IMF Playing Catch-Up with Global Economy, Says Former Adviser
Neville, Laurence, Global Finance
A year on from the appointment of Christine Lagarde as managing director of the International Monetary Fund (IMF), the challenges faced by her institution - and its sister entity, the World Bank - in helping to right the global economy are undiminished. Indeed, the oudook is more precarious than it was a year ago because of the eurozone's continued failure to solve its debt crises.
As the IMF and World Bank hold their annual meetings in Tokyo in October, questions about the track record of the two pillars that are designed to support global economic and financial order are louder than ever. Most notably, the resignation in July of Peter Doyle, former adviser to the IMF's European Department, which is in charge of the bailouts of Greece, Portugal and Ireland, has highlighted significant problems.
Doyle's parting accusations were that the IMF - which focuses on management of the global economy, in contrast to the World Bank, which is concerned with economic development - failed to warn about the scale of the problems facing many economies. Moreover, what warning it did give was too late.These were not shock revelations: The IMF itself had already published reports identifying such failings.
However, two of Doyle's other claims are more damaging. The first is that the fund has been "playing catch-up" ever since it failed to warn of the disastrous buildup of pressures in the global economy. The second is that the appointment of senior IMF staff is illegitimate and reinforces a "European bias" that undermines the credibility and work of the fund.
Both criticisms have considerable merit. Certainly, there is litde evidence that the IMF has struck a bold new course in the past year. Instead, it has continued to follow the lead of the EU in working to solve the debt crisis that has engulfed its periphery and is now spreading to its core (in July, Moody's cut its oudook for Germany's Aaa credit rating from stable to negative).
Should it matter that the IMF is following the lead of Europe's legitimate government institutions? …