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The IMF: A Global Protection Racket


Three days ago Radio New Zealand National reported that the IMF was asking the New Zealand government to make further cuts in public spending. I had shivers up my spine, flashing back to the time my grandmother had a collision with a known Mafia figure and our family received one of those offers you can’t refuse. My colleagues in the National Health Service (where I work as a child and adolescent psychiatrist) and I are very wary of the IMF’s so-called “recommendations.” In fact we can see little difference between the IMF knocking at your door and a mafia or gang member trying to sell you a protection racket.

New Zealand is the only industrialized country I know of that didn’t implement economic bail-outs for banks, jobless workers or families losing their homes. Moreover, as a result of the recession, our government has already made major cuts to public spending, resulting in the layoff of 1500 public service workers. However the IMF expects us to go still further, with specific recommendations that we end free GP visits (for children, seniors and the disadvantaged) and student loan rebates (to address an extremely critical shortage of doctors and teachers). In other words they want us to “privatize” aspects of our health care system and tertiary education.

The Pressure to Privatize Our National Health Service

Given that New Zealand has a national health service, and that both National (the conservatives) and Labour (the liberals) support the belief that health care is a basic human right, I see a clear subtext here. It is well known the people who run the IMF (who for the most part represent financial institutions such as banks, brokerage firms and insurance companies) do not accept the notion of a right to health care. They view health care delivery as a commodity with immense profit potential – and see absolutely no reason why private health insurance companies should be denied the right to make a profit from illness and human misery in all industrialized countries, as they do in the US. I know this because the structural adjustment programs they impose on debtor nations always include a demand that these countries abolish their publicly funded health systems and open their markets to private insurance companies.

What Happens if We Refuse an Offer We Can’t Refuse?

If New Zealand were frittering away IMF money, I could accept that the IMF might be in a position to dictate how we spend it. However New Zealand hasn’t borrowed any money from the IMF. At present New Zealand borrows approximately $250 millions per week from commercial lenders at 4 – 6.5% interest. We pay a low interest rate because of our AA+ credit rating (countries receive credit ratings just like individuals).

The threat, of course, is that if New Zealand fails to cut public spending enough to satisfy its global lenders, our credit rating will be downgraded from AA+ to BBB- (like Iceland and Greece) and our government will be force to borrow from the IMF (like Iceland and Greece). We will then be forced to pay 18% interest and agree to draconian cuts in health and education. Fitch and other rating agencies are supposed to be independent from the financial institutions that control the IMF. However recent criminal prosecutions suggest that they aren’t – and that banks and other financial institutions can “buy” favorable or unfavorable credit ratings to suit their commercial interests.

If New Zealand was inhospitable to foreign companies wanting to do business here or irresponsible in collecting taxes or managing government fraud and corruption, it would be a far different story. However New Zealand is consistently designated as the country with the least red tape and regulation for foreign businesses, as well as the most fraud free. We also have a well-earned reputation for frugality. Our government ran a surplus between 1999 and Oct 2008 – the month the world economy collapsed and we stopped selling exports and overseas travel to tourists – owing to circumstances which were totally beyond our control

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