Don’t Fear the IMF


CAMBRIDGE – The International Monetary Fund is, in many places, the organization that everybody loves to hate. According to some, the IMF is bad for the poor, women, economic stability, and the environmentJoseph Stiglitz, whose influence is amplified by his Nobel Prize, blames the IMF for causing and then worsening the economic crises it was called on to resolve. The IMF purportedly does so to save capitalists and bankers, not ordinary people. Though untrue, this belief does enormous harm and limits the potential good that the IMF can do.

For starters, consider how the world deals with refugee crises, such as Syria’s, and the way it deals with financial crises. As its name indicates, the United Nations High Commissioner for Refugees is a person, not an institution. He or she heads an “office,” not a full-fledged organization. This weakness is what forced German Chancellor Angela Merkel to bully her European Union partners into a more coherent response to the ongoing influx of asylum-seekers.

By contrast, the system to prevent and resolve financial crises is anchored by a full-fledged institution: the IMF. It may not be perfect, but, compared to areas such as refugees, human rights, or the environment, it is light-years ahead.

It is easy to misunderstand what the IMF does. The bulk of its efforts are dedicated to crisis prevention. As Franklin D. Roosevelt said at the 1944 Bretton Woods Conference, where the IMF and the World Bank were established, “Economic diseases are highly communicable. It follows, therefore, that the economic health of every country is a proper matter of concern to all its neighbors, near and distant.”

That is why the 44 countries in attendance, and the 188 that now belong to the IMF, agreed to “consult and agree on international monetary changes which affect each other… and they should assist each other to overcome short-term exchange difficulties.” Operationally, this is expressed in so-called Article IV consultations. These formal policy discussions between the IMF and member governments, typically carried out annually, are written up, reviewed by the Fund’s Board of Executive Directors (representing all 188 governments), and published for anyone to read online. This is a standard of collective surveillance and transparency to which organizations addressing other issues should aspire.