John Hayward Posted: 23 July 2008
"IMF economic programs are associated with significantly worsened tuberculosis control in post-communist Central and Eastern European and former Soviet Union countries, independent of other political, health, and economic changes in these countries ... These results challenge the proposition that the forms of economic development promoted by the IMF necessarily improve public health."
This is the sobering conclusion of a new study by researchers at Cambridge University. Or, as the New Scientist puts it, "The International Monetary Fund could be bad for your health." Of course, this is not a fresh revelation. Fifteen years ago, Dr Paul Mills, now an economist at the IMF, wrote the following about Low Income Country (LIC) debt in our Cambridge Paper The ban on interest: dead letter or radical solution?:
"Banks lent and LICs borrowed heavily in the late 1970s when interest rates were low and commodity prices were increasing rapidly. In the early 1980s, rising world interest rates coincided with a collapse in the prices of commodities produced by the most heavily indebted LICs. In order to maintain their interest payments and receive International Monetary Fund (IMF) emergency loans, most LICs have been forced to increase exports dramatically and submit to austere IMF 'adjustment' programmes. The results have included the degradation of the world's environment (to produce more cash crops for export); the net transfer of resources from poor to rich countries (despite aid and further loans); and cuts in the living standards of the world's poorest societies, to pay for loans from which they have derived little benefit. The lives of millions have been lost as a direct result."
This is not to scapegoat the IMF. Rather, as Dr Mills noted, this is "a typical consequence of the unrestrained workings of an interest-based financial system." At a time when personal debt in the UK has risen to in excess of £1.4 trillion - and is increasing at the rate of £293 million per day, greater than the £258 million being paid in interest per day - his conclusions are worth revisiting:
"A non-interest financial system is perhaps too radical a solution to be realisable in the near future. However, some of its lessons could still be applied within our current ways of operating. For instance, the economy would become more stable if less reliance was placed on interest-bearing debt in favour of profit-sharing and rental arrangements. This process ought to be fostered by the removal of the remaining tax incentives to incur debt – notably mortgage tax relief and the deductability of interest payments against corporation tax. Banks could be permitted to offer chequeable unit trust accounts, so as to provide them with a long-term stake in the profitability of their business clients. Less reliance could be placed on the expansion of credit to finance consumer spending.
"Nevertheless, while interest continues to operate, injustice and inefficiency will remain, even if governments re-regulate financial markets to protect them from their own self-destructive urges. The current plight of many Western and LIC economies is eloquent testimony to the damage wrought by reliance on debt finance. The foundation for an alternative that offers greater fairness, efficiency and stability is the biblical prohibition of interest, and the Christian analysis developed from it. The detractors of Old Testament economics need to take care. Experience has shown that there is far more wisdom in this biblical teaching than Christians have realised for the last five centuries. Without it, we have no cogent response to the financial chaos that rages about us."