Does anybody like the International Monetary Fund?
The half-century-old super-governmental agency has long been out of favor with the political right, which sees it as a usurper of sovereignty and the enemy of free markets. The left is no friendlier, condemning it as a collection agency for international bankers.
Strikingly, in the wake of its ineffective performance in stemming the Asian crisis, members of the establishment have joined the hostile chorus. World Bank Chief Economist Joseph Stiglitz has taken some undiplomatic jibes at the IMF's one-size-fits-all approach to financial distress. In a recent Wall Street Journal op-ed article former Secretary of State George Shultz, former Treasury Secretary William Simon and former Citicorp chairman Walter Wriston called the IMF "ineffective, unnecessary and obsolete." And the congressional Republican leadership, sensing an opportunity to trap President Clinton on the wrong side of the opinion polls, is piling on. Hence Congress is unlikely to approve $18 billion in financial commitments to the embattled lender unless internal reform is put at the top of the IMF's agenda. And some changes, it is widely agreed, are overdue. But the big question remains: What, if anything, can be done to prepare the organization to cope with crises that pop up as unexpectedly as monsters in a Nintendo game? The IMF was created near the end of World War II to stabilize the economies of what was then a cozy clique of advanced capitalist countries dependent on America. The fund provided loans to defend the fixed exchange value of national currencies, typically in return for promises to fight inflation at home. But the club with a big stake in international trade and investment grew beyond the industrial democracies. Adding to the confusion, Europe, America and Japan abandoned the fixed exchange rates that the agency had been formed to defend. And the IMF struggled to carve out a new mission. Since the debt crises of the early 1980s the fund has been using its leverage as a lender of last resort to become ever more intimately involved in the micromanagement of poorly run less-developed economies from Pakistan to Peru. This suited the rich economies because it distanced them from the unpleasant task of imposing austerity on profligate economies in search of aid. And it often suited the leaders of borrowing countries who could blame faceless IMF bureaucrats for everything from unemployment to increases in the price of bread. A few academics, notably Jeffrey Sachs of Harvard, complained bitterly about the IMF's inflexibility in demanding debt repayments from Latin America and Eastern Europe. …