Governments around the world – including the Government of Jordan – must take heed of the warning sounded by the International Monetary Fund in its recent report, published just a few days ago, on the ongoing levels of socio-economic inequality.
The warning, issued by an international financial institution that has been one of the most stringent promoters of the free market economy, reflects the reality that the continuing implementation of liberalizing economic policies has reached a level where its negative repercussions on social protection have become intolerable.
This standpoint has been relatively recently adopted by the IMF, which has instead historically designed economic restructuring programs for different countries, including Jordan, on the basis of economic liberalization’s approaches. The IMF is now warning against the consequences of its own fiscal policies, which have contributed to the exacerbation of socioeconomic inequality.
This is especially true for those policies that pushed towards reduced public expenditures, which the IMF describes as “reducing wastefulness”, but in reality, they simply represent austerity measures that aimed to reduce public expenditures on social welfare.
The IMF is not the first to ring the alarm: several financial institutions, economic forums, and experts have voiced similar warnings. Even the president of the Davos Forum, which has embodied the soul of the Neoliberal School of Economics for years, a few months ago warned about the risks of maintaining these levels of social inequality.
This economic paradigm is based on what is known in economic literatures as the “Washington Consensus”, which formed the basis for capitalism in its harshest form, currently recognized as neoliberalism. This paradigm calls for the complete liberalization of markets from the government interventions, through deregulation, liberalization of trade and prices, implementation of fiscal and monetary austerity policies, and privatization. Later, this economic school of thought expanded towards applying greater pressure on labor and social protection policies, under the slogan of halting waste and regulating public finances.
For years, we – alongside many global and regional coalitions of civil society organizations – have demanded that the IMF revises its economic policies, which have led to unprecedented levels of social inequalities and weakened social protection systems, especially in terms of education, health, and cash assistance.
The IMF’s cautionary report, launched a few days ago in the framework of the spring meetings of IMF/WB, was based on accurate indications showing that the gap between rich and poor has reached unsustainable levels. The unprecedented and frightening wealth of a very limited number of individuals has been built at the expense of equitable wealth distribution.
The IMF has declared that if no action is taken to promote social equality, this will compromise the security and stability of countries, and it has called on governments to expand social spending. In order to prevent the occurrence of instabilities, governments – including our Jordanian government – must review their overall economic policies, and especially the fiscal ones, towards the reformulation of tax policies, reorientation of tax collections, and re-distribution channels, reducing those indirect taxes which have greatly deepened economic inequality.
The government also must redirect its public expenditures towards the enhancement of social protection. Additionally, the government must revise its labor policies – and in particular those regulating wages – as these measures have contributed significantly to the deepening of socio-economic inequality in Jordan and they have reduced the chances of achieving inclusive economic growth.
The IMF itself also must direct the countries that are bound by its agreements to take the path of more equitable economic policies that can alleviate economic inequality.