IMF and power privatization

[Loren]

IMF is not a capitalist institution

Many of us capitalists don't like many of the IMF implementations but for different reasons than typical IMF foes. Many of us would prefer market based fixes for predicaments such as the Argentina or the D.R. A proper capitalist approach would be to simply let the D.R. default on its loans. In the future, foreign lenders would be more hesitant to loan money carelessly to profligate spenders and the cost of borrowing would rise as the government acted less responsibly. Right now, lenders are fairly assured of bailouts so lend money more easily. The cost of borrowing would accurately reflect the risk involved. This is the same problem with debt forgiveness. It creates a moral hazard by punishing developing countries that pay their debt and rewarding countries that borrow more than they can pay. Better for a country to default, soak the lenders, and let the lenders be more cautious in the future lending for silly monuments, public boondoggles or state corruption mechanisms. The reason that many countries are struggling with debt is because they have had access to imprudent lenders who have known that their loans would be repaid by the IMF in case of a potential default.

The IMF itself is not an evil institution, but it makes it too easy for countries to be fiscally irresponsible and then when the countries get in trouble, they beg the IMF for money and get to paint the IMF as the bogeyman for domestic political consumption. The IMF never made anyone borrow money. Countries choose to go to the IMF when they get themselves in trouble. Let all countries borrow at market rates backed by a real ability to repay (as opposed to a perceived IMF co-signer) and over time these messes will become infrequent. Who keeps loaning the D.R. money long after it is apparent the government finances on shaky ground (more like quicksand)? Bankers who expect to get their money back from the IMF.

For a fleshing out of IMF problems from a capitalist viewpoint, I would recommend "Global Fortune" by Ian Vazquez. It's available in paperback.

-Loren

 

[Criss Colon]

"BEST POST" so far!!!!

Of course the "Do Gooders" of the World would not let the people of the defaulting countries suffer by letting the country "default" and go through years of recovery! So we are condemmed to a cycle of lend/squander/lend more/default/restructure,etc! Up to a point! Even in the US,the taxpayers had enough of "Cradle to Grave"welfare,and finally made lazy people go to work!

CCCCCCCCCCCCCCCCCCC

 

[Porfio_Rubirosa]

Nice post, Loren,

At this point, since everyone seems to agree that the IMF is, at best, misguided, and at worst, evil, I am wondering if anyone out there might be able to post something well reasoned in favor of IMF policy in Latin America.

 

[Texas Bill]

:bandit:

Try this on for size!??!!??

Years - 1944-50
Place - Washington, DC
Subject - World Economy in tatters after WWll.

Participants - Financial leaders, Bankers, Reps of "First World Countries".

Discussion - How do we get the world trade, manufacturing, etc., etc. back on track from the recovery setback caused by
WWll and make certain we provide for States being unable to effect full economic recovery.
US suggests a system of loan/deposit/exchange based on the Federal Reserve Bank used in the US. The infant IMF is born.
It will investigate what monies are needed and make recommendations. Private banks will, in concert, make the necessary monies available, guaranteed by the IMF.
The first loans are OK, so the system is expanded. It soon gets out of hand, but it's too late to abrogate the promises made. The loans do some good (ie, they keep a lot of countries from embracing a communist system of economics). There's still a problem (more of a delimma(sp)) and it continues to exist today. The money loaned is not supervisable by the IMF or anyone else. The whiz kids who thought up the system forgot to complete their homework.

Texas Bill

I'm outa here!

 

[Porfio_Rubirosa]

:bandit:

It soon gets out of hand, but it's too late to abrogate the promises made. The loans do some good (ie, they keep a lot of countries from embracing a communist system of economics).

Texas Bill

I'm outa here!

Fascinating post.

My father is a supporter of the IMF, even in Latin America, because, he says:

(i) even if the political class steals all the money, some of it trickles down. Except, I tell him, 99% of it goes to Miami, Switzerland and The Caymans.

