Why is the IMF dead now?

Published 21.02.2018 01:20

Last week, an International Monetary Fund (IMF) delegation completed official talks in Turkey, issuing a traditional review report as required by Article 4. Interestingly, the delegation's finalization of its talks and publication of the report coincided with the 17th anniversary of the 2001 crisis. It has been 17 years since Turkey experienced its greatest crisis ever as a result of IMF prescriptions.

In fact, the road leading to the 2001 crisis and aftermath show the failure of the argument that Turkey has never experienced a crisis because of IMF policies, but because of its populism and failure to properly manage the economy as a result of which the IMF interfered. Since the IMF first entered Turkey in 1947, all the liberal adherents to Americanism, especially those affiliated with the Gülenist Terror Group (FETÖ), have argued for this. Whenever we warned them against such IMF prescriptions that would deepen the crisis, they said, look at those who have made the country like this, not the IMF, which would certainly interfere. Stanley Fischer, the first deputy managing director of the IMF who was one of the architects of the 2001 crisis, proved through his policies for Turkey and all other developing countries, which experienced similar crises, that the IMF is a cause of crisis for developing countries.

In fact, what Fischer suggested at that time was the ignorantly modernized state of the currency board, which is a colonial institution. Here, central banks were setting exchange rates under the name of inflation targeting and were building a crisis economy based on imports and high interest rates that constantly transferred funds to the outside by keeping the local currency constantly valued. These monetary and fiscal policy regimes were based on fixed and closed exchange rate policies that would kill industry in these countries and condemn them to China, which functioned as the factory of the West. Throughout this period, while China kept the value of its currency low, other countries like Turkey, Mexico, Argentina, Brazil and Russia, which followed the guidebook of Fischer and the IMF, targeted valuable domestic currencies and kept interest rates high. Therefore, the economy of goods subjected to foreign trade failed to develop in these countries while countries like Russia, which have plenty of natural resources, tentatively handled the situation.

Following the 2001 crisis, Turkey compulsorily abandoned this nonsense exchange rate targeting, however, it could not get rid of becoming the industrial complement of advanced economies, being positioned as their commodity and finance market and continuing with a course of growth and development that lagged behind them - all of which were actually the main objective of this program.

While prime minister, President Recep Tayyip Erdoğan made a historic speech that revolted against this scam during one of the Justice and Development Party's (AK Party) parliamentary group meetings on May 27, 2014. Opposing not only the IMF itself, but also the whole understanding that constitutes the core of IMF policies, Erdoğan asked: "During World War II, Germany and Japan were destroyed. Although Turkey did not join this war, why did it lag so far behind these two countries that were destroyed in those years?" This question may have many historical and economic answers, which may also be controversial. However, one of the indisputable answers is that Turkey has been implementing the IMF's economic policies without compromising as a result of U.S. domination since 1947. In fact, Erdoğan was also being critical of Turkey in his speech. During and after those days, opposition to Erdoğan started from global monopolist capital circles from outside and extended to FETÖ inside of the country.

Let us go back to today. The IMF delegation published a report on Turkey as a result of its talks last week. The report starts with an acknowledgment of Turkey's strong growth of 7 percent in 2017, well above the potential. Why do they think it is above the potential?

The arguments that inflation will not fall without an interest rate hike, that monetary policy must be further tightened and that fiscal policy must follow this are the points that are repeatedly underlined in the IMF report. The IMF considers Turkey's growth that exceeded its medium-term program objectives to be beyond potential and suggests lowering it. In this context, it wants the Credit Guarantee Fund (CGF) to be terminated after it has been applied to selected areas for a while, welcoming steps in this direction. In my opinion, applying the CGF to selected areas is an option that is incompatible with the nature of the fund and that will render it inapplicable over time. We know that those who advocate this have no other purpose than to reduce growth, just like the IMF.

The report also advises that higher primary surplus and higher interest rates would be better, and it would be better if reforms in the labor market do not boost general welfare and production, but prevent general demand. This IMF report tells us that there are still desperate people in this country who are listening to these IMF dinosaurs, who consider the IMF thanks to be a success and who do not know that the IMF's advice is based on failed economic theories.

For me, if FETÖ's coup attempt had succeeded on July 15, 2016, the arguments of this IMF delegation would have been practiced as economic policy in this country. The IMF defended coup makers and monopolistic, autocratic coup economies, especially in Chile, Argentina and Turkey, throughout the Cold War. The IMF's official views are never market friendly or competitive. They actually highlight a statist and closed economy that has become a thing of the past. In order to achieve an open, competitive, democratic and human-centric economy, not only Turkey, but all developing countries, should do the opposite of what the IMF preaches. Indeed, the IMF is a Bretton Woods institution and the Bretton Woods-based monetary and economic order is over now.

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