Simon Wren-Lewis (former Oxford economics prof) claims in this recent article (1) that the IMF is on balance quite enlightened when it comes to economics. That’s not entirely consistent with this passage of his: “The IMF itself wavered on austerity. At first (before 2010) it encouraged coordinated fiscal stimulus. As the Eurozone crisis began to unfold it changed its mind, and advocated austerity. But this did not last that long.”
My translation of that is “when the comes to austerity, the IMF doesn’t know whether it’s coming or going”. Or maybe that’s over-cynical.
Certainly anyone or any organisation which thinks there is anything at all to be said for austerity (in the sense of pitching aggregate demand lower than is consistent with keeping inflation under control) is basically clueless.
That certainly ties up with Bill Mitchell’s view of the IMF (2), namely that the IMF is so hopeless, it should be closed down. (Mitchell is an Australian economics prof.)
Another piece of evidence that the IMF (along with the OECD) do not have much of a grip on macro-economics is that both organisations have long supported the nonsensical “fiscal space” idea. Bill Mitchell pours cold water on the "fiscal space" idea here (3) for example, and I demolished it here (4), here (5), and here (6).
Given that both Bill Mitchell and I are MMTers, the obvious conclusion is that if the IMF and OECD were replaced with a committee of MMTers, millions of people worldwide who have remained unemployed for years on end over the last ten years would had jobs. Millions would not have been kicked out of their homes because of inability to make mortgage interest payments and many a suicide would have been avoided.
Having said that, I’m well aware of the weaknesses of MMT. For example it is often said there’s nothing new in MMT. That’s true in that MMT is just Keynes writ large. However Keynes (or at least his main work, the “General Theory of Employment Interest and Money” is ridiculously complicated). I.e. what MMT has done is to take Keynes and simplify it.
Plus it’s clear that the IMFs and OECDs of this world do not understand Keynes. That is, they don’t get the point that the solution to recessions is easy: just have the state create more money and spend it (and/or cut taxes). So MMT has done a good job in simplifying Keynes: maybe the little dears at the IMF and OECD will then understand it.
In contrast to the above “non-original” idea that the solution to recessions is easy, there’s another idea advocated by several MMTers which is definitely more original: that’s the “permanent zero interest rate” idea.
Titles of articles referred to:
1. The IMF as a transmission mechanism for academic knowledge.
2. IMF still away with the pixies.
3. The ‘fiscal space’ charade – IMF becomes Moody’s advertising agency.
4. More fiscal space nonsense.
5. "Fiscal space" is hogwash.
6. Ghosh – IMF authors define “fiscal space”.
Bill Mitchell, quite rightly, tries to get them to shut up for the umpteenth time….:-)