The Past Masters of Error Pontificate Again

By Juan Torres López

The Organization for Economic Cooperation and Development (OECD) has just published its new report on the Spanish economy that makes predictions about our immediate future and presents proposals, it says, to exit the crisis.

The forecasts pour a bucket of cold water on the Spanish government because they say that we are not going to achieve the very optimistic scenarios used to plan budgets and the recession is going to be harder and longer than we were led to believe by Don Mariano [Rajoy] and his ministers – some of whom even claim to see signs of recovery in the near term.

It is hardly worth dwelling on the specific data presented by the OECD – along with the International Monetary Fund, the agency that is never right in making predictions, so whatever it now expects is surely be wrong, as almost always happens.

To explain. The reports made are not intended to provide a thorough and accurate analysis of reality to help governments make the right choices. These agencies spearhead the interests of the powers that be and particularly of large financial groups and business worldwide. And so predictions and data provided in their reports are actually aimed at creating a climate of opinion that favours the subsequent adoption of neo-liberal measures that they support and help impose. Only this can explain the accumulation of so many errors in their forecasts, so many mistakes.

The IMF and OECD employ perhaps some of the best paid analysts among international institutions worldwide, providing them with the best available resources to conduct their analysis. And yet, they make the biggest errors in identifying not only what might happen in the future, but even what is happening now.

You could say that the OECD and the IMF are past masters of error, but the funny thing is that they are not daunted and periodically submit their reports to world public opinion as if they were the voice of the gods who know everything and who have the power to tell ordinary mortals what is best for them and what they must do without fail.

Better, then, to ignore the numbers and scenarios they present. They have hardly ever conducted accurate analysis and so one shouldn’t expect a miracle to allow them to hit the mark now.

They are really downbeat about the immediate future in Spain in order to cause the paralysis that fear always produces, and thus create the environment that assumes as irremediable the biased proposals for the pro-oligarchic groups to carry out.

The proof of this is that, apart from steps that the OECD is well aware will not be taken -such as eliminating tax incentives on private pensions – they now propose yet again in their new report practically the same measures that over recent years they have been encouraging and which have created the conditions for the crisis to be unleashed with rare virulence, especially with respect to the impact of widening inequality.

In the section of the OECD report on policies for labour and markets, it recommends the same old “solutions”, which it urged before the crisis: cut wages, limit the bargaining power of workers by ending national level collective bargaining agreements, reduce the cost of dismissal, in short, greater ‘flexibility’ in labour relations. This is a strategy that even OECD research has shown is not a determinants in improving the labour market and employment levels.

The authors of the report have no choice but to recognize that the austerity measures involve a very large cut in growth and employment and, therefore, neither are they able to alleviate the debt problem, nor will they provide stability or growth in the near future. But at the same time, the report maintains an attachment to neoliberalism, stating that the government should stick to the goal of reducing the deficit, and therefore Spain must take further fiscal consolidation measures. That is, the policies are not good, but they must be implemented.

And regarding the situation of the financial system, the OECD simply limits itself to the same arguments pursued by those whom are dedicated to change market conditions in order that the big banks remain with the largest market share possible : repeating that if you do what they say, credit will flow again. The same was said of the Spain’s financial reform that was carried out along the lines proposed by the OECD, and the opposite happened.

On the fiscal front, the OECD thinks that the priority is to create an independent fiscal authority to enforce the policy of stability and austerity. But without putting onto the table any proposals that could raise tax more equitably and efficiently.

Always the same rant: more markets, more freedom for the elite, greater concentration of capital and indifference to inequality, and no incentives to encourage productive activities. And this, despite the ample evidence that where such measures have been imposed, economies have deteriorated further.

The OECD is permeated with pure ideological fundamentalism. Not a single measure to restore large-scale demand, which is what is needed, not a single proposal (other than the miracle that ministers sell) to urgently restore funding to businesses and consumers, not a word about how to change the perverse specialization [banks, bricks and mortar] of our economy; silence on tax fraud, on capital flight, and the role of banks in the crisis that makes it so hard to regain the confidence to exit it.

Nor does the OECD provides a rigorous analysis of how debt has grown in recent years due to lack of central bank financing or structural reforms that the OECD itself promoted.

The OECD report is more of the same. And more of the same means going down the road (also proposed by the OECD) that has led us to where we are – that is, to disaster.

Juan Torres López is Professor of Applied Economics at the University of Seville

El Publico

Translation/Edit by Revolting Europe

On the OECD report (El Pais):

After a year of a draconian spending cuts and tax hikes under the government of Prime Minister Mariano Rajoy, the OECD on Friday recommended another battery of measures — some of them radical — in its latest report on the Spanish economy. The Organization for Economic Cooperation and Development’s Christmas wish list includes further value-added tax rate hikes, making it even cheaper to sack workers, an overhaul of the pension system to lower benefits, the elimination of partial retirement, the removal of tax deductions for contributions to private pension schemes, the withdrawal of some fiscal breaks on existing mortgages on the family home and a tightening of the conditions for entitlement to unemployment benefits. El Pais