By Alejandro A. Tagliavini *
Between Tuesday 15th and Saturday 19th October, the joint annual meeting of the IMF and the World Bank was deliberating. During the first day they released the report on the World Economic Outlook, adjusting for the worse the global growth rate leaving it at 3% for 2019 and 3.4% by 2020 and, by the way, they never get it right. According to Bloomberg Economics, the pace of global expansion has already slowed to 2.2% in the third quarter, from 4.7% in early 2018.
According to the IMF, 90% of countries experience economic weakness. Not surpising, given the expansive neo Keynesian policies – of exaggerated monetary issuance, cheap credits and increased public spending -, the globe goes by very anomalous lanes to the point that US$ 14 trillion in bonds have negative returns, when the Equity rises 14% this year according to the MSCI World index.
Now, global growth in business profits stagnated in the second quarter, depressing business confidence, leading to cuts in capital spending. In addition, wages increased – thanks to expansive policies – without justifying it by productivity growth and jobs could be cut.
Consistent with his ego, inversely to what is proposed in countries like Argentina where the IMF wants to secure the funds so that their loans are returned, the multi state organization calls for relaxing budgets and, of course, always raising taxes. But Morgan Stanley estimates that the primary fiscal deficit that rose to 3.5% of GDP in major economies from 2.4% in 2018, will increase “only” to 3.6% in 2020.
Meanwhile, the Nobel Prize in Economics was awarded to Banerjee, Duflo and Kremer “for their approach to global poverty alleviation.” Basically, specific questions are asked that respond with field experiments. For example, in Kenya, Kremer found that school textbooks and free meals did not improve school results, while student support programs such as reinforcement tutorials were effective.
Among his “discoveries” is that microcredits only serve to increase investment or consumption and that foreign aid only serves for specific humanitarian crises, that is, they are patches. Interesting theories of the new nobles but that are also a patch and that starts from believing that poverty is something natural and, therefore, do not consider a radical solution. But is not. For example, hunger is not since nature – “infinitely wise” – provides enough food for everyone.
According to FAO, global cereal production alone is enough to feed almost 12,000 million people. Hunger and malnutrition are basically due to distribution problems. Now, given that violence is precisely what deviates the spontaneous course of nature, as defined by Aristotle, it is the States that prevent natural, spontaneous development, with its police power, its taxes and regulations.
By the way, believing that there are taxes better than others makes no sense. All of them impoverish because, by the law of marginality, they are derived to the poor by raising prices, lowering wages, etc. And not to understand that the IMF prolongs the life of failed governments with public funds is to escape reality. Governments must respond to market efficiency and, if they do not, they must disappear, not be financed.
* Member of the Advisory Board of the Center on Global Prosperity, of Oakland, California