Christine Lagarde, head of the IMF, wants to increase funding for the IMF because it fears that a further outbreak of the financial crisis will leave this body short of emergency cash. She has laid out five “dark clouds”:  high unemployment, slow growth, hasty deleveraging by banks, strains in the Euro Zone and higher oil prices.

 

This has become a repeated ritual, where the IMF asks for cash from the member countries, particularly the Group of 20 (G20), and these contributions are organised into quick dispersing loans. It is essentially a safety net for the credit of banks whereby the IMF lends more money to potentially defaulting countries to enable them to carry out their repayments back to the banks. These loans are not invested in production and employment to create real economic activity. It is a circular process; the money goes back to the creditors. 

 

The process will not pull the world out of the economic crisis. In fact it is going to make matters worse! The IMF cannot be the solution to this crisis.

 

The onslaught of the debt crisis in the 1980’s through the application of the IMF’s so-called structural adjustment programs, which are in effect austerity measures imposed on developing and economically weaker countries, has contributed to this crisis over a longer period.

 

The application of these austerity measures are in fact the trigger for further collapse, bankruptcy and unemployment. The austerity solutions are not tackling the broader structural causes of what constitutes the most serious economic crisis in world history. It is far larger than what the economic commentators in the media describe as a “double dip recession”.

 

Prime Minister Gillard dutifully pledged a doubling of Australia's support to the IMF from $3.3 billion to $6.6 billion, when she met with the G20 leaders in France last November. She pointed out the money would be available, and “if that is drawn down upon, it’s a loan, it’s an asset on our balance sheets. It’s a loan on which interest is paid.” Gillard argued “It’s about jobs. If the global economy doesn’t work the way it should, if we don’t stabilise it and get it back on a path of growth, then that will cost jobs.”

 

True to her form Gillard is telling a huge lie of what global capitalism is actually doing!  We see the grotesque situation of where money from the public purse goes to the IMF, who loan it to countries at interest and from these countries it goes to the creditor banks. In effect it is a transfer from the public purse to the creditor banks, which are private banking institutions.

 

Capitalism has enormously expanded the productive capacity of human society very quickly. However the laws of capitalist competition also have a negative side, which overshadow any advantages that capitalism might have to offer.

 

Capitalism is a contradictory system for it needs to lower the cost of wages and benefits of working people as much as possible, while producing and selling more and more goods at increasingly lower costs. The impoverishment of workers, who are unable to buy these goods, results in a crisis of overproduction.

 

Australia and other countries are presently witnessing bankruptcies and closure of businesses, massive redundancies and attempts to reduce wages for those still in work. This economic contraction aggravates the crisis still further.

 

The current financial meltdown was set off by banks who, needing to invest their surplus capital, invent all sorts of credit scams so they could lend money to impoverished working people who had little hope of  repaying their debts. This scheme allowed people to keep spending and so disguised the overproduction crisis for years, but now that the scam has collapsed, the crisis is worse than ever.

 

It comes as no surprise that capitalism has outlived its usefulness. The longer it continues, the more ordinary people will suffer. Those who profit from the system go to great lengths to convince the working people that there is nothing wrong with capitalism. The economic crisis they argue is only caused by the greed of a few reckless individuals!

 

The financial crisis was not caused by workers, for they in fact create ample wealth for everybody to be able to live well. If there’s no profit to be made, capitalism refuses to produce and distribute goods that are needed for the general welfare of society. The only solution is for the working class to step forward and take over the means of production.