Of Terror, the IMF, Keynes, and the Fiscal Multiplier

OCTOBER 17, 2012 – Thursday October 11, International Monetary Fund (IMF) managing director Christine Lagarde said that both Greece and Spain should slow down their cuts to government spending. Well, not exactly. Her exact words were: “time is of the essence, meaning that instead of frontloading heavily, it is sometimes better, given circumstances and the fact that many countries at the same time go through that same set of policies with a view to reducing their deficit, it is sometimes better to have a bit more time” (Lagarde 2012). On its face, this makes little sense. But after wading through the doublespeak, and putting the entire quote in context, what it turns out she is saying is “slow down the cuts”. This is a complete reversal of two generations of neoliberal orthodoxy, and an implicit repudiation of the policies carried out by the IMF and its “sister” organizations in that period.