Stephen Jaffe IMF Staff Photograph Flickr

IMF Report: For a System of Stability, Capitalism is a Risky Business

by Katie Arthur

The International Monetary Fund’s April 2016 reports point to increasing market ‘turbulence’ as the cause of ‘tightening global financial conditions’. But as the IMF strives towards restoring market ‘confidence’ amidst growing boom and bust and the worsening effects of climate change, it’s time to ask: when does confidence begin to look like foolishness?

Last week the IMF released its April 2016 Global Financial Stability Report, titled ‘Potent Policies for a Successful Normalisation’ – which rings with the kind of cadence normally expected from a Harry Potter instalment. Much like the tales of everyone’s favourite boy wizard, the IMF report is full of fantastical villains that our pioneering hero, Capitalism, must overcome. Less ‘the boy who lived’ and more ‘there is no alternative’: a riveting throwback to the Thatcherite austerity aesthetic. A second IMF report, the World Economic Outlook ‘Too Slow for Too Long’ gives us a sneak peek at the not-so-twist ending: the (impossible) promise of infinite growth.

It turns out that since our last instalment, Capitalism’s mighty sidekick Growth has fallen short on a global scale and, we’re warned, without him Capitalism really is in trouble. Since the October 2015 report ‘risks to global financial stability have increased’ in the form of rising right-wing nationalisms across Europe and the USA, growing uncertainty around China’s ‘growth transition’, falling prices in oil and commodities, and a general reluctance to integrate markets transnationally. As confidence wavers and slowly recedes in the market, there is an increase in both market volatility and ‘risk aversion’ strategies – and without risky casino confidence the well-oiled mechanisms of speculative capitalism dry up and run out of spare change to prodigally sputter.

The IMF lays out an attempt to reposition policy in the hopes of regaining our confidence in a system that has consistently failed us. The report is veiled in a vocabulary of risk – ‘higher systemic risks’, ‘aggregate risk exposures’, ‘system-wide risk’. In fact, the word ‘risk’ is used a total of 622 times throughout the report. Yet it appears that in the eyes of the IMF there is both good risk and bad risk. Low confidence in the market poses a risk to the inherently necessary system of risk that constitutes late capitalism. Low confidence puts risk itself at risk. Low confidence, then, is essentially preventing us from taking a running jump off a cliff face.

Perhaps unsurprisingly, it was Karl Marx who first captured this inherent paradox to capitalist production in his crisis theory. Predicting the ever worsening ‘boom and bust’ cycle, he argued that “the real barrier of capitalist production is capital itself.” More recently, Rosalind Morris wrote of the rush/panic/rush dynamics of neoliberal capitalism, stating: “a transformation of danger into value occurs in and through the category of risk.” In her study of the political economy of HIV in South Africa, danger and even death are made productive and profitable through risk, mainly through capitalisation on insurance. Morris argues that the dialectic of panic/rush is embodied in ‘the entire schema of financialization’ – “through the mobilization of loss, as the condition of possibility of gain.”

Morris continues: “Far too often, the deployment of finance capital’s idioms – and especially that of risk management – occlude this bitter fact. In so doing, they also occlude the degree to which surplus extraction under finance is connected to death, as well as the manner in which the fantasy of risk management is always also a fantasy of risk-taking – and that the latter must exceed the former.”

Although unmentioned in both IMF reports, finance is both directly and indirectly related to death today, across the globe. In the socio-political imagination, the anxieties around refugee populations in the Eurozone, for example, are both implicitly and explicitly linked to fears around individual wage-labour and concerns surrounding both nation-state prosperity and the stability of trade zones. But the IMF does not pause to draw out how these economic assumptions and causes underpin the current ‘turbulence’ the global market is facing.

Instead, Maury Obstfeld, the IMF’s economic counsellor, identifies several key ‘risk’ factors in the World Economic Outlook press briefing. Interestingly, the IMF does point to ‘non-economic risks’. A particular risk is the rise of ‘geopolitical tensions and strife’ in the form of the increased ‘incidence’ of terrorism and armed conflicts. In his statement, Obstfeld gives particular attention to the ‘humanitarian crisis’ in Syria and the resulting instability in Europe, including the turn to right-wing nationalisms. One manifestation that particularly scares the IMF is the potential Brexit, as well as the more general fear of the Eurozone trade zone disintegrating.

Yet it is not the political, ethical or moral aspects of right-wing nationalism the IMF fears, so much as the disruption of markets and isolationist economic policies that will inevitably result from its rise and consolidation. This is affirmed in Obstfeld’s comments regarding the growth of right-wing nationalism in the USA, which he describes as the ‘backlash against cross border economic integration’. Obstfeld states that this trend can “threaten or even reverse the post-war trend of trade liberalisation.” But when this post-war trend has caused so much inequality, poverty and irreversible damage to the planet, it seems odd that there is not more aggressive questioning about what exactly the IMF is aiming towards…

It is perhaps ironic that the myth of ‘security’ and ‘stability’ has arisen from an economic system based on the casino rapture of speculative risk and gain. Michel Foucault wrote in The History of Sexuality: “[t]here is not one but many silences, and they are an integral part of the strategies that underlie and permeate discourses.” One glaring silence in the IMF reports is climate change.

‘Climate change’ gets mentioned 18 times in the ‘Too Slow for Too Long’ report, but is omitted entirely from Obstfeld’s press briefing. The linking of the global market system and the ‘post-war trend towards the liberalisation of markets’ to extractive industry, irreversible ecological damage, and global poverty both through and as a cause of climate change, is what Herman and Chomsky identify in Manufacturing Consent as ‘inexpressible’, in that it “is not part of the spectrum of discussion.”

British media coverage of the IMF report focused on Brexit fearmongering, lowered economic forecasts and the political pantomime between both the referendum campaigns and the political parties. The coverage is so uniform and clearly derivative from blanket press releases that it is almost more interesting to read the IMF report itself. Until we begin to link the burgeoning crises we face to the bulking wallets of the global elite, we will continue to both misrepresent and misunderstand the problems we are facing. The cracks in the capitalist facade can no longer be glossed over: they have become too deep and have already cost us too dearly.

In this sense, climate change becomes both symptom and cause. It is both the ever more present symptom of the destructive and exploitative disposition of capitalism as well as the increasingly violent cause of global ecological and humanitarian disasters. We are living the very real history of the anthropocene in the form of accelerated species extinction, extreme weather ‘events’ (even in our own back gardens), and wars exacerbated by climate affected resource shortages. Until we start re-thinking the problem, we will continue to watch the destruction of homes, families and lives.

If the IMF really insists on an economic angle to the current global ‘turbulence’, it should – at the very least – begin by examining how climate change constitutes a threat to market stability through supply-chain disruption and the forced migration of populations. Climate change is an essential agent of the instability they fear and an essential product of the economic system they support. Whilst not the resolution, it would be a start. Perhaps it’s time for the IMF’s economic forecasts to become more about the weather…

Photo: Stephen Jaffe/IMF Staff Photograph/Flickr

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Published 18th April 2016

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