the board doesn't fly to Greece.
Marwan Bishara
And it's very political.
Dr Ann Pettifor
And it's incredibly. It's the United States. It's the big G8 countries. They don't turn up in Athens to deliver the nasty programme. The staff do. Then we aim our anger at the staff and it's kind of futile to do that really.
Professor Alex Callinicos
However good the intentions of IMF staff are what we're seeing in Europe at the minute is the restructuring of the economies under the supervision of three institutions that aren’t really democratically accountable. The European Commission which has some relationship with elected politicians. It's the least undemocratic of the three. The European Central Bank which is designed to be unaccountable and the IMF. And so we have this situation where now for example the privatisation of public industry in Greece is going to be supervised by these external forces. Now in a certain way you can say what's happened to many countries in the Third World is now coming home to Europe and one of the things that's happened during the present crisis is because the response of the political elite has been so poor, particularly recently, increasingly it's the technical elites who are shaping the process.
Marwan Bishara
Let's take this a few steps forward, what is the alternative?
Professor Alex Callinicos
One thing would be to go back to the original discussions of Britain Woods when Caines proposed an international credit union in which creditors and debtors would be treated in the same way and the US refused to have that and insisted on a set up in which there was a symmetry between creditors and debtors because in those days the US was the world's biggest creditor. Now we come to an interesting situation because of course the US is now the world's biggest debtor.
Marwan Bishara
So the US might be supportive of that.
Professor Alex Callinicos
Well if its control over the dollar is the main reserve currency seriously became compromised then the US would have to think about other solutions. The interesting question is of course whether the new great creditor powers like China and Germany would like the kind of ...
Marwan Bishara
You think the end of double standards could happen within an IMF reform or it has to be done in an alternative institution?
Dr Mario Blejer
Both. I think there doesn't have to be an alternative institution you can change the structure of the existing institution but you have a big serious problem of governance at this moment and the problem of governance is very difficult to resolve. It's a political problem. But more than bad policies or more than I would say damaging policies the confusion of policies at this moment in the IMF.
Dr Ann Pettifor
I think that's because we’re going through a transformation now. The neo liberal project has been exposed for the weakness and the flawed nature of it.
Marwan Bishara
Are you saying we've seen the back of the Washington consensus?
Dr Ann Pettifor
I think what we're seeing is the dying fight if you like, the struggle, of those who want to hold on. Now I think we're at a point in history where this struggle is now becoming titanic and very unpleasant and very difficult and it's a question of which way the world's democracies societies are going to go. And I see that people are going to want very soon to have some real leadership. To have a strong man to come and rescue them. And very soon we’re going to have fascists raising their ugly heads again.
Dr Georges Corm
Also I mean globalisation the way it works has to be reformed. Take the debts. There would be no debt crisis if the debts were kept local. In domestic currencies. Subscribed mostly by domestic investors. It is the fact that debt of any country, smallest one or biggest one, is international.
Dr Mario Blejer
Remember that today we are having the Italian crisis and most of the Italian debt is held in domestic currency by local citizen.
Dr Ann Pettifor
No, no it's held in Europe.
Dr Mario Blejer
Euro is domestic currency.
Dr Ann Pettifor
No it's not a domestic currency. It's a European currency.
Marwan Bishara
This is a discussion for another day. Thank you so much gentlemen. Ann wonderful having you here. And I'll be back with the last thoughts.
Marwan Bishara
Standard and Poors, Woody, Fitch names you've hardly heard of before the financial crisis are the private companies that have been waiting countries economies, bonds and debts. They downgraded countries from Japan to Greece. Demoting Portugal. And this month downgraded the US from triple to double a plus.
Who are these companies? Who are they accountable to? And if they're in the business of measuring risks and advertising crises why are we always being surprised? And aren't these the same companies who's triple a ratings got us in the financial mess in the first place. Promoting the likes of defunct Enron and boosting the sub prime mortgage market. More importantly why aren't they legally liable when they get it so wrong and destroy the livelihoods of millions of working families across the globe? They should be.
I say someone needs to rate the raters and monitor the monitors. The International Monetary Fund included. That's the way it goes.
Hello and welcome to Empire. The International Monetary Fund is no stranger to criticism. In recent months it's been in the international headlines for all the wrong reasons. But as well as enduring embarrassing personal scandals, the fund has much bigger problems. From across the political spectrum it's faced accusations of exploitations and favouritism almost since the day it was founded. But in the last three years the global economy has undergone a seismic shift and the financial world is still reeling. The old divides between north and south have become blurred. Emerging economies and new democracies in the Arab world and elsewhere are taking a look at what the IMF has to offer and are increasingly saying thanks, but no thanks. Is the IMF up for a change? Can it reform itself? Or is it still beholden to western geo-economics?
Joining me to discuss these issues are economist Dr George Corm. Former Lebanese Minister of Finance. He's advised the World Bank, UNDP and the European Commission among others. The author of the New Global Government.
Dr Ann Pettifor the executive director of Advocacy International and Prime. Also research in macroeconomics. She is the author of the Real World Economic Outlook and The Coming First World Debt Crisis. Dr Mario Blejer, former Governor of Argentina Central Bank. Former Director of the Centre of Central Banking Studies. At the Bank of England he's held various senior positions at the International Monetary Fund and the World Bank. And last but by no means least, Professor Alex Callinicos, Director of the Centre of European Studies at King’s College, London. He is the author of Bonfire of Illusions on the economic crisis among many other titles.
Our starting point is Europe.
The IMF is riding to the rescue of the economy why are these people so angry?
For more than a year now scenes of widespread Greek protests have grown commonplace but out on the streets the focus of their fury has increasingly been aimed at institutions like the IMF.
Greek Protestor
Wherever the IMF gives aid the measures it imposes lead to deep recessions and great unemployment. Already the problems here are great. They will become greater.
The anger towards the Fund isn't restricted to Greece. It's taking place right across Europe in nations at the economic periphery.
Portuguese protestor
For each Euro they are lending us they are taking two and so we are rejecting this plan of austerity and we are rejecting the intervention of the IMF.
Irish protestor
We don't want the IMF in here. The IMF create the situation and they're in for money and they don't care about the future. They don't care about Ireland.
The problem lies in the fact that the plan put forward to remedy the Eurozone crisis is designed to protect banks and major financial institutions first and foremost. Not the taxpayers. And this plan is partially funded and fully endorsed by the IMF. What makes it worse is that these economic interventions are often justified in profoundly arrogant ways.
Dominique Strauss-Kahn
I understand that there maybe demonstration against IMF. People saying very well known IMF go home. I won't say I'm happy with that but really you're better off with us here than at home.
Marwan Bishara
But who is better off? When we compare the intervention, this Eurozone remedy, is remarkably similar to the bailout programme now underway in the United States. Yet again the banks are being saved with taxpayers money even though those banks are the very institutions responsible for the crisis in the first place.
This way of thinking lies at the heart of the IMF criticism and has since it was founded. At the end of the Second World War the IMF and the World Bank were set up to prevent the economic conditions which precipitated the war ever happening again. And at the time there was no question that the only model to follow was Western liberal economics. But the past few years have demonstrated to the world the shortcomings of this system. So given its role shouldn't the IMF be the institution at the forefront of change? That become clear when the IMF faced a crisis a few months when their director was forced to resign after becoming embroiled in a sex scandal. Many saw this as the perfect opportunity for the fund to promote a new leader from the emerging world. But the West looked at the candidates and chose one of their own.
Angela Merkel
In principle we know that in the medium term emerging countries could have a claim for top IMF jobs. However, with the current situation in Europe, there are strong reasons for Europe to have good people ready.
