I’ve labeled the International Monetary Fund as the “dumpster fire” of the world economy.
I’ve also called the bureaucracy the “Dr. Kevorkian” of international economic policy, though that reference many not mean anything to younger readers.
My main complaint is that the IMF is always urging – or even extorting – nations to impose higher tax burdens.
Let’s look at a fresh example of this odious practice.
According to a Reuters report, IMF-supported tax increases are provoking economic strife in Pakistan.
Markets and wholesale merchants across Pakistan closed on Saturday in a strike by businesses against measures demanded by the International Monetary Fund. …Prime Minister Imran Khan’s government..is having to impose tough austerity measures having been forced to turn to the IMF for Pakistan’s 13th bailout since the late 1980s. …Under the IMF bailout, signed this month, Pakistan is under heavy pressure to boost its tax revenues.
I’m not surprised the private sector is protesting against IMF-instigated tax hikes.
We see similar stories from all over the world.
But what really grabbed my attention was the reference to 13 bailouts. Good grief, you would think the IMF bureaucrats would learn after five or six attempts that they shouldn’t throw good money after bad.
That being said, I wondered if the IMF was pushing for big tax hikes because they had demanded – and received – big spending cuts in exchange for the previous 12 bailouts.
So I went to the IMF’s World Economic Outlook Database to peruse the numbers…and I discovered that the IMF’s repeated bailouts actually led to big increases in the burden of spending.
The IMF’s numbers, which go back to 1993, show that outlays have tripled. And that’s after adjusting for inflation!
Looking closely at the chart, I suppose one could argue that Pakistan was semi-responsible up until the turn of the century. Yes, the spending burden increased, but at a relatively mild rate.
But the brakes definitely came off this century. Enabled by endless bailouts from the IMF, Pakistan’s politicians definitely aren’t complying with my Golden Rule.
I’ll close with one final point.
The IMF types, as well as others on the left, actually want people to believe that Pakistan should have a bigger burden of government spending.
According to this novel theory, the public sector in the country, which currently consumes more than 20 percent of GDP, is too small to finance the “investments” that are needed to enable more prosperity.
Yet if this theory is accurate, why is Pakistan’s economy stagnant when there are prosperous jurisdictions with smaller spending burdens, such as Hong Kong, Singapore, and Taiwan?
And if the theory is accurate, why did the United States and Western Europe become rich in the 1800s, back when governments only consumed about 10 percent of economic output?
This video tells you everything you need to know.
———
Image credit: Uzairmaqbool | Pixabay License.
