Five reasons why the IMF should be scrapped
Share
Rather than engaging in the bizarre debate about who should lead the International Monetary Fund (IMF), the organisation should be abolished.
Not only does it do more harm than good in the world economy but it is also profoundly anti-democratic. Here are five reasons why it should go:
* It is discriminatory. The IMF has functioned more like a medieval court than a modern organisation. Owing to a long-standing agreement with America the organisation has been headed by a European, while the World Bank, its sister institution, is headed by an American. Candidates have never been chosen by merit.
Even the current discussion of choosing an emerging economy candidate is about doing an alternative stitch-up.
The candidate will be chosen in a backroom deal between a few top politicians rather than going through a transparent or democratic process.
The way the IMF is set up gives America a veto on any action of which it disapproves. Important decisions require an 85% supermajority and America holds 16.7% of the votes.
The quota system, by which member states receive votes according to the amount of money they contribute to the fund, is also undemocratic. It is in effect giving rich countries more votes than poor ones.
The organisation has also discriminated in the way it has treated developed and developing economies.
For example, it gave the developed world considerable leeway to pursue fiscal stimulus in the period following the 2008 collapse of Lehman Brothers.
In contrast, during the 1997-8 Asian financial crisis it insisted on immediate austerity. If anything, the poorer countries should be given more leeway than the rich ones.
* It is unsure of its role. The organisation was conceived in 1944 as a way of helping to manage a system of fixed exchange rates between currencies. Since the system collapsed in the early 1970s, with the move to floating exchange rates, it has tried to adapt to a fundamentally different environment.
Until the 2008 crisis the focus was largely, although not exclusively, on dealing with the developing world. More recently it has concentrated on the eurozone. Yet there has been little public debate about its exact role. (Strategy blog continues below)
* It prefers stability over growth. The overwhelming emphasis of the IMF is on promoting short-term stability rather than long-term growth. In late 2008, for example, it was part of the drive to restore stability to the global financial system. However, this was done by evading the fundamental weakness of the global economy.
In the subsequent two years there has been little attempt to address weak economic growth in the west or international economic imbalances. As a result the crisis is likely to re-emerge in a new and more virulent form in the future.
Indeed much recent financial history can be understood in those terms. One crisis has been suppressed at the expense of creating the conditions for the next one.
For example, loose monetary policy in America in the aftermath of the 2000 stockmarket falls helped create the conditions for the 2008 crisis. Since then the western nations have expanded credit as a way of tacking a crisis triggered by excess credit.
* The IMF bails out errant financial institutions. The overwhelming emphasis of IMF bailout programmes is on rescuing troubled institutions rather than helping national economies return to growth. In that sense it can be seen as a kind of institutional welfare programme. This is in contrast to the way the western media often presents bail-outs as almost altruistic operations for the benefit of poorer countries.
* It helps absolve politicians of their responsibility. One reason politicians often opt for IMF bail-outs in times of trouble is that it provides them with a way of evading responsibility for their actions. They can claim that they are being forced to impose austerity by an external institution rather as a result of their own policies. The abolition of the IMF would make their culpability more transparent.
To receive more relevant articles like this one, why not sign up to our briefings and breaking alerts by clicking here and Follow @fundweb
Readers' comments (3)
Terence P O'Halloran | 26 May 2011 3:33 pm
At last some common sense. Will anyone listen to reason, truth? Doubtful.
Unsuitable or offensive? Report this comment
J.P. Katigbak | 30 May 2011 2:10 pm
Daniel Ben Ami's view in promoting the idea of abolishing the International Monetary Fund would be one of the most controversial in his career as a financial and economics journalist because he doesn't mention why economic growth at its own expense and the continual impact of secularism on society at large are two of the main concerns currently facing various developed and devloping countries around the world.
I also suspect that imposing liberalism upon people who do not agree with the advocates of what I call the "Libertarian-Marxist Doctrine". I doubt the Libertarian-Marxist sort of idea would work that much anywhere. So do the imposition of the idea of Democracy upon us.
I believe it is the Democratic system that leaves itself unchecked - and vunerable to ideological temptations that result in rampant secularism, damaging corruption, unmitigated mob rule, ungratefulness, the decline in respect to traditional institutions, and many other negative factors. Those factors can actually translate into political instability, social unrest and economic mismanagement that render this kind of system of governance messy and useless.
I sincerely doubt that the Democratic system itself would help solve political and socio-economic problems. The ideologues who are promoting the "Libertarian-Marxist" ideology are doing a great disservice to ordinary people around the world such as me by ignoring the facts about the really unintended consequences of the Democratic governance system (of the unhindered kind, that is) that has flaws that need to be understandable by us!
There should have the Rule-of-Law that can take care of the things that matter to us right now, something the Democratic system of governance cannot do. Therefore, it is neccessary to choose the kind of system of governance carefully before making the case for reforms. There are systems of public governance that need to be considered because they are very different to that of the "Libertarian-Marxist" Democratic governance system: One is a Constitutional Republic; another is a Constitutional Monarchy.
It is time to be considerate about the need for respecting the traditional institutions found in Constitutional Monarchies. But, please, do not let the Marxist ideologues destroy important insitutions of the Rule of Law, because if we do not stop them, chaos and terror could set in and reign like idiots in the corridors of power. There is no holding back in preventing those Marxist/secularist/Atheist ideologues from seizing power before they serve in government offices.
It is time to roll up the sleeves in challenging the idea of "unfettered" Democratic governance system.
Unsuitable or offensive? Report this comment
Anonymous | 1 Jun 2011 0:14 am
And another thing, it is far from reality to prove the point that the Democratic system of governance actually works in solving political and socio-economic problems facing different countries around the world.
Constitutional Republicanism is just fine, yet it has to pass the test in terms of better governance, good values, social unity, political & economic stability, respect for traditional insitutions, and other important aspects. We really need to respect the Constitutional Monarchic system of governance as an institution, not denigrating it, because it still does exist in various countries.
It is time to do what is right for us, as ordinary people, to make the case for the stregnthening the rule of law and minimizing the effects of continual secularism on society as a whole, especially during a series of meaningful discussions.
Unsuitable or offensive? Report this comment