Brad De Long delong at econ.Berkeley.EDU
Sat Jul 11 20:43:05 PDT 1998

>I thought the real problem with the IMF is that it is not keeping
>Indonesia and the rest of East Asia out of depression. And with the report
>of a worldwide collapse of prices in raw materials and the like as a
>result of the Asia crisis (good story in the NYT today), it seems to me
>that the IMF is doing little to thwart deepening catastrophe. Even a
>resumption of capital inflows seems to be predicated on massive
>concessions by the Asian working class, e.g., new rights to terminate
>workers in South Korea.
>best, rakesh

And some concessions from the business class to foreign investors as well--better accounting and fewer institutional conflicts-of-interest in corporate governance.

The IMF sees its mission as providing bridge loans so that countries can lengthen the periods of adjustment needed as they strive to put in place policies to generate export surpluses and reassure foreign capital. They hope that lengthening the period of "adjustment" is a good thing for the country that they are lending too--but the quid-pro-quo they require is that the "adjustment" be complete and thorough (both because they are strongly committed to the neo-liberal vision and because they think they need their money back for the next crisis).

>From the IMF's perspective it is doing all that it can--I don't think that
it has many resources left to loan to anyone else. I think that they are not doing enough--they should be loaning twice as much money for twice as long at lower interest rates with fewer conditions.

However, as anyone who hangs around Washington will point out, the political tides on both left and right are running strongly against any expansion of the IMF so that it can play a less classical-orthodox and more liberal-Keynesian role in dealing with financial crises...

Combine East Asia with Japan's depression, with what looks to be the rapidly-approaching tunnel-at-the-end-of-the-light in Russia, and with a new European central bank committed at its beginning to what look like strongly deflationary policies, and it is beginning to look really scary...

Brad DeLong

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