Marwan Bishara
And because of that decision the Empire strategy towards the Greek bailout and the wider Eurozone crisis suddenly starts to make sense.
Narrator
History suggests that if this were happening to a poor country the rich countries would have voted against it.
Marwan Bishara
The Western powers simply have too much invested in their grand Euro project to let it fail.
Guido
It is much more than just a coin. It is for my point of view it is a political project.
Marwan Bishara
And maintaining that project requires the West to use the mechanisms at its disposal to maintain the system at all costs.
Herman Van Rompuy
When European leaders say that we will do everything what is required to save the Eurozone it is very simple. We mean it.
Marwan Bishara
Voices from within the IMF itself insist the bailout isn't really about Greece at all. It’s about saving European banks exposed to Greek debt. To salvage the entire Euro experiment itself.
Narrator
Greece is not having an easy time. The mostly European private creditors of greece have had an easy time.
Marwan Bishara
This then explains why these people are so angry. Those inside t he club take care of their own. Those outside the club have to pay for it all.
Ann why don't you start us off? How do you think the IMF handled the Greek crisis and Europe in general?
Dr Ann Pettifor
The IMF continues I think, as your report rightly suggests, to act as if you like a carbuncle on the side of this great giant vampire which is creditor interests around the world, ie: the financial interests that have captured in a sense European assets and that have lent money to governments recklessly and now expect taxpayers to bail them out. But what they then did was to insist, together with their allies in academia and the media, on imposing austerity. And what austerity does to Greece and to the rest of Europe and to the United States is to squeeze the public finances. To make it harder to bail out the banks. And yet they continue to demand that. So there's a deep, deep contradiction at the heart of the IMF strategy on behalf of its friends in the banks.
Marwan Bishara
You've worked with the IMF Mario, why the contradiction?
Dr Mario Blejer
The first reaction of the Fund to the financial crisis of 2007/8 was quite correct in my view. It was expansionary policy. It really promoted fiscal expansion at the beginning of the crisis and that helped during that period. Then it turn around and this programme actually in Greece, in Portugal, in Ireland particularly the Greek programme is very badly designed. Very badly designed. Even for the Fund it's badly designed in the sense it's based on the wrong assumption. The assumption was that Greece will be able to come back to the voluntary market, to the credit market, in 2012, next year. This is impossible. So the programme was not financed. In addition to that even if you really, really stick to the austerity as Ann mention all these countries – Greece, Portugal and Ireland – will see even if you stick to all the conditions and you fulfil everything that has been required from the IMF in 2015 the debt of the GDP will be higher than today. So obviously that's unsustainable.
Dr Alex Callinicos
It's not a rescue of the countries concerned. It's a rescue of their creditors. And that in combination with the austerity policies that has been part of the price of the so called rescues makes them extremely dubious from not simply an economic but also a moral perspective. But the IMF isn't acting on its own in Europe. It's acting as part of the Troika so called of the European Commission and the European Central Bank. And if you listen to Greek political discourse for example the peoples ire is directed against the Troika. Personally I think that the IMF is becoming of increasingly marginal importance.
Dr Ann Pettifor
In the Eurozone what the IMF is dealing with is not just the protection of creditors and bankers but the protection of the Euro which is a deeply flawed monetary framework but it is the framework. It's not just a programme. It's the framework that the IMF promoted everywhere including in Argentina when they encouraged the dollarisation of those economies. So just as Argentina had to borrow at a rate of interest set by Mr Alan Greenspan in New York and at a currency level that suits the Americans so the Greeks have had to deal with a currency that suits the Germans. Maybe and the French and the North Europeans. But it doesn't suit the poor countries of Europe.
Dr Georges Corm
I don't think that the IMF change at the beginning of the crisis. When Mr Strauss-Kahn said yes we shouldn't go to austerity measures too soon. Europe and the US should maintain liquidity in the system etc but if you look at what happened underground because we didn't mention that the IMF was called for Hungary and then for Romania and for other countries. Latvia and Latonia. The same kind of mess. And today what do you have in Hungary? Extreme riots is going up with all the misery that has come with the IMF programme. And I wouldn't say that it's being marginalised. It was marginalised before the crisis. Totally. Out of business.
Most governments were fed up. I remember as a minister I was always saying keep away from me. I never go through a standby agreement with you. In spite of the fact that Lebanon was heavily in debt.
Dr Mario Blejer
You know if you look at the numbers today the programmes for Greece, Ireland and Portugal are 66 per cent of the total amount of commitment of the fund. Two thirds are only going to these three countries. And if you had all of Europe, including Eastern Europe, it's 83 per cent. 83 per cent of the total commitment of the fund have gone to Europe. So I think that this is not an International Monetary Fund it's a European monetary fund.
Professor Alex Callinicos
Let's discuss why its role has changed and I think that the decisive event was East Asia and in particular the role that the IMF played in the so called rescues of countries like South Korea and Indonesia.
Marwan Bishara
When you say so called but they didn't actually help with $60bn in South Korea?
Professor Alex Callinicos
Well South Korea they still refer to the crisis of the late 1990s as the IMF crisis because they see the IMF as essentially the collection agency for the western corporations. There's a photograph that was taken I think in early 1998 of Camdessus who is then the Managing Director of the IMF standing over the Indonesian president, Suharto, as he signed the Articles of Agreement with the IMF.
Dr Ann Pettifor
Shocking.
Professor Alex Callinicos
And I thought at the time this is an incredibly stupid thing to do because it's an arrogant declaration of Western supremacy over Asia. And that was stupid because so much economic power was shifting to Asia. So every Asian politician looked at that photograph and thought I'm going to make sure I'm never in a position where that could happen to me. The IMF the IMF power depended upon it being a supplier of scarce capital to countries that were in trouble who were usually on the periphery of the world economy. But now a section of the periphery has risen and has said it's not going to be subject to that power.
Marwan Bishara
Georges you're asking for an answer.
Dr Georges Corm
No I was saying that in fact the IMF was totally marginalised before the crisis. Came back into the spotlight because at the first G8 summit in 2008 the leaders of the big Western countries of the G8 say you have no idea. We don't understand what has happened. Let us ask the IMF to study the situation. And this is how IMF came back to the limelight.
Professor Alex Callinicos
October 2007 they issued a world economic overview which said that the world economy was becoming more stable.
Dr Georges Corm
No, no and the drama here is that whenever a year later they allow the breakdown, the big emerging economies to raise their share in the equity capital of the IMF. They say we have reformed the IMF. While the entire staff structure, the way of thinking of the IMF, especially when it comes to those standby programmes and imposing conditions on countries it’s the same.
Dr Ann Pettifor
But that's the dangers of intellectual capture you see. I think that the G8, The ECB, the EU and the IMF all are engaged in group think and they can't think outside that box.
Dr Mario Blejer
But the big problem is the way that these programmes are designed and implemented and they do not solve the problems. And today I think the whole institution has been captured basically by the European problem. The fund has 28 programmes at this moment. Twenty-eight programmes which are called poverty reduction and growth. OK. Now all these 28 programmes all the commitments on these 28 programmes are ten per cent of the Greek problem. All the 28 is ten per cent of the Greek problem.
Marwan Bishara
But their effect on these countries is huge. Underdevelopment in those countries.
Dr Ann Pettifor
I think we need to get away from the IMF here because actually what we're talking about is the profession, if I may say so to my distinguished colleagues here, of economics.
Professor Alex Callinicos
Oh I'm not an economist thank God.
