By Amitabh Pal on May 27, 2011
Even with all the attention on the International Monetary Fund in the wake of Dominique Strauss-Kahn, there’s been very little focus on the institution itself. The world needs a drastic overhaul of the organization, not just a change in the leadership.
The root problem here is that the IMF does the bidding of Wall Street, which through the U.S. treasury, controls the policies that the fund dictates to the planet.
The IMF has changed its mandate “from serving global economic interests to serving the interests of global finance,” Nobel laureate and former World Bank chief economist Joseph Stiglitz wrote in his 2002 book “Globalization and Its Discontents.” “Capital market liberalization may not have contributed to global economic stability, but it did open up vast new markets for Wall Street.”
This mission to act at the behest of Wall Street has made the IMF foist disastrous policies on innumerable countries, contributing to the Asian financial crisis in the late 1990s and the current global Great Recession. Nations that have emerged relatively unscathed have done so by going their own route.
The countries that have done best [in recent years, such as China and India] are the ones that never bought into the IMF-Washington Consensus policies, Stiglitz told me in a 2009 interview.
Although it has modified its policy prescriptions at the margins, the IMF’s core recommendations remain the same.
The IMF is still playing its traditional role of applying the medieval economic medicine of bleeding the patient, writes Mark Weisbrot, co-director of the Center for Economic and Policy Research.
The impact of such therapy has been severely negative, especially in Europe, where the IMF has reasserted control in the aftermath of the financial crisis. The result: “In Latvia, the IMF presided over an Argentine-style recession that set a world historical record for the worst two-year loss of output (about 25 percent)—a complete disaster,” Weisbrot points out.
But instead of debating the changes that need to be made at the IMF, the media has instead been bombarding us with constant coverage of Strauss-Kahns arrest or breathless speculation about his replacement. A typical example is a recent NPR story gushing about a possible contender, French Finance Minister Christine Lagarde, due to her ease with American culture.
To their credit, Brazil, Russia, India, China, and South Africa have gotten together and have announced that they will not this time consent to the traditional, colonial prerogative of a European leading the IMF. The countries representatives at the IMF have rightly pointed out in a joint statement that since the global recession has been a creation of the West, this has underscored the urgency of reforming international financial institutions so as to reflect the growing role of developing countries in the world economy.
But if we want to make certain that the world doesn’t further suffer as a result of bad economic advice, we have to go much further than a change at the top. The IMF as an entity needs to be radically transformed.
If you liked this article by Amitabh Pal, the managing editor of The Progressive magazine, please check out his article entitled "Obama’s Actions Belie His Middle East Speech."
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