The IMF must now learn to be cruel to be kind rosemary righter
The truth is out at long last. The International Monetary Fund — accused by generations of professional do-gooders of uncaringly inflicting untold suffering on the world’s poor in the name of free market orthodoxy — is an old softie.
Far from exerting too much pressure on delinquent borrowers, it exerts too little. Instead of insisting on a “candid stock-taking” when the recovery programmes its money (our money) is supposed to be supporting are evidently going off the rails, its staff bend over backwards to find excuses for failure — and even to avoid admitting that anything is seriously wrong.
So good money is poured after bad; the typical IMF reaction to “policy slippages” — bureaucratese for money down the drain or stashed in some kleptocratic dictator’s Swiss bank account — is to sigh, shake its corporate head, and come up with a fresh wadge of cash. In theory, the IMF is in the business of bridging loans to tide countries over balance-of-payments difficulties. In practice, it has become the “old dope peddler” of international finance. No fewer than 44 countries, by no means all of them among the desperately poor, are now “repeat borrowers”, in some cases for decades — they are hooked on the IMF drug. A quarter of IMF lending last year went to repeat offenders. As the delicately worded report I have just been reading puts it, “the expectations of continued IMF financial support may have reduced incentives for countries to act decisively”. What, after all, comes easier than continuing in the bad old ways, while blaming “IMF austerity ” for the mess that is of your own making? No wonder that, whatever the world’ s more irresponsible and corrupt rulers tell their people, their hearts belong to Daddy. He treats them so well.
Daddy has now been told to get tough. Not by some rabid right-wing Washington think-tank, but by the new Independent Evaluation Office (IEO), which was set up mainly in response to the liberal critics who wanted its arrogance and errors exposed to the world’s scandalised gaze. They were right about letting more light in on the IMF; but this first IEO report, published on the eve of next week’s annual World Bank/IMF meeting, demonstrates just how wrong they have been about everything else.
The report depicts the rake’s progress whereby the IMF comes under international pressure, often for political motives, to lend to countries in crisis, even when their governments have so little serious intention of digging themselves out of trouble “that the probability of success is low”. Other lenders, including private banks, take an IMF agreement to lend as a “ seal of approval”. For fear of upsetting a whole row of applecarts, the IMF then lends more to avert default. This report draws its detailed examples from three serial borrowers, Pakistan, the Philippines and Senegal, but it could equally pertinently have cited the IMF’s failure to blow the whistle on Argentina.
It concludes by asking the IMF’s executive board to set rules which would trigger automatic “due diligence” vetting — in other words, to cut off funds to governments which treat IMF loans as a free lunch. That is probably the only way to stop the rot, because the West is terrified of appearing “ anti-poverty” and the debtors hang together for fear of hanging separately.
The anti-capitalist, dump-the-debt lobbies will hate this report. So will their new hero Joseph Stiglitz, the World Bank chief economist turned conspiracy theorist who got last year’s Nobel Prize in Economics for a book on Globalisation and its Discontents that, outrageously, all but equated IMF-imposed belt-tightening with Hitler’s “Final Solution”. Stiglitz’s own solution is to give the IMF’s chronic debtors, particularly Africa’s, more votes on its board. That is just how not to help the poor, who end up paying for the profligacy of the politicians they seldom get the chance to elect.
The IMF has to be crueller to be kind. So does the World Bank, which is on the way to being ruined by political correctness. Step forward next week, Gordon Brown, to back tough love. If you dare.
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