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
Strikingly, in the wake of its ineffective performance in
the Asian crisis, members of the establishment have joined the
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,
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
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. …