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Letter: Did the IMF drink the Comrade's Kool-Aid?
Published on July 25, 2016 Email To Friend    Print Version

Dear Sir:

“Drinking the Kool-Aid" metaphorically refers to a person or group uncritically holding a doomed or dangerous belief, argument, or philosophy. The term comes from the behavior of over 900 mainly African-American men, women, and children who blindly followed Jim Jones’ ultra-socialist vision at Jonestown, Guyana, by committing so-called “revolutionary suicide” in 1978 by drinking cyanide-laced Kool-Aid.

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This metaphor nicely applies to the just released staff report of the International Monetary Fund (IMF) following bilateral discussions with the government of St Vincent and the Grenadines.

The IMF is a United Nations organization whose, “primary purpose is to ensure the stability of the international monetary system -- the system of exchange rates and international payments that enables countries (and their citizens) to transact with each other…. To maintain stability and prevent crises in the international monetary system, the IMF reviews country policies and national, regional, and global economic and financial developments through a formal system known as surveillance. The IMF advises its 188 member countries, encouraging policies that foster economic stability, reduce vulnerability to economic and financial crises, and raise living standards.”

The IMF’s annual staff reports consist mainly of the compilation and interpretation of material supplied to the visiting team by the relevant government ministries, supplement by other data, in our case mainly Eastern Caribbean Currency Union (ECCU) material. There is no independent collection of data by the visiting staff though it does question the way material supplied to them is collected, compiled, and interpreted. For example, the report argues that:

“Only part of PetroCaribe St Vincent’s debt to Venezuela is fully accounted in the public sector debt statistics. At end-January 2016 the total debt to Venezuela under the agreement stood at EC$183.8 million, of which only EC$71 million is recorded as government debt, to fund the construction of the international airport. This suggest that the public sector debt should be about 5.3 percent of GDP (EC$112 million) higher to reflect the full debt to Venezuela (p. 43).”

Aside from such tepid rebukes, the report makes many pie-in-the-sky projections about economic growth and debt reduction, the most questionable being the prophesied growth stemming from the completion of Argyle International Airport (AIA).

“Growth is projected to further increase in 2016 and over the medium-term, spurred by investment prompted by the new airport. This game-changing project is expected to boost tourist arrivals and agriculture exports through expanded airlift capacity and direct routes to main markets. Risks to this projection are balanced” (p. 20; italics added).

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Jonestown massacre, November 18, 1978, at the hands of its white pastor

Recall what I wrote in my last essay:

“Economic predictions are among the most fallible of all [predictions]. How many economists accurately predicted the global economic recessions of 1975, 1982, 1991, 2009, or the Great Depression of the 1930s? How many knowledgeable pundits forecasted the plunge in oil prices that began in the second half of 2014?”.

Why would the IMF conclude that AIA would be a “game-changing project” (referring to it in positive terms no fewer than 12 times in its 78-page report)? Because this is what they were told by the Honourable Dr Ralph Gonsalves and his government.

Recall also that it was Glen Beache, CEO of our Tourism Authority, who said that building AIA was necessary because, “It’s always been about access and direct flights. This airport is a huge game-changer for us”.


Keep in mind as well that the chronically criticized IMF does not conduct nor carefully evaluate existing feasibility studies (which is part of the mandate of its sister institution, The World Bank, which was never asked by our government to carry one out) in these annual reports. Finally, remember that no genuine economic feasibility study was ever carried out for AIA by any local or external body.

That IMF officials simply drank Dr Gonsalves’ Kool-Aid helps explain the contradiction between their “game-changing” prediction and the data in Figure 1 where they compare SVG’s tourism growth to that of the other ECCU members (Antigua and Barbuda, Dominica, St Kitts and Nevis, St Lucia, and Grenada).

Figure 1. The IMF’s Summary of ECCU Member Tourist Arrivals, 2004-2015 (p. 23)

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These data clearly show how poorly our tourism industry has performed since the collapse of the Lehman Brothers global financial services firm in 2008 which helped precipitate an international economic recession whose aftermath apparently and inexplicably is still being felt by the tourist industry in SVG.

Among other criticisms, the IMF has been accused of: (1) “being ‘out of touch’ with local economic conditions, cultures, and environments”; (2) having policies that “lack a clear economic rationale”; and (3) making it hard for “indebted countries to say no to environmentally harmful projects”.

Each of these criticisms applies to its unsubstantiated and uncritical support of the AIA project. (1) No attempt was made to query why our tourism numbers are so out of line with the other ECCU members by asking, for example, whether environmental conditions on our mainland (most notably the absence of white sand beaches) is a mass tourism limitation no international airport could ever overcome. (2) The suggestion that the airport will boost agriculture exports shows a remarkable ignorance of the nature of our small-scale and costly local agricultural system and the realities of global marine agricultural transport. (3) There is no appreciation of the potential harmful effects of mass international tourism on the local ecosystem.

Conversely, implicit in the IMF’s mindless support of AIA is the weird assumption that the fallout of the Lehman Brother’s bankruptcy has been stronger in SVG than elsewhere in the ECCU. This support is also the antithesis of its mission statement because it gives a stamp of approval to a project whose imminent failure will foster local economic instability, increase our vulnerability to external economic and financial crises, and lower our living standards.

But I guess this is the kind of crazy policy support you get when you drink the Comrade’s Kool-Aid.

***

This is the 28th in a series of essays on the folly of the proposed Argyle International Airport.

Get ready for a November election in St Vincent and the Grenadines! But which November?
Lessons for Argyle International Airport from Canada's Montreal-Mirabel International Airport
Lessons for Argyle International Airport from the cruise ship industry
Lessons from Target Canada for Argyle International Airport in St Vincent
Lessons from Trinidad and Tobago for Argyle International Airport
The dark side of tourism: Lessons for Argyle Airport
Why Argyle won't fly: Lessons from Dominica
Ken Boyea and the Phantom City at Arnos Vale
Airport envy Vincie-style
Fully realising our country's tourism potential
Airport without a cause
The unnatural place for an international airport
The Potemkin Folly at Argyle
False patriotism and deceitful promises at Argyle
Airport politics and betrayal Vincie-style
Phony airport completion election promises, Vincie-style
Is Argyle International Airport really a ‘huge game-changer for us’?
Has the cat got your tongue, prime minister?
More proof that Argyle won't fly
Our very own Vincentian cargo cult at Argyle
The missing Argyle Airport feasibility studies
The world's four most amazing abandoned airports
Farming, fishing, and foolish talk about Argyle International Airport
Argyle Airport amateur hour
St Vincent's place in the world of travel
Investing in St Vincent's tourism industry
The Argyle Airport Prophecy: What the numbers say

C. ben-David
 
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Comments:

Peter Binose:

Well written David I approve your message.


Patrick Ferrari:

C. ben, Ralph will punish you ... more.


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