What Should the International
Monetary Fund Do?
An overriding theme in previous chapters is that the blame for the failure of globalization usually rests with the emerging market countries themselves. Indeed, taking responsibility for policy failures, as South Korea did in the late 1990s, is a crucial step in putting in place the reforms that can set a country on the path to wealth. Often international institutions such as the IMF step in to help countries in crisis. As often as not, however, the IMF doesn't help matters as much as it could—and sometimes it makes bad situations even worse. Have some IMF policies contributed to globalization failures? Can these policies be reoriented to help emerging market countries make globalization work?
The role of the IMF in coping with financial crises in emerging market countries in recent years has been highly controversial. Indeed, it has come under attack, sometimes quite viciously, by those in both developing and advanced countries. Does the world economy need an IMF?1 If so, what should be its mission and how should it operate? How can the IMF promote successful financial globalization?
This chapter is not intended to provide an exhaustive examination of the IMF, a topic well beyond the scope of this book.2 However, the financial crisis framework developed in earlier chapters does have something to say about what the IMF should do and how it should do it.