Reinventing the IMF?

October 26, 2008

With the continued decline of financial markets and the threat of radical destablization throughout the Global South, I suspect that a consensus view that the IMF must step in to ensure the solvency of developing countries is already spreading quickly among the punditocracy and major news outlets.

The IMF (photo by Kyrion cc-by-nc-nd)

The IMF (photo by Kyrion cc-by-nc-nd)

Given the weakened condition of wealthy states and corporations, the IMF will play a major role in any sort of multilateral bailout. Indeed the crisis presents an opportunity for the Fund to resurrect itself after a number of very, very bad decisions made in the Neoliberal 1980’s and 90’s finally came home to roost, bringing shame upon the organization and its ideas.

The question is what kind of an IMF will we get this time around? The critical work of Joseph Stiglitz, Ngaire Woods, and others has provided ample evidence that the Fund’s proclivities for anti-poor policies were not an accident, but a systematic result of the organization’s structure and culture.

Since 2002 (when such positions first gained widespread traction), there has been much talk of reform – a trend which will no doubt continue well past November’s Global Financial Summit – but precious little action.

The U.S. and Europe still retain a ridiculous share of the voting power within the IMF, World Bank, and the WTO, virtually guaranteeing that they will strong arm through whatever solutions they deem fit. While Ambassadors, Trade Representatives, and their ilk may talk a good game about promoting equality through increased multilateral liberalization, the bottom line is that truly equitable trade will not come about without a substantial sacrifice by the traditional “Great Powers” of the West. The recent trend of the U.S. and E.U. pursuing absurd schemes to evade accountability and transparency by undermining global forums also belies any rhetoric of good will.

Does the IMF have what it takes to bring about a true shift in the underlying structures of the global financial system? I doubt it, but it will be revealing to see just how hard Dominique Strauss-Khan (if he holds onto his job now that he has officially held onto his job despite a sex scandal) and his colleagues will try.

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