Dr Ann Pettifor
What we have here is an economic orthodoxy which the IMF is simply a spokesperson for. And they just mouth these incredibly flawed economics. And I want to blame the academics who are responsible for these crazy policies which are so impoverishing people and now wrecking both the Eurozone, damaging the US and you know causing a global social as well as economic and political ...
Marwan Bishara
Georges you have a whole chapter in your book about grooming an entire new generation of economists.
Dr Georges Corm
Yes I mean millions of MBA or of economics based on mathematical modelling which is out of touch with reality has been produced in the world is an army of just people with one eye or half an eye. It's terrible.
Professor Alex Callinicos
I don't want to dismiss the complicity of the academics but the IMF exists and has played the kind of role that it has particularly in the neo liberal era because it's proved useful to the dominant powers in the world. Since economic power is shifting eastwards will the new spectrum of dominant powers find the IMF as useful an institution as the West has?
Dr Ann Pettifor
And has taxpayer resources.
Marwan Bishara
Why are the likes of China and Brazil getting in on the business of the IMF? Why are they so interested to be part of that?
Dr Mario Blejer
Are they interested to be part of it because they would like to have a voice in the international arena?
Marwan Bishara
So it's not so useless then the IMF?
Dr Mario Blejer
No. We have been discussing so far all the issue of the programmes and the financial role of the IMF but the IMF have other roles and in some of the roles they've been useful.
Marwan Bishara
Such as?
Dr Mario Blejer
Interchange of information you get quite a lot of good statistics and quite a lot of good analysis that has not been practise if you want.
Marwan Bishara
But Dr Blejer they did get it wrong so many times. And they have been surprised each and every crisis.
Dr Ann Pettifor
Absolutely.
Dr Mario Blejer
No, no they did.
Dr Ann Pettifor
Mexico 95. South East Asia 98. They kept issuing ...
Dr Mario Blejer
The whole profession got it wrong.
Dr Ann Pettifor
But I think it goes further. I think that all of these institutions and academia have been captured by a very small financial elite.
Professor Alex Callinicos
I wish you'd stop pointing at me whenever you refer to academia. It's like being resisting these ideas.
Dr Ann Pettifor
I beg your pardon.
Dr Mario Blejer
I have a different question I want to give back about the role of China and Brazil and India and all the emerging markets. You mentioned that there was some reform and increase their share.
Dr Georges Corm
No there isn't a reform in my view. This was sold as being the reform of the IMF.
Dr Mario Blejer
But what we have to see is that not happened really and one of the reforms that was supposed to take place that the next managing director does not have to come directly from Europe and that didn't take place. So it means from the governance point of view the IMF has a big problem.
Professor Alex Callinicos
I think it was useful for them to make a big fuss about another European being appointed but to let it go ahead and that I think partly is because I think the battle over the directorships of the IMF and all that kind of thing are a symbolic struggle. It's important for China and Brazil etc to be more recognised in global forums. Doesn't mean that the IMF itself is that.
Dr Mario Blejer
When I was in the IMF I work very much in china. A lot in China. Used to go every month. And what's extremely important for them to have a voice there. They consider to have a voice in the IMF a very important world recognition of their status.
Dr Georges Corm
But there was this initiative by Japan in the crisis in 97 to create an IMF or facility for Asia and then the American government went out of his mind. Forbidden.
Professor Alex Callinicos
It would be much harder for them to do that now. But the Asians don't need it now. That's one of the great ironies of history.
Marwan Bishara
It seems that most of the problems are coming from the so called neo liberal economic policies and yet the IMF is the arm of established neo-liberalism around the world. How do you expect the IMF give the prescription for the sort of problems that its own ideology creates?
Dr Mario Blejer
No I already made it clear that I don't believe that the IMF design of programmes is going to be the solution to the problem. But I am just saying there are some problems in the world that come from different issues.
Dr Ann Pettifor
If you look at economic growth or economic activity in Africa 1945 to 1980 it's fairly healthy. You look at it after 80 when the IMF arrives Africa goes backwards and there's a direct correlation between this period, which is essentially a period of [Cainesian] policies and the neo liberal polices post 1980
Marwan Bishara
This is a very important but we're going to have to address it when we come back from the break but before we take a news break we're going to take a look at what happened in Argentina sometime ago to look to see if the IMF has ever learned its lessons.
Narrator
It all looked so good in the 90s. Argentina was the IMF's star pupil and did everything they asked. Free market reforms. Privatisation. It even pegged its currency to the dollar. But the economy went into recession.
Protestor
The people are hungry.
Argentine protestor
My husband is unemployed and I can't feed my children.
Argentine protestor
This can't go on, we have to obey the IMF.
Narrator
So Argentina went back to the IMF doctor who upped the austerity dose. It slashed public spending. It raised taxes and interest rates and of course took plenty of IMF loans.
George Bush, former president
The key for Argentina is to get her fiscal house in order. Get monetary policy in order. It'll all be done through the IMF.
Narrator
Yet the cure ended up being worse than the disease and the combination of cuts and taxes almost killed the patient.
Professor Alan Cibils
Prescribing these fiscal spending cuts and cuts to the salaries of state workers and of the retired means that the economy is going to contract because there is going to be less spending in the economy. And so if the economy contracts then fiscal revenues are also going to continue to contract and so you're in a downward spiral.
Narrator
It was a vicious circle. The government needed $22bn a year just to service its debt so the IMF loans were only prolonging the agony.
Domingo Cavallo
In the next two or three days we're going to work intensively with the IMF.
Narrator
What followed was enormous capital flight and a run on deposits. And with its currency pegged to the dollar Argentina had no room for manoeuvre and it became insolvent.
Eduardo Duhalde
I think following the IMF prescriptions has been part of the problem.
Narrator
At a $132bn it was the biggest default in history.
You'd think that it would be a salutary lesson so why is the IMF prescribing the same to
Greece.
Part 2
Marwan Bishara
Welcome back. The Arab world and Africa have had their own share of political and economic turbulence over the last few months and years and IMF wasn't far from the epicentre of the storm. Critics of the IMF are plentiful but are their arguments a bit too simplistic? After all the IMF is not about restoring economic prosperity it's about avoiding economic calamity. Two very different things but here's the catch. What happens when a country's leadership isn't interested in achieving prosperity for its people? When it comes to dictatorships is the IMF a reformer or an enabler?
Narrator
In the days before the Libyan revolution began Tripoli appeared calm. For Western institutions like the IMF nothing seemed out of the ordinary. In fact a mere 48 hours before people began risking their lives in protest the fund issued a report. "The outlook for Libya's economy" it said "remains favourable".
In Egypt the work of the revolution has at last exposed to the world what the IMF has long known. That the Mubarak dynasty has ruthlessly exploited its own citizens for decades and yet just last year the IMF was praising the Egyptian government for its "careful fiscal management".
In Tunisia disgraced former leader Zine El Abidine Ben Ali has already been found guilty in absentia of embezzling more than $25m. And yet somehow just months before he fled the IMF credited the Ben Ali regime with "sound macroeconomic management".
This praise was little comfort to a young Tunisian man desperate enough to set himself on fire or the millions of his fellow countrymen to live in economic destitution. Already the transitional Egyptian government has rejected a new IMF loan preferring instead to institute reforms itself. That's forced the new director of the fund to defend its work.
Christine Lagarde
The IMF never forces programmes down the throat of anybody. The IMF only offers services if it is asked.
Narrator
And she says she understands why Egypt is choosing to go it alone for now.
Christine Lagarde
If the country determines that it can actually organise its economic situation this is great. But if it can't and if it needs outside support and funding then it should really think of the Fund as an institution that is available.
