International Monetary Fund: Difference between revisions
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Overall the IMF success record is limited. While it was created to help stabilize the global economy, since 1980 over 100 countries have experienced a banking collapse that reduced GDP by four percent or more. Far more than any previous time in history. The considerable delay in IMF response to a crisis, and the fact that it tends to only respond to rather than prevent them, has led many economists to argue for reform. |
Overall the IMF success record is limited. While it was created to help stabilize the global economy, since 1980 over 100 countries have experienced a banking collapse that reduced GDP by four percent or more. Far more than any previous time in history. The considerable delay in IMF response to a crisis, and the fact that it tends to only respond to rather than prevent them, has led many economists to argue for reform. |
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Whatever the feelings people in the western world have for the IMF, a research by the [[Pew Research Center]] shows that more than 60 percent of Asians and 70 percent of Africans feel that the IMF and the [[World |
Whatever the feelings people in the western world have for the IMF, a research by the [[Pew Research Center]] shows that more than 60 percent of Asians and 70 percent of Africans feel that the IMF and the [[World Bank]] have a ''positive'' effect on their country[http://people-press.org/reports/pdf/185topline.pdf]. Such research has made proponents of IMF claim the IMF-critique misleading, as it would be difficult to speak of suffering if the sufferers don't feel hurt. |
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==Quotes== |
==Quotes== |
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Revision as of 13:42, 15 November 2004
The International Monetary Fund (IMF) is an international organization responsible for managing the global financial system and for providing loans to its member states to help alleviate balance of payments problems. Part of its mission is to help countries that experience serious economic difficulties. In return, the countries who are helped are obliged to launch certain "reforms," such as privatizations of government enterprises.
The IMF describes itself as: "an organization of 184 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty".
History and Background
Agreement for its creation came at the United Nations-sponsored Monetary and Financial Conference in Bretton Woods, New Hampshire, United States, on July 22, 1944. The Articles of the IMF Agreement came into force on December 27, 1945, the organization came into existence in May 1946, as part of a post-WWII reconstruction plan, and it began financial operations on March 1, 1947. Accordingly, it is sometimes referred to as "a Bretton Woods institution", along with the Bank for International Settlements (BIS) and the World Bank, its twin organization. Together, these three institutions define the monetary policy shared by almost all countries with market economies. In order to gain access to IMF loans, BIS privilege, and strategic World Bank development loans, a country must normally agree to terms set forth by all three organizations.
Managing Directors of the IMF
A non-written rule establishes that the IMF's managing director must be European and the president of the World Bank from United States.
Criticisms
The role of the three Bretton Woods institutions has been controversial to many since the late Cold War period. Critics claim that IMF policy makers deliberately supported capitalist military dictatorships friendly to American and European corporations. Critics also claim that the IMF is generally apathetic or hostile to their views of democracy, human rights, and labor rights. These criticisms generated a controversy that helped spark the anti-globalization movement. Others claim the IMF has little power to democratize sovereign states, nor is that its stated objective: its advice is, however, intended to promote financial stability, which in turn may indirectly further democracy. Economic chaos is seldom a good starting point for a stable democracy.
Two criticisms from economists has been that the so called "Conditionalities", including Structural Adjustment Programmes, on which the financial aid is always bound, retard social stability and hence inhibit the IMF's targets. By discouraging the development of infrastructure and demanding austerity, the IMF Conditionalities restrict the economies of Third World nations to simply providing cheap labor and cheap raw materials to the G-7 nations, which critics claim is a disguised form of colonialism.
Adherents of supply-side economics generally find themselves in open disagreement with the IMF because typically the IMF advocates a Keynesian approach to economics. It may advocate currency devaluation so as to export more goods (which supply-siders see as inflationary). This is recommended by the IMF to the governments of poor nations with struggling economies. Supply-side economists claim these Keynesian IMF policies are destructive to economic prosperity, although many other economists disagree.
Complains are also directed toward International Monetary Fund gold reserve being undervalued. IMF stills peg gold at 35 dollars backing an ounce of gold. This was however broken by Nixon administration after it became obvious that there was far too much Eurodollars circulating than the gold worth at Fort Knox. The pegging is therefore unnecessary and only serve to limit the amount of money that the organization can use to help debt ridden countries.
That said, the IMF sometimes advocates "austerity programmes", increasing taxes even when the economy is weak, in order to generate government revenue and balance budget deficits, which is the opposite of Keynesian policy.
Most altermondialists, like ATTAC, believe that IMF interventions aggravate the poverty and the debts of Third World and developing countries.
Opposition to the IMF can be very fragmented. For instance advocates of Supply-side economics would in general regard the policies advocated by ATTAC to be little different in form to the ideas peddled by the IMF. In other words, they would see ATTAC tax and spend policies and the IMFs austerity policies as being fundamentally similar.
Argentina, which had been considered by the IMF to be a model country, experienced a serious economic crisis in 2001. This crisis created a movement of popular hatred against this institution within Argentina, with many blaming the IMF for the country's economic problems.
Another example of where IMF Structural Adjustment Programmes aggravated the problem was in Kenya. Before IMF got involved in the country, Kenya central bank oversaw all currency movement in and out of the country. IMF mandated that Kenya central bank had to allow easier currency movement. The adustment however resulted to very little foreign investment, but it allowed Kamlesh Manusuklal Damji Pattni with the help of corrupt government official to syphon out billions of Kenya shillings in what came to be known as Goldenberg scandal. The net result was the country ended up worse that before IMF got involved.
That the IMF intervenes only in countries that are already in dire financial straits has certainly hurt its reputation. The financial collapses it intervenes to help are the product of decades of mismanagement, but mismanagement that is often invisible to the outside world. These collapses tend to lead to years of economic difficulty, and since this period is often coextensive with IMF involvement in the economy it has in many cases quickly become associated with the malaise. Politicians have also long used the IMF as an easy target for blame when they themselves have erred, using nationalism and the poor public relations of the IMF to gain easy political points.
Overall the IMF success record is limited. While it was created to help stabilize the global economy, since 1980 over 100 countries have experienced a banking collapse that reduced GDP by four percent or more. Far more than any previous time in history. The considerable delay in IMF response to a crisis, and the fact that it tends to only respond to rather than prevent them, has led many economists to argue for reform.
Whatever the feelings people in the western world have for the IMF, a research by the Pew Research Center shows that more than 60 percent of Asians and 70 percent of Africans feel that the IMF and the World Bank have a positive effect on their country[1]. Such research has made proponents of IMF claim the IMF-critique misleading, as it would be difficult to speak of suffering if the sufferers don't feel hurt.
Quotes
- April 2000 -- IMF World Outlook Report
- "In the recent decades, nearly 20% of the world population has regressed. This is arguably one of the greatest economic failures of the 20th century."
- April 2001 -- former World Bank economist Joseph E. Stiglitz
- "When a nation is down and out, the IMF takes advantage and squeezes the last pound of blood out of them. They turn up the heat until, finally, the whole cauldron blows up. It has condemned people to death." (1 p.50-51)
- November 3, 1959 -- Che Guevara -- Interview for Radio Rivadavia of Argentina
- "If it is an element of liberation for Latin America, I believe that it should have demonstrated that. Until now, I have not been aware of any such demonstration. The IMF performs an enitrely different function: precisely that of ensuring that capital based outside of Latin America controls all of Latin America."
- "The interests of the IMF respresent the big international interests that today seem to be established and concentrated in Wall Street."
See also
External link
- International Monetary Fund website http://www.imf.org