The Controversial IMF

While visiting the IMF website I noticed the high concentration of power within the top high-income countries, otherwise known as the Group of Seven. In particular the United States has an immensely higher number of votes than any other country. After learning about the WTO and the World Bank I was skeptical of the IMF, having serious doubts about its motivations and its success in "crisis resolution." At first, I felt bad that I was so doubtful of an international organization in which our country is at the forefront, but after reading Wolf and Stiglitz I now realize that I was correct in questioning the Fund. According to Wolf, in terms of the IMF controversy, "It would take a book to address all the complaints made against it" (288). Wolf looks at the most popular criticisms of the IMF and then offers his personal anaylis of their accuracy, they include: (288)
1. Using a one-size fits all "policy of austerity" in all countries
2. Failure to better predict the risks of capital account liberalization
3. Its unsuccessful recomendations made during the Asian crisis
4. Creating "moral hazard" by "lending too much and bailing out the imprudent lenders who are its true masters, at the expense of innocent people in crisis-hit countries"
5. Being overly influenced by the self-interests of the Group of Seven

Interestingly, Wolf begins his section regarding the "Follies of the IMF" discussing the first charge and quoting Stiglitz. Wolf then goes on to critique Stiglitz saying that Stiglitz is right up until a certain point. He agrees with Stiglitz that the IMF is often "hidebound, arrogant, demanding, and incompetent" (281) but he also addresses the idea that the IMF is also sometimes the scapegoat (similar to when a doctor comes in too late and is "blamed for the pain" (290). According to Wolf, "The correct criticism of the Fund is that it is a hedgehog-that is, someone who knows just one big trick- pretending to be a fox- that is, a flexible master of many tricks" (289).

Perhaps the most obvious and the most disheartening point is the joke that Wolf presents that the letters IMF actually stand for "It's mostly fiscal" and sadly that is very true. It is all about money; the moral argument to give to the poor and let the risks flow from the poor to the rich is simply not a reality. The G7 has the power and they are going to act in their own self-interest, unless serious changes are made to the power structure allowing for more power and representation from lower-income countries.

Stiglitz offers some proposals of changes that could possible help to "ensure that debt burdens do not again grow to levels that are beyond the ability of poor countries to pay" (213). Stiglitz want's more of an emphasis to be put on overlending than just overborrowing and he wants "the poor country's taxpayers" to stop having to pay for "the rich country's lending mistakes" (217). I wholeheartedly agree.

Therefore, I am learning that this is once again a money vs. morality issue, and currently money is definitely winning.