The phrase "Washington Consensus" is widely used by politicians, is constantly encountered in the media, and is mentioned in textbooks on economics and finance. This year marks thirty years since the official birth of the Washington Consensus (VC). And now for twenty-seven years he has been running Russia.
The road to "consensus"
What is this thing?
According to reference books and textbooks, the Washington Consensus (VC) means a certain set of recommendations of the IMF in the field of macroeconomic and financial policy addressed to those countries with which it works (provides loans and borrowings, technical assistance, and consults). Today, 189 countries are members of the IMF. Approximately 90% of them are from developing countries and countries with economies in transition. These recommendations are intended for them.
The IMF was established by the decision of the International Monetary and Financial Conference in Bretton Woods in 1944. The post-war monetary and financial system was based on the principle of stability (in fact, fixedness) of the exchange rates of the monetary units of the member countries. This was considered the most important condition for the recovery of the post-war economy and world trade. For the first three decades, the fund was engaged in providing loans to equalize the balances of payments of member countries and thus maintain the stability of exchange rates.
In the 70s of the last century, the Bretton Woods system collapsed, and was replaced by the Jamaican system, which allowed the transition to freely floating exchange rates. In this situation, the fund with its loans to equalize the balances turned out to be unnecessary, there were even rumors that the "shop" could be closed. However, the fund survived thanks to the efforts of the main shareholder of the IMF - the United States, while the fund's activities underwent a fundamental reform. The second half of the 1970s was the time of active lending by American banks from various countries of the world at the expense of petrodollars that poured into their accounts (especially from Saudi Arabia and other countries of the Middle East). The countries of Latin America were most actively credited, and at a floating interest rate. But in the early 1980s, the key rate of the US Federal Reserve was sharply increased: the credit boom was over, and the debt crisis began. The same countries of Latin America suffered especially.
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And then the IMF entered the scene as a "savior". He began to provide countries on the brink of default, credit assistance at relatively moderate interest rates - but subject to the countries' radical economic reforms. The Fund began to seek full economic liberalization from countries. This was necessary to draw countries into the process of economic and financial globalization. And globalization, as Zbigniew Brzezinski explained, is the process of promoting American interests in the world. Thus, the fund began to serve the interests of transnational corporations and banks, especially those associated with the US Federal Reserve System (I call them "owners of money").
Bear Services Washington Style
And in 1989, the work of the English economist John Williamson (John Williamson), entitled "Restructuring Latin America: What Happened?" (Latin American Adjustment: How Much Has Happened?). The author of the book is a fellow at the private Institute for International Economics, also called the Peterson Institute, based in Washington. Williamson's work analyzes a set of recommendations that the foundation proposed to Latin America in the 1980s and which have been implemented. The foundation's experience was summarized and sorted out. Apparently, the work was written by order of the IMF, since the fund in its practical work with any countries (not only Latin American) began to be guided by a set of recommendations from Williamson's study.
They began to be called the "Washington Consensus", since the recommendations were agreed upon in the US Treasury and were intended for the IMF and the World Bank, and the offices of all three organizations are located in the city of Washington.
John Perkins wrote very convincingly and in detail about the recommendations of the fund, imposed on developing countries, in his sensational book Confessions of an Economic Murderer. In the book, he talks about his own experience as a consultant to the IMF and the World Bank.
Dozens of books have been written about how these “recipes” work in the recipient countries of the fund's loans, and fundamental research has been carried out to assess the results of the “aid”. An example is a study by the Heritage Foundation of Americans Brian Johnson and Brett Schaefer: Brett Schaefer and Bryan Johnson. IMF Reform? Setting the Record Straight. The work covers the activities of the foundation from 1965 to 1995. During this period, the IMF provided assistance to 89 countries. By the time the study was completed (1997), 48 of them remained in approximately the same economic and social situation as before the IMF loans were granted, and in 32 the situation worsened. In general, the authors assessed the activities of the foundation as destructive. It should be borne in mind that the study covers a panorama of three decades,and the destructive nature of its activity has sharply increased since the beginning of the 1980s, when the foundation began to follow instructions for "economic murderers".
The economic murders carried out by the foundation are sophisticated. The Foundation, strictly speaking, does not kill itself. He prepares his client for suicide, and this preparation is carried out on the basis of the said instruction. All actions, including putting the rope around the neck, are carried out by the client himself. Formally, the fund has nothing to do with it. The IMF simply states that another suicide has occurred.
Consensus Commandments
Anti-globalists call VK the "symbol of faith" of globalists and supporters of economic liberalism. For three decades, the Washington Consensus has not changed. It contains ten unshakable points. They can be called the ten commandments, or instructions for economic murderers. Here is a short version of these commandments.
- Maintaining fiscal discipline (minimum budget deficit)
- Liberalizing financial markets to keep the real interest rate on loans at a low, but still positive level
- Free exchange rate of the national currency
- Liberalization of foreign trade (mainly due to the reduction of import duty rates)
- Removing restrictions on foreign direct investment
- Privatization of state enterprises and state property
- Deregulation of the economy
- Protection of property rights
- Reducing marginal tax rates
- Prioritizing health, education and infrastructure over government spending.