Narrator
It could be argued that the IMF simply misread the Arab script badly underestimating the will of the people. But this logic falls apart when different examples are brought to bear and a pattern starts to emerge.
These countries all suffered under dictatorships and all of them were given massive IMF loans. After the Duvalier's fled Haiti realised 80 per cent of its total debt was owed to the IMF. The same story in South Africa at the end of apartheid. Malawi more than 80 per cent. Somalia more than 90. Paraguay, Congo, Sudan, Indonesia. The legacy of corrupt leadership matched by the legacy of crippling IMF debt.
These statistics may come as a shock to many in the West but they might also help explain why the Arab revolutionaries had no choice but to take matters into their own hands.
And this also helps to explain why the IMF is beginning to accept the growing global criticism.
Christine Lagarde
What I see as significant change in the last few years has been the ability of the Fund under the leadership of its Managing Director to make the approach more comprehensive. To address the employment slash unemployment issues. The social fabric of society. As opposed to looking exclusively and in a sort of sanitised way at numbers.
Narrator
This question of addressing the social fabric of society lies at the heart of the IMF criticism. The challenge for the fund and its new leader is whether the IMF is at last ready to listen to what emerging economies have been saying for years.
Marwan Bishara
Georges you've known Madame Lagarde from before what's wrong with what she just said?
Dr Georges Corm
The IMF in the last ten years almost 15 years have been absent from the Arab world. Almost all Arab countries maybe the exception of Yemen or Mauritania was having the standby with the IMF.
Marwan Bishara
That's what Mario said before one of its main job is evaluations.
Dr Georges Corm
Again being minister I was asking the IMF to down turn his appraisal so positive of the banking system in Lebanon. I said I cannot make any reforms of the banks and I need to reform them.
Marwan Bishara
Why do they do that?
Dr Georges Corm
Ah it's the financial elite. Our five six big banks who really control the economy of the country are of course very close to the IMF, to the World Bank, to the G8 leaders, to this and to that, it's a club.
Dr Mario Blejer
I don't think this is the case. This is missing the situation, missing the crisis, is not only in the Arab countries. I mean if you look at the report on Iceland two weeks before the crisis.
Dr Georges Corm
They don't have contact with the real economy.
Dr Mario Blejer
It's incredibly positive. Now why did this happen? I don't think this is a conspiracy because the Fund is a political organisation and there is always the need, as regarded by the Board or the Fund, or the staff of the Fund, to please the government in charge.
Marwan Bishara
I see so there's a complicity between the leadership of the IMF with the governments.
Dr Mario Blejer
The leadership and the staff too. We work in these countries and you always want to please the
governments of these countries. You will find very rare cases where there is criticism.
Professor Alex Callinicos
That can be very harsh.
Dr Georges Corm
Especially if you have a Minister of Finance which is not politically correct or economically correct.
Dr Mario Blejer
That is correct that the country has no power in the Fund.
Marwan Bishara
Alex remember in 1991 when Yemen did not vote with the US and the Security Council. At the time the US Ambassador told the Yemenis that this is going to be a very costly vote for not voting for the war in Iraq and they did not get their IMF money.
Professor Alex Callinicos
But that's a very long standing pattern. In the early 90s the Financial Times published an internal IMF report which showed that they knew that the money the Fund was lending to Mubutu, the dictator of Zaire, was being misappropriated for the benefit of his family. The reason for that was that he was on the right side in the Cold War.
Marwan Bishara
Is that why they keep lending?
Professor Alex Callinicos
Yes. It's very clear from what Mario is saying.
Dr Ann Pettifor
Friendly to the banks. Friendly to the Western banks in particular.
Dr Mario Blejer
You will never find a report of the IMF the word this is non-democratic country or this is corruption. The word corruption doesn't appear in the reports of the IMF. These types of things does not appear.
Marwan Bishara
Never.
Dr Georges Corm
Transaction costs.
Dr Mario Blejer
The report of the Fund are usually sanitised but it's true what has been said. What you said could be harsh but it's harsh if there is a political interest within the Fund.
Professor Alex Callinicos
Sure if the West wants to whack someone.
Marwan Bishara
There is a bit of contradiction of what I'm hearing so far. So if the IMF is bad for your economy and you're in the third World and then they decide to punish you by not giving you money. That's good for you in the end.
Professor Alex Callinicos
It's not good not to have the money. The problem is that the money comes with very harsh conditions. That's the problem.
Dr Ann Pettifor
The IMF acts as the gatekeeper for the worlds capital markets. That means if I'm a landlocked country and I need to get dollars to pay for oil I have to rely on the IMF. So you can never win because it's not just their money that they stop coming. It's aid money. It's private money. Any kind of money is now blocked because they act as the gatekeepers.
Dr Georges Corm
But the creditor bankers will ask for a standby with the IMF before its scheduling the debt.
Dr Ann Pettifor
Yes guaranteed.
Marwan Bishara
Is this the central role of the IMF today? The gatekeeper of the international money.
Dr Ann Pettifor
It has been for many years.
Professor Alex Callinicos
Except that its ability to act as the gatekeeper has been weakened. Because the flow of capital historically it policed the flow of capital from the rich core of the world to the rest of the world. The problem is that the flows of capital have changed.
Dr Ann Pettifor
But I want to turn attention to the countries that have defied the IMF now because right now we have the example of Egypt. And I think the refusal to accept the IMF loan is incredibly courageous. I think it reflects the nature of the revolution and I hope that we can support the Egyptians in this.
Marwan Bishara
So you think it's correct?
Dr Ann Pettifor
It's not correct. It's going to be hard for them because the IMF and the creditors will punish them. They will punish them. But on the other hand they maintain their policy autonomy. Now the very interesting example is Iceland. Iceland went through this and then the President, who is a Democrat, had the courage to call for a referendum. He asked the people and the people said why should we pay for the private creditors big mistakes and for the British government's failure to regulate its own banks. We're not doing that. So then they have instituted a new regulation, laws, changes to their constitution which say we will pay our foreign creditors when we have a surplus but when in years we don’t have a surplus they won't get the money. So that stops the creditors from milking these countries.
Dr Mario Blejer
This is correct but this is with the approval of the IMF. They got exactly one billion four hundred.
Dr Ann Pettifor
The IMF was so disgraced.
Marwan Bishara
How much did they get?
Dr Mario Blejer
$1.4bn and they deserved it. So they took the money and did the right thing. I agree with you.
Dr Ann Pettifor
Iceland is a beautiful example because it's an example of a small country that exercised leverage against a powerful creditor. And as you say they got the money too but on their terms.
Marwan Bishara
And let's look to the south, why did Egypt refuse the money Georges?
Dr Georges Corm
Well because Egypt has bad records of going into too much indebtedness and this is one of the reasons why Egypt probably went to the first Gulf War with the US to liberate Kuwait. Because then almost 40 per cent of its foreign debt was relieved. Totally wiped out by the Western creditors. But Egypt had bad memories of IMF programmes, of people in the street because you've taken out subsidies to essential products and things like this.
Marwan Bishara
Do you agree with the conventional wisdom that there were no strings attached to this latest offer?
Dr Georges Corm
No, no, no that's not true. That's simply not true. No strings attached to so called bilateral aids from Europe and governments to Egypt. And this also is not true because I've been an evaluator of Europe in aid to disburse aid you always have a lot of conditionality that BLEEP to say that there is no strings attached.
Marwan Bishara
So Alex if this is such a useful tool, certainly a political tool, for the United States and the West, why would they ever give it up or give up its leadership?
