The International Monetary Fund has been, for some years, an institution looking for a new role. Now, the credit crunch has brought it spluttering back to life.
Originally an instrument for bringing wayward first world governments (such as the UK under Labour in 1976) into line by imposing fierce policy reforms in exchange for loans, it used to have a reputation as the slimmest and most effective of the post-Second World War institutions. Over the years, however, it had transmogrified into just another bloated global bureaucracy.
For its critics, it came to exemplify all that was wrong with western economic values. The hardline values it espoused, such as removal of food subsidies, made it an object of hatred among some client countries. It became an object of particular scorn among anti-globalisation protesters, and is now forced to hold its twice-yearly meetings with a ring of steel around its complex.
Initially operating with a small staff of experts out of one building, it now occupies a whole city block in downtown Washington. At its peak it employed 2,600 people. Once it had run out of first world governments to lend to, it turned its attention to the developing world. The IMF became a huge presence in Latin America, often appearing to support dictators and provoking riots as it imposed its draconian model on its customers. It expanded rapidly in the 1990s to cope with Russia and Eastern Europe, and took on a bigger role in Africa and Asia.
It has never been loved, yet has managed to maintain the support of the western democracies, its biggest shareholders. But in recent years it seemed to run out of things to do. Its big customers--Brazil, Argentina, Mexico and, more recently, Russia and South Korea--became thriving economies with large foreign-exchange reserves, and no longer needed the Fund.
Under the lacklustre leadership of the Spanish politician Rodrigo Rato, it drifted, ran short of money and became inward-looking. But the current managing director, Dominique Strauss-Kahn, an urbane former French finance minister, knew what to do. He speeded up modernisation of the Fund's structure so that votes were shifted from the old 1945 powers to a broader range of countries, recognising the rising importance of Asia and Latin America. Costs have been slashed by $100m, leading to the departure of 400 of the 2,600 staff. And the Fund is to …