It is perceived that IMF is changing ideology to be more pro-poor...
International Monetary Fund’s (IMF) diminishing
influence and funding notwithstanding, has been given a new and exciting opportunity by G-20 nations of rebuilding the emerging economies which are tattering under the shackles of recession. $750 billion will be pumped into IMF’s kitty to try and do that. The new Managing Director of IMF, Dominique Strauss Kahn is trying his best to restore its old glory by shifting its ideology that can satisfy even its hardest critic. It has certainly done so with Joseph Stighitz, a Nobel Laureate who had a long time antipathy for IMF’s policies, thus declaring the new polices as ‘welcome’ in Wall Street Journal. The criticism was particularly sharp for inveterate IMF’s policies of imposing conditions against granting loans. So much so, that it often used to instruct governments to cut-back on public spending as a pre-requisite for granting loans. This kind of dealings with fragile Third World economies has often proved to be its nemesis. East Asian crisis and Argentine collapse are the examples of IMF’s flawed policies based out of the US and Western Europe’s dictates.
The IMF’s present condition is rooted to its genesis since its inception in 1945 at Betton Woods Conference. Its main function then was to oversee the orderly balance of payment between countries, since there were fixed exchange rates at that time. But when Richard Nixon stopped dollars convertibility to gold, IMF’s role became less pertinent. However in 1980s the IMF found a new role for itself as a crisis-lending institution for developing countries. During this time IMF was also seen as a protagonist for US led free-market economy being imposed on frail under developed countries. However, the “Washington Consensus” as it was called, is under fire – because its prescriptive has crippled many economies causing major social and economic distress. The recession has cut the deepest among developing with IMF predicting that another 85 million people will further loose their jobs world wide in 2009.
Civil society organisations are concerned about developed countries’ lack of empathy towards their poor cousins who are languishing in miseries and have called for immediate increased aid and debt relief. There is no doubt that IMF is changing, as is acknowledged by Gordon Brown, Prime Minister of the UK, when he stated “Laissez-faire has had its day”. Lately, IMF has advocated deficit spending and monetary easing. Although it is true that IMF has disposed of laissez-faire ideology, it is not clear what kind of economic policy will it espouse? It was Keynesian world when IMF came into being, with fixed exchange rates and fiscal intervention. After this system subsided in 1970s, IMF embraced free market philosophy, and now a leftist idea has brought them back to Keynesianism. After 65 years of ups and downs, probably the time has come for the body to withdraw from its undemocratic, doctrine oriented body to a more accommodating financial organisation that will be beneficial to the majority of the world.
International Monetary Fund’s (IMF) diminishing
influence and funding notwithstanding, has been given a new and exciting opportunity by G-20 nations of rebuilding the emerging economies which are tattering under the shackles of recession. $750 billion will be pumped into IMF’s kitty to try and do that. The new Managing Director of IMF, Dominique Strauss Kahn is trying his best to restore its old glory by shifting its ideology that can satisfy even its hardest critic. It has certainly done so with Joseph Stighitz, a Nobel Laureate who had a long time antipathy for IMF’s policies, thus declaring the new polices as ‘welcome’ in Wall Street Journal. The criticism was particularly sharp for inveterate IMF’s policies of imposing conditions against granting loans. So much so, that it often used to instruct governments to cut-back on public spending as a pre-requisite for granting loans. This kind of dealings with fragile Third World economies has often proved to be its nemesis. East Asian crisis and Argentine collapse are the examples of IMF’s flawed policies based out of the US and Western Europe’s dictates.The IMF’s present condition is rooted to its genesis since its inception in 1945 at Betton Woods Conference. Its main function then was to oversee the orderly balance of payment between countries, since there were fixed exchange rates at that time. But when Richard Nixon stopped dollars convertibility to gold, IMF’s role became less pertinent. However in 1980s the IMF found a new role for itself as a crisis-lending institution for developing countries. During this time IMF was also seen as a protagonist for US led free-market economy being imposed on frail under developed countries. However, the “Washington Consensus” as it was called, is under fire – because its prescriptive has crippled many economies causing major social and economic distress. The recession has cut the deepest among developing with IMF predicting that another 85 million people will further loose their jobs world wide in 2009.
Civil society organisations are concerned about developed countries’ lack of empathy towards their poor cousins who are languishing in miseries and have called for immediate increased aid and debt relief. There is no doubt that IMF is changing, as is acknowledged by Gordon Brown, Prime Minister of the UK, when he stated “Laissez-faire has had its day”. Lately, IMF has advocated deficit spending and monetary easing. Although it is true that IMF has disposed of laissez-faire ideology, it is not clear what kind of economic policy will it espouse? It was Keynesian world when IMF came into being, with fixed exchange rates and fiscal intervention. After this system subsided in 1970s, IMF embraced free market philosophy, and now a leftist idea has brought them back to Keynesianism. After 65 years of ups and downs, probably the time has come for the body to withdraw from its undemocratic, doctrine oriented body to a more accommodating financial organisation that will be beneficial to the majority of the world.