Professor Alex Callinicos
Well I think they will be forced to make adjustments when it comes to the leadership. Maybe Madame Lagarde is going to be forced to resign for somewhat different reasons.
Marwan Bishara
What you mean the legal process in France?
Professor Alex Callinicos
Yeah and in that case I'm sure that the Europeans will try desperately to get another European in charge but over a longer period of time they're going to have to give up the Managing Directorship.
Marwan Bishara
What about the share in the board?
Professor Alex Callinicos
Yeah I'm sure they'll have to make adjustments.
Marwan Bishara
You think America will ever give up its veto?
Professor Alex Callinicos
Not if it can possibly avoid it but America is an increasingly embattled position because of the scale of the crisis that it now faces itself. It maybe forced to make concessions that it would prefer not to.
Dr Ann Pettifor
And that crisis takes us back to the policies of the IMF. These policies are parasitic on the real healthy productive economy. This is the finance set if you like acting as parasite on the real economy where we make things and we grow things and we are productive. Now what has happened is that if you like these bloodsuckers, let's be very brutal about this, have starved the body of the real economy. This is hurting now. It’s beginning to hurt the United States. Its hurting Europe.
Marwan Bishara
Are you talking by the financial markets or are you talking about the IMF?
Dr Ann Pettifor
I'm talking about the policies that underpin the IMF. They effectively, because they act for creditors.
Marwan Bishara
Talk to us about Africa since you've known about this. Have the African economies got much worse with the IMF or they got better or are there exceptions to the rule?
Dr Ann Pettifor
Well I mean I've worked with the Nigerians. They were very interesting. You know the story if I owe the bank a £1,000 it's my problem if I owe them a million pounds it's their problem. Nigeria's debt was the IMF and the banks problem. And therefore Ngozi Okonjo-Iweala who was their Finance Minister at the time had a very strong leverage and very strong influence over the programme and so on and in that sense achieved $18bn of debt cancellation. But other countries in Africa that have less leverage did not do as well.
Marwan Bishara
I don't want to regionalise the discussion but I would also like to hear your perspective of the IMF in Latin America?
Dr Mario Blejer
Argentina had inflation of about 5,000 per cent when the peso was pegged to the dollar. And during four or five years the programme worked very well. not the IMF programme the programme of stabilisation. It was later on when the country started taking excessive debt and has huge deficit that is totally inconsistent with this peg and there is where the problem with the IMF occur.
Marwan Bishara
So you said the same thing about Greece. You said in the beginning it worked but then it didn't but isn't that the point, in the long term it works?
Dr Mario Blejer
No, no I just was saying at the beginning it has nothing to do with IMF.
Dr Georges Corm
I remember so many people came into me, sometimes academic authorities, Mr Minister in Lebanon do like Argentina.
Dr Mario Blejer
What I'm trying to say there were two periods here and the first period worked the second period didn't work because obviously it was badly managed and that was supported by the IMF.
Professor Alex Callinicos
You know there's so many episodes in which the role of the IMF and the kind of thinking that it represents were negative.
Dr Mario Blejer
It was largely political. Of course the United States wanted to support this particular programme. But the issue is that Argentina after this system was abolished defaulted on its own and paid back to the IMF and actually has no more programme. And in fact if you look at the list of programmes there are few Latin American.
Dr Ann Pettifor
Yes they're now independent of the IMF.
Dr Mario Blejer
They are completely out of it. My point is that you cannot claim that the problems in the world come from the IMF.
Marwan Bishara
No of course not.
Professor Alex Callinicos
It's an important part of the ...
Dr Mario Blejer
... to resolve problems.
Dr Georges Corm
It's only implementing the main trend economic throw. That you are looking at markets. Are markets free or not? Whether behind the freedom of markets you have a financial oligarchy, our productive economy is totally collapsing. The Fund and the World Bank and the EU doesn't care. They don't give a damn. As long as you liberalise your economy.
Professor Alex Callinicos
That's not just an intellectual error. That's an error that supports certain interests. For example look at the incredible record of Goldman Sacs in helps to set up for example the crisis in Greece and so on and so forth. So there's a confluence between a certain view of markets and so on and so forth and very powerful influence.
Dr Georges Corm
Academics economy. I wouldn’t blame your businessman who wants to maximise his profits
Dr Mario Blejer
But you have to also be balanced on that. If you want to know what the staff of the Fund thought about the Greek problem they thought it was a very bad programme and that it had to include a big default. That was what the staff believed. The board and the politicians that actually ruled it.
Dr Ann Pettifor
I think it's the board that makes the decisions and the board tries to stay invisible so the board doesn't fly to Greece.
Marwan Bishara
And it's very political.
Dr Ann Pettifor
And it's incredibly. It's the United States. It's the big G8 countries. They don't turn up in Athens to deliver the nasty programme. The staff do. Then we aim our anger at the staff and it's kind of futile to do that really.
Professor Alex Callinicos
However good the intentions of IMF staff are what we're seeing in Europe at the minute is the restructuring of the economies under the supervision of three institutions that aren’t really democratically accountable. The European Commission which has some relationship with elected politicians. It's the least undemocratic of the three. The European Central Bank which is designed to be unaccountable and the IMF. And so we have this situation where now for example the privatisation of public industry in Greece is going to be supervised by these external forces. Now in a certain way you can say what's happened to many countries in the Third World is now coming home to Europe and one of the things that's happened during the present crisis is because the response of the political elite has been so poor, particularly recently, increasingly it's the technical elites who are shaping the process.
Marwan Bishara
Let's take this a few steps forward, what is the alternative?
Professor Alex Callinicos
One thing would be to go back to the original discussions of Britain Woods when Caines proposed an international credit union in which creditors and debtors would be treated in the same way and the US refused to have that and insisted on a set up in which there was a symmetry between creditors and debtors because in those days the US was the world's biggest creditor. Now we come to an interesting situation because of course the US is now the world's biggest debtor.
Marwan Bishara
So the US might be supportive of that.
Professor Alex Callinicos
Well if its control over the dollar is the main reserve currency seriously became compromised then the US would have to think about other solutions. The interesting question is of course whether the new great creditor powers like China and Germany would like the kind of ...
Marwan Bishara
You think the end of double standards could happen within an IMF reform or it has to be done in an alternative institution?
Dr Mario Blejer
Both. I think there doesn't have to be an alternative institution you can change the structure of the existing institution but you have a big serious problem of governance at this moment and the problem of governance is very difficult to resolve. It's a political problem. But more than bad policies or more than I would say damaging policies the confusion of policies at this moment in the IMF.
Dr Ann Pettifor
I think that's because we’re going through a transformation now. The neo liberal project has been exposed for the weakness and the flawed nature of it.
Marwan Bishara
Are you saying we've seen the back of the Washington consensus?
Dr Ann Pettifor
I think what we're seeing is the dying fight if you like, the struggle, of those who want to hold on. Now I think we're at a point in history where this struggle is now becoming titanic and very unpleasant and very difficult and it's a question of which way the world's democracies societies are going to go. And I see that people are going to want very soon to have some real leadership. To have a strong man to come and rescue them. And very soon we’re going to have fascists raising their ugly heads again.
Dr Georges Corm
Also I mean globalisation the way it works has to be reformed. Take the debts. There would be no debt crisis if the debts were kept local. In domestic currencies. Subscribed mostly by domestic investors. It is the fact that debt of any country, smallest one or biggest one, is international.
Dr Mario Blejer
Remember that today we are having the Italian crisis and most of the Italian debt is held in domestic currency by local citizen.
