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Europe

What’s not been said about the new BRICS bank

Vicenç Navarro*

The history of disasters (and there is no other way to define the consequences of their policies) created by the International Monetary Fund (IMF) is long. This institution, which in its current configuration aims to defend the interests of finance capital (ie the banks) at the expense of the interests of the countries supposedly helped by it, has produced enormous damage to populations of the states it “helped” (and, in particular, their popular classes) because of policies imposed on their peoples (see Los amos del mundo. Las armas del terrorismo financiero, Vicenç Navarro y Juan Torres, 2012)

A clear case occurred in 1997, when several Asian countries affected by a financial crisis caused by constant speculation in the financial markets, tried to establish their own alternative bank to the IMF, tentatively called the
Asian Monetary Fund. This attempt was immediately vetoed by the U.S. federal government, specifically the Secretary of the Treasury, closely linked to Wall Street, the banking center of the United States. As a result, they had to follow the policies imposed by the IMF, the classic and predictable neoliberal policies, reforms that profoundly reduced the welfare of the peoples of the countries “helped” by its policies, as now also occurs in the Eurozone, and which were ineffective in resolving the enormous economic and financial crisis. In fact, they got worse, as has also happened in the Eurozone.

As a result, there was a growing demand from these countries, and others that had suffered the same policies, to get out of the IMF and establish an alternative fund. These countries concluded that it was virtually impossible to change the IMF, controlled as it was by U.S. financial interests and its European allies, interests which, also negatively affected the welfare of the North American and European populations.

It was not, as Big Media, tried to always present it, a conflict between the US and Europe on the one hand, and the rest of the world on the other. Rather it was a conflict between the financial interests of the banking institutions, benefiting minority sectors in those countries, and the the majority of the population of countries at different levels of economic development. What the policies imposed by the IMF showed was that the particular interests of the banking institutions were not the same nor consistent with the interests of the popular classes of the developed countries, nor the interests of the emerging countries. As shown in the huge financial crisis that the U.S. and the European Union are suffering, the reality is that the enormous control by banking institutions of the IMF, the World Bank and the European Central Bank (ECB), is benefiting particular interests, different, and indeed opposed to the general interests of the majority of the population (who are your classes) countries, both economically advanced and the less developed. Again, what is happening in the Eurozone (and, in particular, on its periphery) is a clear example.

The situation in Ukraine and 31 countries “helped” by the IMF

It may suprise the reader that this article has a reference to Ukraine, a country that is suffering the huge consequences of a war. But the civil war in that country is hiding another disaster created by the IMF. In that country, the neoliberal policies imposed by the IMF and its ally, the ECB, are causing a massive recession, a decline of no less than 5% of GDP, and a large increase in unemployment. In fact, of the 41 countries receiving “help” from the IMF, 31 suffered a massive recession caused by the austerity policies imposed by the IMF and the ECB (see the excellent article by Mark Weisbrot, “BRICS ‘New Financial Institutions Could Break a Long-Standing and Harmful Monopoly“, Center for Economic and Policy Research, 18,7.2014).

Hence the urgency and need to create alternative institutions, like the one created by emerging BRICS (Brazil, Russia, India, China and South Africa), open to other countries. The media, influenced by American and European
financial capital, have attempted to minimize the importance of this development, considering it implausible. Its credibility as an alternative financial institution, however, is underpinned by the fact that all these countries have public banking systems. In fact, a fact that is not generally known is that countries that have had major financial crisis have been those where the banking system has been dominated by the private sector. The clearest cases are the U.S. and the Eurozone, even more accentuated the Eurozone, because in this area the ECB is not a central bank, but a lobby of the private banks (see my article “El BCE, el lobby de la banca”, El Público,08.12.11). This leaves governments in a very vulnerable situation, forcing them to pay excessive interest on their debt.

Hence the emergence of an alternative fund to the IMF could mean a considerable step forward in the attempt to break the stranglehold of the IMF over all countries, both the emerging and the so-called developed countries.

*Professor of Public Policy and Political Science, University Pompeu Fabra

El Publico

Translation by Revolting Europe

About revoltingeurope

Writer on Europe's Left, trade union and social movements @tomgilltweets or @revoltingeurope

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