Thursday, September 18, 2014

Ukraine Can't Afford the IMF's 'Shock Therapy'

The war in eastern Ukraine continues to rage on, despite efforts by separatist and national forces to reach a cease-fire. But even if the warring sides reach a long-term truce, the government in Kiev is simultaneously fighting another, perhaps equally important battle: the economy. Unfortunately, President Petro Poroshenko is shooting himself in the foot.

Ukraine's government is in the middle of implementing a set of stringent economic reforms agreed to in April with the International Monetary Fund (IMF) in exchange for a $17 billion bailout. Although Kiev has been commended by the IMF for a "bold economic program," the loan's terms, combined with Ukraine's political and economic crisis, are a recipe for disaster.

We have seen this story before. During the 1990s, when I worked at the U.S. Agency for International Development (USAID) in the office charged with managing economic reform projects in the former Soviet Union, I observed that the type of austerity now being required of Ukraine was the standard prescription for countries in economic crisis. The leading Washington financial institutions, such as the IMF, World Bank, and U.S. Treasury Department, were passing out this one-size-fits-all solution. And it almost never worked.

Russia was the classic case. In the midst of the political shock caused by the breakup of the Soviet Union, neoliberal reformers supported by the West instituted a policy of so-called "shock therapy" involving an end to price controls and large cuts in government spending and subsidies. The result was a plunge in Russia's GDP and inflation rates averaging 20 percent per month. As the poverty rate climbed to a full 55 percent of the population, there was a widespread political backlash against austerity led by Russian Vice President Alexander Rutskoy, who termed the reforms "genocide" and led a failed attempt to overthrow President Boris Yeltsin in 1993.

Complete story at - Ukraine Can't Afford the IMF's 'Shock Therapy'

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Recommended Reading via Amazon

If you're seeking more information about how the world really works, and not how the media would want you to believe it works, these books are a good start. These are all highly recommended.

If you don't see pictures above, you likely have an adblocker running.  If so, here are the links.

1. The Shock Doctrine - Naomi Klein
2. Confessions of an Economic Hit Man - John Perkins
3. Manufacturing Consent - Edward Herman, Noam Chomsky
4. Gladio - NATO's Dagger at the Heart of Europe - Richard Cottrell
5. Profit Over People - Noam Chomsky
6. Soviet Fates and Lost Alternatives - Stephen Cohen
7. The Divide - American Injustice in the Age of the Wealth Gap - Matt Taibbi

How this works.  Follow one of the links.  Should you decide to buy that item, or any item, I get a small percentage, which helps to maintain this site.  Your cost is the same, whether you buy from my link or not.  But if the item remains in the cart too long, I don't get a thing.  
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