Dr Ann Pettifor
No, no it's held in Europe.
Dr Mario Blejer
Euro is domestic currency.
Dr Ann Pettifor
No it's not a domestic currency. It's a European currency.
Marwan Bishara
This is a discussion for another day. Thank you so much gentlemen. Ann wonderful having you here. And I'll be back with the last thoughts.
Marwan Bishara
Standard and Poors, Woody, Fitch names you've hardly heard of before the financial crisis are the private companies that have been waiting countries economies, bonds and debts. They downgraded countries from Japan to Greece. Demoting Portugal. And this month downgraded the US from triple to double a plus.
Who are these companies? Who are they accountable to? And if they're in the business of measuring risks and advertising crises why are we always being surprised? And aren't these the same companies who's triple a ratings got us in the financial mess in the first place. Promoting the likes of defunct Enron and boosting the sub prime mortgage market. More importantly why aren't they legally liable when they get it so wrong and destroy the livelihoods of millions of working families across the globe? They should be.
I say someone needs to rate the raters and monitor the monitors. The International Monetary Fund included. That's the way it goes.
Saturday, August 20, 2011
Thursday, August 18, 2011
Tuesday, August 16, 2011
BBC: The Story of God
Monday, August 15, 2011
Sunday, August 14, 2011
Saturday, August 13, 2011
Face To Face: Richard Gage
Friday, August 12, 2011
Thursday, August 11, 2011
Kennedy: President & Press
The President and The Press
April 27, 1961 | American Newspaper Publishers Association
Mr. Chairman, ladies and gentlemen:
I appreciate very much your generous invitation to be here tonight. You bear heavy responsibilities these days and a article I read some time ago reminded me of how particularly heavily the burdens of present day events bear upon your profession.
You may remember that in 1851 the New York Herald Tribune under the sponsorship and publishing of Horace Greeley, employed as its London correspondent an obscure journalist by the name of Karl Marx. We are told that foreign correspondent Marx, stone broke, and with a family ill and undernourished, constantly appealed to Greeley and managing editor Charles Dana for an increase in his munificent salary of five dollars per installment, a salary which he and Engels ungratefully labeled as the "lousiest petty bourgeois cheating."
But when all his financial appeals were refused, Marx looked around for other means of livelihood and fame, eventually terminating his relationship with the Tribune and devoting his talents full time to the cause that would bequeath to the world the seeds of Leninism, Stalinism, revolution, and the Cold War.
If only this capitalistic New York newspaper had -- had treated him more kindly; if only Marx had remained a foreign correspondent, history might have been different. And I -- I hope all publishers will bear this lesson in mind the next time they receive a poverty-stricken appeal from a small increase in the expense account from an obscure newspaper man.
I have selected as a title of my remarks tonight "The President and the Press." Some may suggest that this would be more naturally worded "The President Versus the Press." But those are not my sentiments tonight. It is true, however, that when a well-known diplomat from another country demanded recently that our State Department repudiate certain newspaper attacks on his colleague it was unnecessary for us to reply that this Administration was not responsible for the press, for the press had already made it clear that it was not responsible for this Administration.
Nevertheless, my purpose here tonight is not to deliver the usual assault on the so-called "one party press." On the contrary, in recent months I have rarely heard any complaints about political bias in the press except from a few Republicans. Nor is it my purpose tonight to discuss or defend the televising of Presidential press conferences. I think it is highly beneficial to have some 20 million Americans regularly sit in on these conferences to observe, if I may say so, the incisive, the intelligent, and the courteous qualities displayed by your Washington correspondents.
Nor, finally, are these remarks intended to examine the proper degree of privacy which the press should allow to any President and his family. If in the last few months your White House reporters and photographers have been attending church services with regularity, that has surely done them no harm. On the other hand, I realize that your staff and wire service photographers may be complaining that they do not enjoy the same green privileges at the local golf courses which they once did. It is true that my predecessor did not object as I do to pictures of one's golfing skill in action. But neither on the other hand did he ever bean a Secret Service man.
My topic tonight is a more sober one -- of concern to publishers as well as editors.
I want to talk about our common responsibilities in the face of a common danger. The events of recent weeks may have helped to illuminate that challenge for some; but the dimensions of its threat have loomed large on the horizon for many years. Whatever our hopes may be for the future -- for reducing this threat or living with it -- there is no escaping either the gravity or the totality of its challenge to our survival and to our security -- a challenge that confronts us in unaccustomed ways in every sphere of human activity.
This deadly challenge imposes upon our society two requirements of direct concern both to the press and to the President -- two requirements that may seem almost contradictory in tone, but which must be reconciled and fulfilled if we are to meet this national peril. I refer, first, to the need for far greater public information; and, second, to the need for far greater official secrecy.
The very word "secrecy" is repugnant in a free and open society; and we are as a people inherently and historically opposed to secret societies, to secret oaths, and to secret proceedings. We decided long ago that the dangers of excessive and unwarranted concealment of pertinent facts far outweighed the dangers which are cited to justify it. Even today, there is little value in opposing the threat of a closed society by imitating its arbitrary restrictions. Even today, there is little value in insuring the survival of our nation if our traditions do not survive with it. And there is very grave danger that an announced need for increased security will be seized upon by those anxious to expand its meaning to the very limits of official censorship and concealment. That I do not intend to permit to the extent that it's in my control. And no official of my Administration, whether his rank is high or low, civilian or military, should interpret my words here tonight as an excuse to censor the news, to stifle dissent, to cover up our mistakes, or to withhold from the press and the public the facts they deserve to know.
But I do ask -- But I do ask every publisher, every editor, and every newsman in the nation to reexamine his own standards, and to recognize the nature of our country's peril. In time of war, the government and the press have customarily joined in an effort, based largely on self-discipline, to prevent unauthorized disclosures to the enemy. In times of "clear and present danger," the courts have held that even the privileged rights of the First Amendment must yield to the public's need for national security.
Today no war has been declared, and however fierce the struggle may be, it may never be declared in the traditional fashion. Our way of life is under attack. Those who make themselves our enemy are advancing around the globe. The survival of our friends is in danger. And yet no war has been declared, no borders have been crossed by marching troops, no missiles have been fired.
If the press is awaiting a declaration of war before it imposes the self-discipline of combat conditions, then I can only say that no war ever posed a greater threat to our security. If you are awaiting a finding of "clear and present danger," then I can only say that the danger has never been more clear and its presence has never been more imminent.
It requires a change in outlook, a change in tactics, a change in missions -- by the government, by the people, by every businessman or labor leader, and by every newspaper. For we are opposed around the world by a monolithic and ruthless conspiracy that relies primarily on covert means for expanding its sphere of influence -- on infiltration instead of invasion, on subversion instead of elections, on intimidation instead of free choice, on guerrillas by night instead of armies by day. It is a system which has conscripted vast human and material resources into the building of a tightly knit, highly efficient machine that combines military, diplomatic, intelligence, economic, scientific, and political operations.
Its preparations are concealed, not published. Its mistakes are buried, not headlined. Its dissenters are silenced, not praised. No expenditure is questioned, no rumor is printed, no secret is revealed. It conducts the Cold War, in short, with a war-time discipline no democracy would ever hope or wish to match.
Nevertheless, every democracy recognizes the necessary restraints of national security -- and the question remains whether those restraints need to be more strictly observed if we are to oppose this kind of attack as well as outright invasion.
