International Monetary Fund

:This page is about the International Monetary Fund; IMF can also mean the International Metalworkers' Federation, a global union federation.

Criticism

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.

Related Topics:
Cold War - Military dictatorship - Corporation - Apathetic - Democracy - Human rights - Labor rights - Anti-globalization movement

~ ~ ~ ~ ~ ~ ~ ~ ~ ~

Two criticisms from economists have been that financial aid is always bound to so-called "Conditionalities", including Structural Adjustment Programs. Conditionalities, it is claimed, retard social stability and hence inhibit the stated goals of the IMF.

Related Topics:
Conditionalities - Structural Adjustment Program

~ ~ ~ ~ ~ ~ ~ ~ ~ ~

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.

Related Topics:
Keynesian - Supply-side economics - Devaluation - Inflationary - 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. At its inception in 1945, the IMF pegged gold at 35 dollars per troy ounce of gold. In 1973 the Nixon administration lifted the fixed asset value of gold in favour of a world market price. Hence the fixed exchange rates of currencies tied to gold were switched to a floating rate, also based on market price and exchange. This largely came about because Petrodollars outside the United States were more than could be backed by the gold at Fort Knox under the fixed exchange rate system. The fixed rate system only served to limit the amount of assistance the organization could use to help debt-ridden countries.

Related Topics:
International Monetary Fund gold reserve - Floating rate - Petrodollar - Fort Knox

~ ~ ~ ~ ~ ~ ~ ~ ~ ~

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. These policies were critisised by Joseph E. Stiglitz, former chief economist at the World Bank, in his book Globalization_and_Its_Discontents. He argued that by converting to a more Monertarist aproach, the fund was no longer had a valid purpose as it was designed to provide funds for countries to carry out Keynsianesque reflations.

Related Topics:
Taxes - Budget deficit - Globalization_and_Its_Discontents

~ ~ ~ ~ ~ ~ ~ ~ ~ ~

Most altermondialists, like ATTAC, believe that IMF interventions aggravate the poverty and the debts of Third World and developing countries. According to the analysis by Yves Engler, the IMF is considered to be responsible for worsening or creating famine in Malawi (2002), Ethiopia (2003) and Niger (2005). http://www.zmag.org/content/showarticle.cfm?SectionID=2&ItemID=8494

Related Topics:
Altermondialists - ATTAC - Poverty - Debt - Third World - Developing countries - Yves Engler - Famine - Malawi - 2002 - Ethiopia - 2003 - Niger - 2005

~ ~ ~ ~ ~ ~ ~ ~ ~ ~

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 in its compliance to policy proposals by the Bretton Woods institutions, experienced a catastrophic economic crisis in 2001, generally believed to have been caused by IMF-induced budget restrictions — which undercut the government's ability to sustain national infrastructure even in crucial areas such as health, education, and security — and privatization of strategically vital national resources. The crisis added to widespread hatred of this institution in Argentina and other South American countries, with many blaming the IMF for the region's economic problems http://www.serendipity.li/hr/imf_and_dollar_system.htm. The current — as of 2005 — trend towards moderate left-wing governments in the region and a growing concern with the development of a regional economic policy largely independent of big business pressures can be seen as a result, at least partially of this crisis.

Related Topics:
Argentina - 2001 - Privatization

~ ~ ~ ~ ~ ~ ~ ~ ~ ~

Another example of where IMF Structural Adjustment Programmes aggravated the problem was in Kenya. Before IMF got involved in the country, the 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. However, the adjustment resulted in very little foreign investment, but allowed Kamlesh Manusuklal Damji Pattni, with the help of corrupt government officials, to syphon out billions of Kenya shillings in what came to be known as the Goldenberg scandal, leaving the country in a state worse than that which it was in before the IMF reforms were implemented.

Related Topics:
Kenya - Kamlesh Manusuklal Damji Pattni - Goldenberg scandal

~ ~ ~ ~ ~ ~ ~ ~ ~ ~

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 at 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, 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 http://people-press.org/reports/pdf/185topline.pdf. 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.

Related Topics:
Pew Research Center - World Bank

~ ~ ~ ~ ~ ~ ~ ~ ~ ~

The documentary Life and Debt deals with the IMF's policies' influence on Jamaica and its economy, from a critical point of view.

Related Topics:
Life and Debt - Jamaica

~ ~ ~ ~ ~ ~ ~ ~ ~ ~

.

~ ~ ~ ~ ~ ~ ~ ~ ~ ~