IMF CHIEF Christine Lagarde opened her speech of last Monday in Washington with a dose of false optimism.
She said: ‘Let me begin by saying that many of the right decisions have been taken. Most recently, initiatives by major central banks – the European Central Bank’s OMT bond-purchasing programme, QE3 by the US Federal Reserve, the Bank of Japan’s expanded Asset Purchase Programme – are big policy signals in the right direction . . .
‘Just as the Central Banks were misguided during the Great Depression and accelerated that crisis, it may well be that Central Banks will have played a significant role in pulling the global economy out of this great recession.’
What is the content of her ‘may well be’.
It is One: ‘We continue to project a gradual recovery, but global growth will likely be a bit weaker than we had anticipated even in July, and our forecast has trended downward over the last twelve months.
Two: ‘And now we are also seeing other global ripple effects: the slowdown in emerging markets; great concern in low-income countries about rising food prices and volatile commodity prices; growing frustrations across the Middle East.’
Three: The danger of revolution. ‘I am thinking about the lasting scars of unemployment and the massive human cost – especially among young people, and especially in countries like Greece and Spain, where growth is simply not sufficient to generate the jobs that are needed.’
And Four: The threat of renewed financial collapse. ‘Worryingly, the energy to implement the reforms that have been agreed – as well as the other reforms that we need – is waning. I am often asked, five years into the crisis, whether the financial sector is safer today than it was then. My answer? “Despite real progress, not yet”.’
In less diplomatic language the answer is ‘no’, the financial sector is not safer than it was five years ago.
Lagarde makes a call to arms: ‘We need decision-makers to be real action-takers. We need delivery.’
‘We need’ the ruling classes to take decisive action against the working classes of the world is her message.
Lagarde continued: ‘to focus on three key sets of policy challenges.’
These are: ‘Europe obviously remains the epicentre of the crisis and where the most urgent action is needed . . . This will require euro area leaders to deliver on their June 29 commitments – establishing a single supervisory mechanism and enabling the direct recapitalisation of banks . . . We also recognise that there is no alternative to the structural reforms and fiscal adjustment needed to get back on the right path . . .’
As for the US: ‘The immediate concern is that current law implies a dramatic tightening of the deficit by about four per cent of GDP next year. This would effectively plunge the country off a “fiscal cliff” – reducing growth by as much as two per cent. Failure to reach a deal on raising the debt ceiling could also force a dramatic tightening.
‘We all recognise that political calendars impact the timing of key decisions. This is true everywhere. But the current uncertainty presents a serious threat for the United States and, as the world’s largest economy, for the global economy’.
Another is ‘the 20 per cent increase in global food prices since June.’
What shines forth from Lagard’s speech is a system that is in its death agony and can only live a little longer through the destruction of the lives of the workers and poor of the planet.
The only way out of this crisis is through the organisation of the victory of the world socialist revolution to replace bankrupt world capitalism with socialism.