The IMF says it's bad for big companies to have a lot of power, but their prescription goes in the other direction

– Should we moderate the power of companies?
– Yes

– Because?
– Because it negatively affects investment, reduces growth potential and increases inequalities between people, all of which are ongoing processes in Argentina, as shown by Indec data showing recession, declining capital formation and worsening income distribution.

– Who promotes the moderation of corporate power?
– The International Monetary Fund. The same organization that conditions the country to pursue an economic policy generating these same setbacks.

But coherence is not something that characterizes this institution, which, if something stands out, consists among other things in imposing requirements contradicted by part of its speech.

The article signed by Federico Diez and Romain Duval, two senior researchers in the structural reform research sector, argue that "if governments no longer control big business, their growing market power could further damage economic growth ".

The article is based on the findings of a gigantic survey that the IMF released a short time ago in the form of an entire chapter on "The increase of the market power of companies and their macroeconomic effects"in its annual report Perspectives of the World Economy. The research relies on data extracted from nearly one million companies from advanced economies and emerging markets between 2000 and 2015.

The growth of companies' market power has been measured with the help of the price margin, an indicator that reflects the difference between the price that companies charge for what they sell and the cost of production. . They found that this margin had increased, especially in the decile of large firms, with an average increase of more than 30%.

Against common sense and established dogmas, the work of the Fund reveals that this higher profit margin did not encourage but discouraged the investments of these same companies: "As the market power of a company increases, it can a higher price and a reduction in production, which in turn leads to a reduction in its demand for capital and, consequently, its investment, which was considerable among the companies whose margins experienced the largest increases ", indicates the newspaper.

Add to the work of IMF technicians that the increase in market power of large companies since 2000 was one of the factors that caused "a general reduction in the income participation of workersThis has contributed to worsening inequality, as rising capital income tends to benefit mainly high-income earners. "

Among the measures recommended by the authors to curb the progress of large corporations include "the reform of corporate tax to tax the return of excess capital from market power."

A week before the publication of this article, Christine Lagarde acknowledged in a speech in Washington that "the perception that the public has large multinationals pays only little tax."

He complained about "the ease with which they avoid paying taxes" and said that this reason, as well as "the decline observed over the last 30 years of the aliquots paid by companies, undermine confidence in the equity of the tax system in general ".

He gave as an example that, according to an IMF badysis, countries that are not part of the Organization for Economic Co-operation and Development (OECD) do not receive about $ 200 billion in revenue per year, which equals about 1.3% of GDP. "because companies transfer their profits to low tax jurisdictions".

Very sensitive about the French Madame. Too bad that none of these concerns are taken into account when negotiating agreements with countries victims of this phenomenal puncture of resources. One more time, do what I want but not what I say.

There are more examples of this double talk

Last Tuesday, a day before the publication of the article on the power of big business, Lagarde said during another speech in Washington before the US Chamber of Commerce: "We must use smarter fiscal policy, which means finding the right balance between growth, debt sustainability and social goals. "

A council that would come to Argentina, where the damaging results of a local economic policy obsessed with deficit reduction and which it supports, should encourage precisely to apply smarter and more balanced recipes..

In the same speech, he advocated "the fight against excessive inequalities", for which he proposed to promote "progressive tax measures". Idea that shines by its absence in the current confirmation agreement.

Policy that does not promote industrialization

With reasons and well-founded precedents, the IMF was and is now also co-responsible for a policy that does not encourage industrialization.

This is why, once again, there is an in-depth essay just published by Reda Cherif (Algerian Ph.D. at the University of Chicago) and Fuad Hasanov (PhD in Texas-Austin), two researchers from the Department of training in development. The title of the book quips the anti-industrial stigma that the IMF deserves: "The return of a policy that we must not name: principles of industrial policy".

Throughout these 70 fascinating pages, the authors claim the need for an industrial policy, taking as main examples the evolution of Asian countries. The conclusions are as follows: "A true industrial policy must be based on state intervention to facilitate the incorporation of local firms into sophisticated business sectors, beyond the comparative advantages existing in this country.It must be export-oriented, so that they have the pressure to remain competitive and the need to innovate. "

Cherif and Hasanov oppose an import substitution-based industrial policy, claiming that it leads to inefficiencies, a lack of innovation and a persistent dependence on imports. imported inputs.

According to an orthodox approach, they add that a good industrial policy must be accompanied by macroeconomic stability, adequate infrastructure, a human capital endowment and a good business climate. But he considers them as "necessary but not sufficient ingredients to maintain sustained industrial growth".