International Monetary Fund
From open-encyclopedia.com - the free encyclopedia.
The International Monetary Fund (IMF) is an international organization responsible for managing the global financial system and for providing loans to its member states to help alleviate balance of payments problems. Part of its mission is to help countries that experience serious economic difficulties. In return, the countries who are helped are obliged to launch certain "reforms," such as privatizations of government enterprises.
The IMF describes itself as: "an organization of 184 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty".
| Contents |
History and Background
Agreement for its creation came at the United Nations-sponsored Monetary and Financial Conference in Bretton Woods, New Hampshire, United States, on July 22, 1944. The Articles of the IMF Agreement came into force on December 27, 1945, the organization came into existence in May 1946, as part of a post-WWII reconstruction plan, and it began financial operations on March 1, 1947. Accordingly, it is sometimes referred to as "a Bretton Woods institution", along with the Bank for International Settlements (BIS) and the World Bank, its twin organization. Together, these three institutions define the monetary policy shared by almost all countries with market economies. In order to gain access to IMF loans, BIS privilege, and strategic World Bank development loans, a country must normally agree to terms set forth by all three organizations.
Managing Directors of the IMF
An unwritten rule establishes that the IMF's managing director must be European and the president of the World Bank from United States.
Criticisms
The role of the three Bretton Woods institutions has been controversial to many since the late Cold War period. Critics claim that IMF policy makers deliberately supported capitalist military dictatorships friendly to American and European corporations. Critics also claim that the IMF is generally apathetic or hostile to their views of democracy, human rights, and labor rights. These criticisms generated a controversy that helped spark the anti-globalization movement. Others claim the IMF has little power to democratize sovereign states, nor is that its stated objective: to advise and promote financial stability. Arguments in favor of the IMF say that economic stability is a precursor to democracy.
Two criticisms from economists have been that financial aid is always bound to so-called "Conditionalities", including Structural Adjustment Programmes. Conditionalities, it is claimed, retard social stability and hence inhibit the stated goals of the IMF. By discouraging the development of infrastructure and demanding austerity, critics allege, the IMF Conditionalities restrict the economies of Third World nations to simply providing cheap labor and cheap raw materials to the G-7 nations: veiled colonialism.
Typically the IMF and its supporters advocate a Keynesian approach. As such, adherents of supply-side economics generally find themselves in open disagreement with the IMF. The IMF frequently advocates currency devaluation, criticized by proponents of supply-side economics as inflationary). Secondly they link higher taxes under "austerity programmes" with economic contraction.
Currency devaluation is recommended by the IMF to the governments of poor nations with struggling economies. Supply-side economists claim these Keynesian IMF policies are destructive to economic prosperity, although many other economists disagree.
Complaints are also directed toward International Monetary Fund gold reserve being undervalued. IMF stills peg gold at 35 dollars backing an ounce of gold. This was however broken by Nixon administration after it became obvious that there was far too many Eurodollars circulating than could be back by the gold at Fort Knox. The pegging is therefore unnecessary and only serves to limit the amount of money that the organization can use to help debt ridden countries.
That said, the IMF sometimes advocates "austerity programmes", increasing taxes even when the economy is weak, in order to generate government revenue and balance budget deficits, which is the opposite of Keynesian policy.
Most altermondialists, like ATTAC, believe that IMF interventions aggravate the poverty and the debts of Third World and developing countries.
Opposition to the IMF can be very fragmented. For instance advocates of Supply-side economics would in general regard the policies advocated by ATTAC to be little different in form to the ideas peddled by the IMF. In other words, they would see ATTAC tax and spend policies and the IMFs austerity policies as being fundamentally similar.
Argentina, which had been considered by the IMF to be a model country, experienced a serious economic crisis in 2001. This crisis created a movement of popular hatred against this institution within Argentina, with many blaming the IMF for the country's economic problems [1].
Another example of where IMF Structural Adjustment Programmes aggravated the problem was in Kenya. Before IMF got involved in the country, Kenya central bank oversaw all currency movement in and out of the country. IMF mandated that Kenya central bank had to allow easier currency movement. The adustment however resulted to very little foreign investment, but it allowed Kamlesh Manusuklal Damji Pattni with the help of corrupt government official to syphon out billions of Kenya shillings in what came to be known as Goldenberg scandal. The net result was the country ended up worse that before IMF got involved.
That the IMF intervenes only in countries that are already in dire financial straits has certainly hurt its reputation. The financial collapses it intervenes to help are the product of decades of mismanagement, but mismanagement that is often invisible to the outside world. These collapses tend to lead to years of economic difficulty, and since this period is often coextensive with IMF involvement in the economy it has in many cases quickly become associated with the malaise. Politicians have also long used the IMF as an easy target for blame when they themselves have erred, using nationalism and the poor public relations of the IMF to gain easy political points.
Overall the IMF success record is limited. While it was created to help stabilize the global economy, since 1980 over 100 countries have experienced a banking collapse that reduced GDP by four percent or more. Far more than any previous time in history. The considerable delay in IMF response to a crisis, and the fact that it tends to only respond to rather than prevent them, has led many economists to argue for reform.
Whatever the feelings people in the western world have for the IMF, a research by the Pew Research Center shows that more than 60 percent of Asians and 70 percent of Africans feel that the IMF and the World Bank have a positive effect on their country[2]. Such research has made proponents of IMF claim the IMF-critique misleading, as it would be difficult to speak of suffering if the sufferers don't feel hurt.
There is a great documentary featuring the IMF's effects upon the economy of Jamaica, "life and Debt"
See also
External link
- International Monetary Fund website http://www.imf.org
- How the IMF Props Up the Dollar System http://www.serendipity.li/hr/imf_and_dollar_system.htm
References
de:Internationaler Währungsfonds es:Fondo Monetario Internacional eo:Internacia Mona Fonduso fr:Fonds monétaire international nl:Internationaal Monetair Fonds ja:国際通貨基金 pt:Fundo Monetário Internacional he:קרן_המטבע_×”×‘×™× ×œ×ומית
