Education International
Education International

What the IMF and Central Bankers knew, but didn’t tell us

published 2 September 2009 updated 2 September 2009

One of the principal announcements coming out of the G20 Summit in London last April was the launch of the Financial Stability Board, which is meant to ensure global financial stability and especially to set up measures which would prevent another crisis in the future. It will bring together major international players – the International Monetary Fund, the World Bank, the OECD, the Finance Ministers from 25 countries and others.

The Secretary General of the new Financial Stability Board is Svein Andresen, who previously headed the secretive Financial Stability Forum based in Basel, Switzerland. Now, after the G20, he will get more staff and an expanded mandate – to save the world from new financial disasters, no less! After the launch of the FSB, he came to speak to the Trade Union Advisory Committee at the OECD. Very carefully, and in considerable detail, he explained the FSB’s new role, its structures, and how he expects to fulfil the G20 mandate. One of the Board’s tasks will be to set up an “Early Warning System,” he told us. But then, as my trade union colleagues around the table peppered him with questions, came the startling revelation: the IMF already had an “Early Warning System,” he said. A couple of years ago, the IMF had prepared “a fine report” describing precisely the risks to the global financial system. They had analyzed the massive imbalances in the system, imbalances which made it unsustainable. In other words, it was not if a major crisis would erupt, but when. Trade union economists had been sounding the same alarm bells for at least two years. At that time, trade union representatives were labelled as being unduly pessimistic. Nobody wanted to spoil the party! But Andresen now revealed that the IMF had made precisely the same analysis! Surely such a warning should not have been ignored. So what happened? “Well,” he replied, “the report was circulated internally to Central Banks and to key financial ministries, but nobody acted on it.” He followed with an elliptical commentary on how central bankers and finance ministries had to be careful with information, so as not to disturb the markets. “But the report will probably be published some day – perhaps soon,” he sought to assure us. I pointed out that the FSB was now more visible than its predecessor, because of the prominence given to it by the G20. The global union movement had to be given a seat at the table, we said. If the Marshall Plan, which gave birth to today’s OECD, could set up consultative mechanisms with trade unions, as well as business and industry, the FSB could do it too. Closed door meetings are no longer acceptable, we said, nor are confidential reports that are ignored and kept secret, for fear of “disturbing the markets.” Today, previously closed doors are now slightly ajar. We have been allowed to peer in and see some of the inner workings of institutions that previously did not feel the need to talk with representatives of workers. Now those doors must be pushed wide open. When historian Barbara Tuchman wrote “The March of Folly” some years ago, she showed how major upheavals in human history had been preceded by warnings that were then ignored. So it has been with the financial crisis – another unhappy example of the collective folly and failure of institutions. That is why these institutions must be opened up, and why representatives trade unions must have a seat at the table. By Bob Harris.

This article was published in Worlds of Education, Issue 31, September 2009.