(ii) it pays the political class to "play ball" and not "go radical".

 

[Texas Bill]

:bandit: :devious: :ermm:

Porf

You got it right, that time!!!

Texas Bill

 

[bdaric]

Your Power Company

To bear on the power privatisation part, I see on DR1 a note about DR's government paying for a power company more than it sold it for and that they were not paid for it when they sold it.

Also the company failed to generate power as promised and you have the ridiculous situation of power constantly going on and off.

There would seem to be some stock in having a legal recourse for performance promises broken.

Why would your government want to pay over the odds for something they didn't get?
If its so blindingly obvious to the man in the street or reporters in the media, why can't the current government see it?

Why was or is it so difficult to set up a power system in DR?

What benefit is there for DR or its current government not to have decent power generation for its people and businesses
I have to admit in this day and age its hard to understand in whose interest it is not to have these facilities.
Its obvious its holding back your country.

Finally, often in other western countries it doesn't take many more than one central issue to ensure a change of government at the polls.
Surely the people realise what a lousy job has been done and would want to see another group have a try.

Rich.....

 

[diablorojo]

The IMF is nothing but a US puppet which tries to ensure that capitalist hegemony extends over the world.....it gives loans at unreasonable interests and then economically binds those nations to the first world through debts, and then the debts are used as excuses to interfere in internal politics, the IMF is a tool of exporting and perpetuating the system of exploitation generated by the first world.....nothing more. It serves the interests of the few while ignoring the needs of the many......it is a political tool set up by the old colonial imperialists to preserve their hold on former colonies.........

 

[Porfio_Rubirosa]

Diablorojo,

Amazing how your hatred of the US gives you "blinders" on reality. The IMF is a construct of the entire industrialized world, specifically the US, Canada, UK, France, Germany, Italy and Japan, as well as Spain, Switzerland, Holland and others. Though it is at best misguided and at worst, at least in Latin America, part of an evil system to perpetuate exploitation, it is part of a First World vs. Third World dynamic that goes way beyond the USA alone. The US is not the only "winner" in this system. Your oddly idealized Spain is just as guilty (if not more so since the DR owes more to Spain right now than to the US).

Hippo and his political class are collaborators and traitors to the Dominican people because they PERSONALLY benefit from this system while hopelessly indebting the regular people of the nation. But your blinders don't allow you to see this and, accordingly, you post in support of Hippo in other threads. You can post as much anti-American stuff as you want and it will only seem funny to some, but when you post in support of Hippo, you're laughed at by all.

Why don't you see that? Did an American do something bad to you as a child when you were growing up in New York/Boston/Florida?

 

[Chris]

The IMF is nothing but a US puppet which tries to ensure that capitalist hegemony extends over the world.....it gives loans at unreasonable interests and then economically binds those nations to the first world through debts, and then the debts are used as excuses to interfere in internal politics, the IMF is a tool of exporting and perpetuating the system of exploitation generated by the first world.....nothing more. It serves the interests of the few while ignoring the needs of the many......it is a political tool set up by the old colonial imperialists to preserve their hold on former colonies.........

For once, I agree with Diablo! I just don't like the way he says it --- too Norm Chomsky for me. But, if something is true, it is true. Like I asked once before, anyone, but anyone, please tell me which country was assisted and 'helped' by the IMF, and is now independent and economically healthy?. You can search far and wide. There are none! It is just one great big multi-level marketing scheme on another level. Loan Shark is the name of the IMF. As far as colonial imperialists preserving their hold on former colonies - well, economically this does not make sense. Any old country will do - it does not have to be a former colony. They're not trying to 'preserve their hold'. They're simply making money by giving loans -- and if it is an 'ill-given' loan, there sure has to be good security --- security as good as the loan, so now we take some of the countries internal resources in payment.

For the DR's power woes - I say let market forces prevail.