For the facts of the matter are that this nation's foes have openly boasted of acquiring through our newspapers information they would otherwise hire agents to acquire through theft, bribery, or espionage; that details of this nation's covert preparations to counter the enemy's covert operations have been available to every newspaper reader, friend and foe alike; that the size, the strength, the location and the nature of our forces and weapons, and our plans and strategy for their use, have all been pinpointed in the press and other news media to a degree sufficient to satisfy any foreign power; and that, in at least in one case, the publication of details concerning a secret mechanism whereby satellites were followed required its alteration at the expense of considerable time and money.
The newspapers which printed these stories were loyal, patriotic, responsible, and well-meaning. Had we been engaged in open warfare, they undoubtedly would not have published such items. But in the absence of open warfare, they recognized only the tests of journalism and not the tests of national security. And my question tonight is whether additional tests should not now be adopted.
That question is for you alone to answer. No public official should answer it for you. No governmental plan should impose its restraints against your will. But I would be failing in my duty to the nation, in considering all of the responsibilities that we now bear and all of the means at hand to meet those responsibilities, if I did not commend this problem to your attention, and urge its thoughtful consideration.
On many earlier occasions, I have said -- and your newspapers have constantly said -- that these are times that appeal to every citizen's sense of sacrifice and self-discipline. They call out to every citizen to weigh his rights and comforts against his obligations to the common good. I cannot now believe that those citizens who serve in the newspaper business consider themselves exempt from that appeal.
I have no intention of establishing a new Office of War Information to govern the flow of news. I am not suggesting any new forms of censorship or new types of security classifications. I have no easy answer to the dilemma that I have posed, and would not seek to impose it if I had one. But I am asking the members of the newspaper profession and the industry in this country to reexamine their own responsibilities, to consider the degree and the nature of the present danger, and to heed the duty of self-restraint which that danger imposes upon us all.
Every newspaper now asks itself, with respect to every story: "Is it news?" All I suggest is that you add the question: "Is it in the interest of national security?" And I hope that every group in America -- unions and businessmen and public officials at every level -- will ask the same question of their endeavors, and subject their actions to the same exacting tests. And should the press of America consider and recommend the voluntary assumption of specific new steps or machinery, I can assure you that we will cooperate whole-heartedly with those recommendations.
Perhaps there will be no recommendations. Perhaps there is no answer to the dilemma faced by a free and open society in a cold and secret war. In times of peace, any discussion of this subject, and any action that results, are both painful and without precedent. But this is a time of peace and peril which knows no precedent in history.
It is the unprecedented nature of this challenge that also gives rise to your second obligation -- an obligation which I share. And that is our obligation to inform and alert the American people -- to make certain that they possess all the facts that they need, and understand them as well -- the perils, the prospects, the purposes of our program and the choices that we face.
No President should fear public scrutiny of his program. For from that scrutiny comes understanding; and from that understanding comes support or opposition. And both are necessary. I am not asking your newspapers to support an Administration, but I am asking your help in the tremendous task of informing and alerting the American people. For I have complete confidence in the response and dedication of our citizens whenever they are fully informed.
I not only could not stifle controversy among your readers -- I welcome it. This Administration intends to be candid about its errors; for as a wise man once said: "An error doesn't not become a mistake until you refuse to correct it." We intend to accept full responsibility for our errors; and we expect you to point them out when we miss them.
Without debate, without criticism, no Administration and no country can succeed -- and no republic can survive. That is why the Athenian lawmaker Solon decreed it a crime for any citizen to shrink from controversy. And that is why our press was protected by the First Amendment -- the only business in America specifically protected by the Constitution -- not primarily to amuse and entertain, not to emphasize the trivial and the sentimental, not to simply "give the public what it wants" -- but to inform, to arouse, to reflect, to state our dangers and our opportunities, to indicate our crises and our choices, to lead, mold, educate, and sometimes even anger public opinion.
This means greater coverage and analysis of international news -- for it is no longer far away and foreign but close at hand and local. It means greater attention to improved understanding of the news as well as improved transmission. And it means, finally, that government at all levels, must meet its obligation to provide you with the fullest possible information outside the narrowest limits of national security -- and we intend to do it.
It was early in the 17th Century that Francis Bacon remarked on three recent inventions already transforming the world: the compass, gunpowder, and the printing press. Now the links between the nations first forged by the compass have made us all citizens of the world, the hopes and threats of one becoming the hopes and threats of us all. In that one world's efforts to live together, the evolution of gunpowder to its ultimate limit has warned mankind of the terrible consequences of failure.
And so it is to the printing press -- to the recorder of man's deeds, the keeper of his conscience, the courier of his news -- that we look for strength and assistance, confident that with your help man will be what he was born to be: free and independent.
April 27, 1961 | American Newspaper Publishers Association
Mr. Chairman, ladies and gentlemen:
I appreciate very much your generous invitation to be here tonight. You bear heavy responsibilities these days and a article I read some time ago reminded me of how particularly heavily the burdens of present day events bear upon your profession.
You may remember that in 1851 the New York Herald Tribune under the sponsorship and publishing of Horace Greeley, employed as its London correspondent an obscure journalist by the name of Karl Marx. We are told that foreign correspondent Marx, stone broke, and with a family ill and undernourished, constantly appealed to Greeley and managing editor Charles Dana for an increase in his munificent salary of five dollars per installment, a salary which he and Engels ungratefully labeled as the "lousiest petty bourgeois cheating."
But when all his financial appeals were refused, Marx looked around for other means of livelihood and fame, eventually terminating his relationship with the Tribune and devoting his talents full time to the cause that would bequeath to the world the seeds of Leninism, Stalinism, revolution, and the Cold War.
If only this capitalistic New York newspaper had -- had treated him more kindly; if only Marx had remained a foreign correspondent, history might have been different. And I -- I hope all publishers will bear this lesson in mind the next time they receive a poverty-stricken appeal from a small increase in the expense account from an obscure newspaper man.
I have selected as a title of my remarks tonight "The President and the Press." Some may suggest that this would be more naturally worded "The President Versus the Press." But those are not my sentiments tonight. It is true, however, that when a well-known diplomat from another country demanded recently that our State Department repudiate certain newspaper attacks on his colleague it was unnecessary for us to reply that this Administration was not responsible for the press, for the press had already made it clear that it was not responsible for this Administration.
Nevertheless, my purpose here tonight is not to deliver the usual assault on the so-called "one party press." On the contrary, in recent months I have rarely heard any complaints about political bias in the press except from a few Republicans. Nor is it my purpose tonight to discuss or defend the televising of Presidential press conferences. I think it is highly beneficial to have some 20 million Americans regularly sit in on these conferences to observe, if I may say so, the incisive, the intelligent, and the courteous qualities displayed by your Washington correspondents.
Nor, finally, are these remarks intended to examine the proper degree of privacy which the press should allow to any President and his family. If in the last few months your White House reporters and photographers have been attending church services with regularity, that has surely done them no harm. On the other hand, I realize that your staff and wire service photographers may be complaining that they do not enjoy the same green privileges at the local golf courses which they once did. It is true that my predecessor did not object as I do to pictures of one's golfing skill in action. But neither on the other hand did he ever bean a Secret Service man.
My topic tonight is a more sober one -- of concern to publishers as well as editors.
I want to talk about our common responsibilities in the face of a common danger. The events of recent weeks may have helped to illuminate that challenge for some; but the dimensions of its threat have loomed large on the horizon for many years. Whatever our hopes may be for the future -- for reducing this threat or living with it -- there is no escaping either the gravity or the totality of its challenge to our survival and to our security -- a challenge that confronts us in unaccustomed ways in every sphere of human activity.
