each year 11m Third World children under age 5 die*

Brad De Long delong at econ.Berkeley.EDU
Thu Jun 4 11:47:50 PDT 1998

Les Schaffer wrote:
>i was just last night reading through my Baumol and Blinder (B&B) --
>now getting hauled over the coals on PEN-L -- that the idea for the
>IMF was established during the Bretton Woods talks to smooth out the
>problems of int'l currency exchange after WWII. my question is: was
>the initial concept of an IMF a good idea gone bad (imperial,
>hegemonic, whatever) or was it the wrong solution from the start?

Well, if the IMF isn't there, then Michael Manley hits the wall--needs $100 million next week or imports of food and oil shut down--a lot earlier.

The IMF views itself as giving countries an extra two or three years during which they can make the result of hitting the wall less painful--make the cutback in imports and the loss of incomes gradual. The IMF points out that it has to get its money *back* for the next crisis, and that getting its money *back* has to be its first priority. And the IMF says that it is very happy to be a lightning rod--that one of its functions is to take the blame for changes in policy.

But--at least from the IMF's perspective--to say that it is a bad institution is to say that fire trucks are bad because they are always found near fires and, anyway, their hoses don't have enough pressure.

I think that the IMF is too smug. It has often been ideologically rigid (and insisted on policies that were destructive and that weren't needed in order to make sure that it gets its money back). It has never given a high enough priority to getting reserves so that it can operate on as large a scale as it needs to--today, for example, it has bet its future on East Asia and has no extra reserves in case another crisis (Russia? South Africa? Latin America? the Euro?) breaks out in the near future. It has never been willing enough to the G-7 and saying that this is a case in which the G-7 should forgive debts rather than insist that the IMF try to find a solution that will simply restructure them.

I want a kinder, gentler IMF with three times the resources and with the authority and inclination to recommend large-scale debt forgiveness to the G-7...

Of course, Trent Lott thinks that the IMF is a commie organization run by a French socialist that disrupts the workings of the free market, and should be annihilated. So you and Trent Lott agree that the IMF as constituted is bad--and that we would be better off without it


Brad DeLong

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