 

[XanaduRanch]

Chris,

It takes two to tango. The IMF wouldn't be able to loan a dime to bankrupt countries like the DR if bankrupt counties like the DR didn't have bankrupt politicians bankrupting them by robbing every dime from his chopo friends and covering the debt with loans from the IMF, like His Baldness, Hippolito Mejia.

Tom (aka XR)

 

[Porfio_Rubirosa]

Tom,

You're correct, except that the IMF is MORE to blame because:

1. Hypocracy. They hold themselves out as an institution of the first world governments designed to "help" and "stabilize" third world countries.

2. Moral Expectations. Hippo has stopped even pretending to care about the wellbeing of the DR. Reelection is vote-buying, pure and simple.

3. Systemic Failure. The IMF provides the funds for clientist politicians like Hippo to buy reelection. Moreover, the economic conditions that the IMF promotes through the endless series of loans and austerity programs acts to destroy the middle class, meaning that the middle class are not able to fund a viable fiscally responsible candidate to begin true systemic corrections.

 

[XanaduRanch]

Caveat Emptor

You're on the mark, PR. But how do you solve the problem of politicians who simply are more concerned about having their butt in that chair, than in the well being of their people? That's the issue. Otherwise they'd do the right thing and tell the IMF to take a hike. They wouldn't be needed here at all if the idiot childrin politicians would just unleash the power of the people and let them be the economic engine that changes the DR for the better. But they are too busy lining their own pockets.

It's a symbiotic relationship. Neither could exist without the other. Sorry to say.

Tom (aka XR)

 

[Chris]

Yes I agree. It is a symbiotic relationship. The 'seller' cannot exist without the 'buyer'. This relationship however becomes rotten to the core if the 'seller' promises the buyer a 'helpful action' and issues a loan that cannot be paid back. (Yes, I know the buyer is equally at fault also by accepting the loan). And in the back rooms where the reasoning takes place, it is clearly decided which of the 'buyers' internal country resources will be given to which group of 'investors' when the loan is defaulted upon. The 'seller' of the loan, *wants* the loan to be defaulted upon. This is an example of globalization at its best.

It is a system that most possibly set out with a good vision, but grew to corruptness - so, in this case, clearly taking from the 'poor' nations to add to the 'rich' nations wealth. (Both parties at fault).

I would not be surprised if a little down the pike, the investors of the current IMF loan, gets given, say -- the power generation and distribution of the Dominican Republic. Now, this may be a good thing for the consumer who will have professionaly generated and distributed power - but a bad thing for the country, in two senses - firstly their responsibility for themselves is eroded (they are fully complicit in this happening) and secondly, the country slips into globalization - and it is then that the left wingers complain about 'big brother' and 'exploitation' as the labor force in a country, starts working for a corporation in another country. So, the 'value add' in money, eventually leaves the country - zero trickle down.

The important thing is that both parties are complicit. So, I agree fully, it is not a one way street. And the Diablo's of the world need to see and understand this. One party is not more 'guilty' than another party. Their own leaders give away the farm, for personal gain. Besides the IMF's shenanigans, this has happened in capitalism, in communism and in socialism. All three of the systems that we see around us today - and in the past in all the historical precedents I can think of. I don't think the problem lies in the system so much - I think the problem lies in the unadulterated greed of people. The stronger 'eating' the weaker. The only system that I ever saw that worked for the good of everyone, is the kibbutz farms in Israel - and this is socialism at its best. But the rights of the individual is totally suppressed for the 'good of the group'. Whether this can work on a larger scale, well, I don't know. I just know that I personally won't survive for 5 minutes in this kind of regime.

Have a look at the play between the nations in the meetings around the WTO (have a look at this history from about the time of the Seattle conference). It is a classic play for dominance from the richer nations and the poorer nations play with - for short term gain. The Dominican Republic in my opinion is making some serious errors in this whole saga. This happening has had not too much press time - at least in the US press, so one needs to look to find the info.

As for the current DR government generating and distributing power to the country. Yeah right! But, it is a ripe plum to pick for the right operator. Watch it play out.