This deadly challenge imposes upon our society two requirements of direct concern both to the press and to the President -- two requirements that may seem almost contradictory in tone, but which must be reconciled and fulfilled if we are to meet this national peril. I refer, first, to the need for far greater public information; and, second, to the need for far greater official secrecy.
The very word "secrecy" is repugnant in a free and open society; and we are as a people inherently and historically opposed to secret societies, to secret oaths, and to secret proceedings. We decided long ago that the dangers of excessive and unwarranted concealment of pertinent facts far outweighed the dangers which are cited to justify it. Even today, there is little value in opposing the threat of a closed society by imitating its arbitrary restrictions. Even today, there is little value in insuring the survival of our nation if our traditions do not survive with it. And there is very grave danger that an announced need for increased security will be seized upon by those anxious to expand its meaning to the very limits of official censorship and concealment. That I do not intend to permit to the extent that it's in my control. And no official of my Administration, whether his rank is high or low, civilian or military, should interpret my words here tonight as an excuse to censor the news, to stifle dissent, to cover up our mistakes, or to withhold from the press and the public the facts they deserve to know.
But I do ask -- But I do ask every publisher, every editor, and every newsman in the nation to reexamine his own standards, and to recognize the nature of our country's peril. In time of war, the government and the press have customarily joined in an effort, based largely on self-discipline, to prevent unauthorized disclosures to the enemy. In times of "clear and present danger," the courts have held that even the privileged rights of the First Amendment must yield to the public's need for national security.
Today no war has been declared, and however fierce the struggle may be, it may never be declared in the traditional fashion. Our way of life is under attack. Those who make themselves our enemy are advancing around the globe. The survival of our friends is in danger. And yet no war has been declared, no borders have been crossed by marching troops, no missiles have been fired.
If the press is awaiting a declaration of war before it imposes the self-discipline of combat conditions, then I can only say that no war ever posed a greater threat to our security. If you are awaiting a finding of "clear and present danger," then I can only say that the danger has never been more clear and its presence has never been more imminent.
It requires a change in outlook, a change in tactics, a change in missions -- by the government, by the people, by every businessman or labor leader, and by every newspaper. For we are opposed around the world by a monolithic and ruthless conspiracy that relies primarily on covert means for expanding its sphere of influence -- on infiltration instead of invasion, on subversion instead of elections, on intimidation instead of free choice, on guerrillas by night instead of armies by day. It is a system which has conscripted vast human and material resources into the building of a tightly knit, highly efficient machine that combines military, diplomatic, intelligence, economic, scientific, and political operations.
Its preparations are concealed, not published. Its mistakes are buried, not headlined. Its dissenters are silenced, not praised. No expenditure is questioned, no rumor is printed, no secret is revealed. It conducts the Cold War, in short, with a war-time discipline no democracy would ever hope or wish to match.
Nevertheless, every democracy recognizes the necessary restraints of national security -- and the question remains whether those restraints need to be more strictly observed if we are to oppose this kind of attack as well as outright invasion.
For the facts of the matter are that this nation's foes have openly boasted of acquiring through our newspapers information they would otherwise hire agents to acquire through theft, bribery, or espionage; that details of this nation's covert preparations to counter the enemy's covert operations have been available to every newspaper reader, friend and foe alike; that the size, the strength, the location and the nature of our forces and weapons, and our plans and strategy for their use, have all been pinpointed in the press and other news media to a degree sufficient to satisfy any foreign power; and that, in at least in one case, the publication of details concerning a secret mechanism whereby satellites were followed required its alteration at the expense of considerable time and money.
The newspapers which printed these stories were loyal, patriotic, responsible, and well-meaning. Had we been engaged in open warfare, they undoubtedly would not have published such items. But in the absence of open warfare, they recognized only the tests of journalism and not the tests of national security. And my question tonight is whether additional tests should not now be adopted.
That question is for you alone to answer. No public official should answer it for you. No governmental plan should impose its restraints against your will. But I would be failing in my duty to the nation, in considering all of the responsibilities that we now bear and all of the means at hand to meet those responsibilities, if I did not commend this problem to your attention, and urge its thoughtful consideration.
On many earlier occasions, I have said -- and your newspapers have constantly said -- that these are times that appeal to every citizen's sense of sacrifice and self-discipline. They call out to every citizen to weigh his rights and comforts against his obligations to the common good. I cannot now believe that those citizens who serve in the newspaper business consider themselves exempt from that appeal.
I have no intention of establishing a new Office of War Information to govern the flow of news. I am not suggesting any new forms of censorship or new types of security classifications. I have no easy answer to the dilemma that I have posed, and would not seek to impose it if I had one. But I am asking the members of the newspaper profession and the industry in this country to reexamine their own responsibilities, to consider the degree and the nature of the present danger, and to heed the duty of self-restraint which that danger imposes upon us all.
Every newspaper now asks itself, with respect to every story: "Is it news?" All I suggest is that you add the question: "Is it in the interest of national security?" And I hope that every group in America -- unions and businessmen and public officials at every level -- will ask the same question of their endeavors, and subject their actions to the same exacting tests. And should the press of America consider and recommend the voluntary assumption of specific new steps or machinery, I can assure you that we will cooperate whole-heartedly with those recommendations.
Perhaps there will be no recommendations. Perhaps there is no answer to the dilemma faced by a free and open society in a cold and secret war. In times of peace, any discussion of this subject, and any action that results, are both painful and without precedent. But this is a time of peace and peril which knows no precedent in history.
It is the unprecedented nature of this challenge that also gives rise to your second obligation -- an obligation which I share. And that is our obligation to inform and alert the American people -- to make certain that they possess all the facts that they need, and understand them as well -- the perils, the prospects, the purposes of our program and the choices that we face.
No President should fear public scrutiny of his program. For from that scrutiny comes understanding; and from that understanding comes support or opposition. And both are necessary. I am not asking your newspapers to support an Administration, but I am asking your help in the tremendous task of informing and alerting the American people. For I have complete confidence in the response and dedication of our citizens whenever they are fully informed.
I not only could not stifle controversy among your readers -- I welcome it. This Administration intends to be candid about its errors; for as a wise man once said: "An error doesn't not become a mistake until you refuse to correct it." We intend to accept full responsibility for our errors; and we expect you to point them out when we miss them.
Without debate, without criticism, no Administration and no country can succeed -- and no republic can survive. That is why the Athenian lawmaker Solon decreed it a crime for any citizen to shrink from controversy. And that is why our press was protected by the First Amendment -- the only business in America specifically protected by the Constitution -- not primarily to amuse and entertain, not to emphasize the trivial and the sentimental, not to simply "give the public what it wants" -- but to inform, to arouse, to reflect, to state our dangers and our opportunities, to indicate our crises and our choices, to lead, mold, educate, and sometimes even anger public opinion.
This means greater coverage and analysis of international news -- for it is no longer far away and foreign but close at hand and local. It means greater attention to improved understanding of the news as well as improved transmission. And it means, finally, that government at all levels, must meet its obligation to provide you with the fullest possible information outside the narrowest limits of national security -- and we intend to do it.
It was early in the 17th Century that Francis Bacon remarked on three recent inventions already transforming the world: the compass, gunpowder, and the printing press. Now the links between the nations first forged by the compass have made us all citizens of the world, the hopes and threats of one becoming the hopes and threats of us all. In that one world's efforts to live together, the evolution of gunpowder to its ultimate limit has warned mankind of the terrible consequences of failure.
And so it is to the printing press -- to the recorder of man's deeds, the keeper of his conscience, the courier of his news -- that we look for strength and assistance, confident that with your help man will be what he was born to be: free and independent.
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