Some commandments, at first glance, look quite "civilized". For example, the last named. Is it bad that health and education have a high priority in the budget? But the fact is that the first commandment requires a sharp cut in the budget as a whole. Therefore, a country that has agreed to the terms of the VC will have to cut its budgetary spending on health and education in absolute terms.
In addition, it should be borne in mind that each commandment of the VK has detailed interpretations that allow you to more fully understand its essence. Thus, the interpretation of the tenth commandment stipulates that only expenses for primary education and emergency medical care are mandatory. The rest is secondary.
But infrastructure is really seen as a priority item of budget spending. The natives must build railroads and highways, power lines, logistics, sea and air ports, and much more. But all this is not for the sake of the local population, but in order for transnational corporations to come to this country and begin its effective exploitation.
Consensus in Russia
Alas, the topic of VK is directly related to our country. After all, the Russian Federation in 1992 became a member of the International Monetary Fund. Immediately Russia began to importunately the fund's loans. Naturally - in exchange for "reforms" that our state had to carry out in accordance with the commandments of the VC.
Well, in the 1990s, Russia received several loans totaling $ 22 billion. But the cost of these loans was prohibitively high, and we still pay. No, all formal obligations under the credit agreements of the 90s have already been paid off. But Russia, due to the fulfillment of the requirements of the VK, has turned into a semi-colony. It was in the 1990s that mechanisms were created for the permanent robbery of the country by transnational corporations and other organizations close to the "owners of money." And these mechanisms continue to work.
Of course, the hardest blow was inflicted on our economy as a result of the fulfillment of commandment number 6 (privatization of state enterprises and state property). Nowadays, few people remember how, in difficult years for the country, the fund twisted Russia's arms, demanding the immediate corporatization and privatization of thousands of giant state-owned enterprises that were created by our fathers and grandfathers over several decades. Hundreds of advisers (also CIA officers) rushed to Russia to help the fund, who were located in the offices of the State Property Committee, led by the fund's protégé, Mr. Chubais. In fact, it was a raider seizure of the Russian economy under the cover of the International Monetary Fund.
Privatization has taken place, and the total market value of the assets of the former state-owned enterprises is now measured in trillions of dollars. Moreover, a significant part of these assets today is directly or indirectly controlled by foreigners, including companies and banks close to the "owners of the money." Take Sberbank, for example. In Soviet times, these were the Savings Banks, which were part of the Ministry of Finance. Today, more than a third of Sberbank is owned by American shareholders, and, apparently, behind many nominal American shareholders is the main shareholder and beneficiary - JPMorgan Chase Bank. So, in exchange for $ 22 billion, received not just like that, but in debt at interest, Russia agreed to open access to state assets for foreign investors, the value of which is measured in trillions of dollars.
And so that foreign investors in Russia would not have any problems in acquiring the most delicious "pieces" of the Russian economy (assets), the IMF in the 90s forced the Russian authorities to eliminate any economic and administrative barriers for non-residents. After all, this is the fifth commandment of the VK (elimination of restrictions on foreign direct investment).
In the 21st century, Russia has never used the Fund's loans, and all obligations under the IMF loans were paid back in the 2000s. But the foundation regularly continued to send its missions to Moscow, and Moscow accepted these missions and dutifully fulfilled all the recommendations of the foundation's missions - voluntarily, disinterestedly, without demanding anything in return.
For example, the fourth commandment is the liberalization of foreign trade, including the reduction of import duties. Yes, this commandment was partly fulfilled in the early years of the existence of the Russian Federation. First of all, there was a complete rejection of the state monopoly of foreign trade, which existed in the USSR. But that was not enough. The full fulfillment of the fourth commandment took place only in 2012, when Russia was dragged by the ears into the World Trade Organization. Only on May 8 last year, President V. Putin, speaking before the Federal Assembly, admitted that we were naive in deciding to join the WTO. Well, if a mistake is recognized, then it should be corrected. But so far, there have been no indications from the Russian president to withdraw from the WTO.
The third commandment (free exchange rate of the national currency) was also fulfilled, and this happened even later than the decision on Russia's accession to the WTO. The Russian ruble was sent to “free float” in 2014.
Close to disaster
For several years now, an open trade and economic war has been waged against Russia, and the fund indirectly participates in it on the side of Washington (the main shareholder of the IMF). How? Russia in December 2013 provided Ukraine with a sovereign loan in the amount of $ 3 billion. In December 2016, the full repayment of the loan by the Ukrainian side was supposed to take place, but Ukraine, instigated by Washington, refused to repay. According to the rules of the fund, this means a sovereign default of Ukraine, but the fund pretended that nothing happened and, in violation of its own charter, continued lending to Ukraine.
But why did we close our eyes to this shameless behavior of the fund and continued to accept the IMF missions and listen to their recommendations? Mikhail Delyagin drew attention to this: “This is the eternal recipe of the IMF - get into debt bondage and die. This we went through in the 90s … The fact that the IMF is again beginning to teach us life is, of course, close to a catastrophe."
The key place in the fund's report on the results of the fund's last year mission in Russia was occupied by the issue of pension reform. Surprisingly, all the parameters of the reform proposed by the government and supported by United Russia exactly coincided with the report of the Fund on Russia. It turns out that Russia is controlled by the International Monetary Fund, and the government only voices its decisions. And this governance, as in the 1990s, is carried out in line with the Washington Consensus.
Author: Katasonov Valentin