everything's really ok

Brad DeLong delong at econ.Berkeley.EDU
Wed Oct 11 16:35:52 PDT 2000

>No, Brad. You're wrong. Nader does not say moral hazard is "the problem"
>with the IMF. And there is not "no distinction" between Nader's critique and
>the Meltzer critique.
>Nader says moral hazard is *a* problem with the IMF. (Are you saying moral
>hazard doesn't exist?) But he directs most rhetorical fire at IMF lending
>conditionalities, which he opposes wholesale. Meltzer wants *more*
>conditions. That is a distinction. Who's on the Scrooge side of that debate?

Actually, Meltzer doesn't want *more* conditions, he wants fewer loans. Ask Allan, and he'll tell you that it would be much better to have governments disciplined by a laissez-faire capital market than disciplined by an IMF imposing conditions.

The distinction appears scholastic to me: Nader doesn't want any IMF money to be loaned, but if it were to be loaned it should be loaned without conditions attached, but he doesn't want any IMF money to be loaned. Meltzer doesn't want any IMF money to be loaned, but if it were to be loaned it should be loaned with heavy conditions that mimic what the laissez-faire market would require governments to do.

In either case, it's the *opposite* of Stiglitz's and Sachs's (and my) criticisms of the IMF: we think it should loan more money for longer periods of time at lower interest rates with less conditionality...

>Why do you always ignore the issue of IMF conditions?

I don't always ignore the issue of IMF conditions. For example, in _Fortune_ on July 24, I wrote:

"The blizzard of commentary carries the message that the IMF, the World Bank, and the U.S Treasury made a bunch of bad mistakes. The U.S. Treasury demanded early repayment of its loans to Mexico, worsening Mexico's situation in order to show a large profit for the Treasury and score political points against the Alfonse D'Amatos and Jack Kemps who claimed that somehow U.S. taxpayers' money was being "wasted." The IMF closed down some but not all of Indonesia's insolvent banks, causing each Indonesian to fear that their bank was insolvent too and deepening the panic. The IMF demanded that fundamentally healthy East Asian economies showing budget surpluses raise taxes, thus shrinking aggregate demand further and deepening the recession.

"I agree with all three of these criticisms..."

So the only appropriate answer I can make to "why do you always ignore the issue of IMF conditions?" is "when did you stop beating your wife?"

Brad DeLong

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