I think that the answer to your questions is an expansion of my point: that "Stan Fischer is a lot smarter than Montagu Norman... but Lauch Faircloth is not."
I think that our policy toward Russia is insane. I think that having spent $4 trillion in the generation before 1990 buying weapons to defend ourselves from the Commies, that any sane U.S. government would have been willing to spend a tenth that amount--$400 billion--on a Marshall Plan for the former Soviet Union. I think that a hundred years from now historians will judge that the greatest crime committed by Ronald Reagan was that his tax-cut rhetoric robbed the U.S. government of the ability to do the right thing at the end of the Cold War.
As to why the IMF responded to Asian deflation with austerity packages, I wish that the IMF had loaned a lot more money to East Asia on easier terms. But I don't see how it could have done so, at least not without a mammoth injection of new capital. And that is nowhere on the horizon.
I asked my patron (and the former chair of my dissertation committee Lawrence Summers) this same question: why isn't the IMF loaning East Asian countries twice as much for twice as long at lower interest rates with less conditionality?
His answer had two parts--
(i) That I must remember Mexico in 1995: how the IMF and the U.S. Treasury had tried to do more, and had been pulled up short by others. (I do remember Newt Gingrich trying to make administration acceptance of the Balanced Budget Amendment a precondition for even bringing up aid to Mexico for a vote; I do remember the British and German Executive Directors of the IMF registering strong opposition to the Mexican loan package; I do remember Principal Deputy Managing Director Fischer stating at a San Francisco Federal Reserve conference that most of the 6% fall in Mexican real GDP in 1995-1996 could have been avoided had the peso support package been the size that the U.S. Treasury and the IMF had originally envisioned.)
(ii) That, as he politely put it, "neither your friends on the left nor your friends on the right want to see a larger, better-funded IMF. Where is the political coalition to support increasing the IMF's resources going to come from?"
The IMF is not a central bank: it cannot create large amounts of purchasing power to pull countries (or the world) out of global recession. It can provide temporary injections of liquidity to (somewhat) soften the trauma when the world economy (and its own government) have just creamed some developing economy. But a kinder, gentler IMF would need to be a better-funded IMF.
And at the moment we are caught between Lauch Faircloth (who doesn't want to see a kinder, gentler, refunded IMF because such an IMF would reduce the amount by which East Asian workers suffer), and Ralph Nader (who doesn't want to see a kinder, gentler, refunded IMF because such an IMF would reduce the amount by which New York-based investors suffer). Moreover, we have people at the head of the Bank of Japan and the European Central Bank who may be as clueless as Montagu Norman was...
>More
>broadly, why has the IMF been pushing deflationary policies - not just
>fiscal contraction, but the encouraging 120 poor countries to compete for
>the privilege of exporting to 20 rich ones - on the whole damn world at
>least since Mexico's 1982 default?
>
Exports to the first world are the best way to get the purchasing power to buy the industrial capital goods that embody so much modern technology--and those countries that have exported and used the proceeds to boost their investment rates have done much, much better than other developing countries over the past half century.
Of course, there are those developing countries that have boosted exports and used the proceeds to pay for elite vacations in Davos. Those have not done so well...
And most developing countries have not gone for export promotion: export promotion (usually) requires a relatively low exchange rate. The elite is much happier with controls on imports that keep the non-elite from buying from abroad, with the high exchange rate controls on imports generate, and with the ample ability to purchase foreign luxuries that a high exchange rate allows...
I agree that if the developing world as a whole actually listened to what the IMF economists said in their Article IV consultations--that if all developing countries tried to follow export-led development strategies--we would see exactly how elastic first-world demand for third-world imports is. But there are powerful domestic political reasons why only East Asia and Southwestern Europe undertook the export-led road to growth in the second half of the twentieth century. Those reasons remain. There are many places in the world today where the state is not an executive committee for managing the affairs of the business class, and there is no reason to expect economic growth in such places...
Brad De Long