Alright today's word of the is "IMF," "International Monetary Fund," given that right here behind me, the spring meetings of the IMF and its cohort the World Bank are going on.
Now, while 188 countries are meeting about global challenges and their global solutions (so they say), the big headlines have been about Madame Lagarde and the money that she's getting pledged to boost the IMF's firepower, which is really—let's be honest—kind of all about Europe.
But really the big thing I want to ask, stepping back, is "What is the IMF, and what is its role?" First let's go back to its history: It was formed after things got so bad in the Great Depression, with countries adopting "Beggar-Thy-Neighbor" policies, global cooperation broke down and countries said "Hey, we need to get this together, cooperate, get trade back going." They did this at Bretton Woods in New Hampshire. It was an historic meeting and the IMF was established. It went into effect at the end of World War II. I should also mention, at that historic meeting, the US dollar became the global reserve currency, so, a lot going on there.
Fast forward, though. What does the IMF say about its role today? The IMF says it "works to foster global growth and economic stability. It provides policy advice and financing to members in economic difficulties and also works with developing nations to help them achieve macroeconomic stability and reduce poverty." How does the IMF say it does this? Well, the IMF argues it "promotes international monetary cooperation and exchange rate stability, facilitates the balanced growth of international trade, and provides resources to help members in balance of payments difficulties or to assist with poverty reduction."
These days, I would argue the IMF has become a little bit more synonymous with the criticism of it. I mean, what would a spring meeting be without protestors criticizing the neo-liberal policies which critics have argued have been economically devastating...uh...to populations of countries along with not really solving the economic problems.
Now the irony is that while critics like economist Joseph Stiglitz has said that these policies contributed to financial crises in East Asia and in Argentina during the '90s, today its developed economies in Europe that have needed IMF assistance and thus been subject to IMF policies: countries like Iceland, and more recently Portugal, Ireland, and Greece.
Now, there are critics that argue that the problem with the IMF is that it is giving these bailouts in the first place, and that it has strayed too far from its original charter—people like economist Paul Craig Roberts, take a listen.
[Paul Craig Roberts] "...it's only permitted to lend for balance of payment problems. It's not permitted to lend for, uh, deficit problems or government debt problems. So, what we see, coming out of all this crisis, is lawlessness."
Alright now we're back outside of the IMF spring meetings and I should note that the criticism of the IMF policies—the "conditions for lending"—is based on what's known as the "Washington Consensus," which includes fiscal austerity, high interest rates, trade liberalization, privatization, and open capital markets. Now as for whether the IMF and its thinking within this institution will materially change, economists like Michael Hudson say "Not likely ever."
[Michael Hudson] "I won't say they're religious fanatics, because every religion has been on the side of debtors, not creditors like the IMF is. But they're like sectarian cultists. I don't think you can teach an IMF economist anything."
So, by the end of this weekend, you're likely to see many headlines coming out of these IMF meetings behind them. Now you know what the IMF is and what you really need to know about it.
