is the IMF nothing more than a scapegoat?

The IMF was conceived in July 1944 after World War II as a way to create international economic cooperation and regulate currency. It was formally established in the latter part of 1945 when 29 members signed the articles of agreement. In 1947, France became the first country to borrow from the IMF. By the 1950’s the IMF was growing due to African countries applying for membership. Until 1971, the world followed the Bretton Woods System which allowed countries to keep their currencies pegged against the U.S. currency in terms of gold. According to the IMF website, this system was known as the par value system and it worked until 1971 when the U.S.” suspended the convertibility of the dollar (and dollar reserves held by other governments) into gold.” (IMF.org) Since then, the IMF has loaned thousands upon thousands of dollars to countries in need. So why is the IMF under so much heat? Why are many viewing the role of the IMF as one that is unnecessary? Is the IMF really just a “scapegoat”?

Well, in the article I read titled The IMF Strikes Back by Kenneth Rogoff, Rogoff outlines the four most common arguments against the IMF. For countries in dire need of cash, the IMF tends to lay down “harsh fiscal austerity” (Rogoff) The fund also encourages reckless investments made by financiers. The advice that the IMF lends to countries tends to only intensify the already severe economic conditions. Lastly the fund, according to the article, pushes “countries to open themselves up to volatile and destabilizing flows of foreign capital” (Rogoff). However, up until 1971 the IMF helped out the first world, countries who don’t particularly need help.

There is something that really struck an interest in the article. The article states that all 184 member countries could decide to offer grants to countries in need rather than a loan. This means that those countries receiving the grant would never have to repay it. Furthermore this means member countries that are more economically developed (i.e. the United States) would need to constantly give money to the IMF so the IMF could in turn give to those countries in need. So at that rate, why is the IMF even needed? Countries in need could just address the international community directly rather than addressing the IMF. It almost makes the IMF an invalid institution if the loans were just converted into grants. Lets say the UK was ever in need of borrowing from the IMF again, instead of going to the IMF just go to the U.S; one of the main contributors to the IMF, and ask them for a grant. It cuts out the middle man. Essentially that is all the IMF is-- a political machine that U.S. uses a their middle man.

There is a possibility that the IMF could be one of the most powerful non-state institutions in the world effecting the economies of more than 180 countries. Countries are supposed to use the IMF as the extremely last resort however it is more common for a country to just get a loan from the IMF. The IMF has become more of an institution were larger more developed countries use it as a forum to push their economical policies on the less developed world. How can the IMF state that their macroeconomic focus will help developing nations find a balance even when there is a need to find alternate methods to ensure that a country's domestic markets still thrive when enhanced aid materializes yet the IMF’s own economic policies are sometimes not the best for a country? (REFER to my blog on Zimbabwe). I read in a textbook for my Global Political Economy class, that the “newly industrializing countries of East and South-East Asia” who had been success stories inadvertently caused the Asian Financial Crisis in the late 1990’s. "The IMF praised its strategy to ensure macroeconomic adjustment but at the very moment the baht was nosediving”.

The Asian Financial Crisis may have not been directly caused by the IMF’s lack of good advice but it was certainly part of the problem. Furthermore, the IMF has policies that end up eliminating jobs, reducing employment; cut back government programs in turn driving up food prices all while increasing speculation. Is that not a little contradictory to what the IMF is supposed to do: increase international stability? It seems to me that the IMF's so called macroeconomic policies are nothing more than the western world's way (mainly the U.S.) of pushing their political and economic ideology on the underdeveloped world.

In my opinion, the IMF is nothing more than a “scapegoat” where countries like the U.S. exert power over other countries. In was done in 1976 when the British applied for a loan from the IMF. The U.S. pushed harsh conditions for the loan to be approved which the British did not like because they were far to the left and a republican was in office in the U.S. at the time. This shows that since the U.S. holds more power in the IMF they are able to exert their political, economic or social power. Right now the IMF is just cradling the needs of first world countries to exert their force. It is almost like a popularity contest. If the IMF had more reform and stability it might actually help the international community in the way it is supposed to and do more than it already is.

I honestly think that the grant idea is an excellent way to boost the underdeveloped world and help the poorest nations in the world like those on the continent of Africa become more developed and actually give them the tools they need to compete in a global economy. If the IMF offered grants rather than loans to countries there would never be debt to pay back. The countries who borrow from the IMF wouldn't be bogged down with lengthy loan terms with absurd interest rates. Furthermore, those countries would be able to use the loans to finance infrastructure development and economic growth rather than just being scrutinized and tied down to strict rules that are attached to the loan. The IMF has fallen into the guise of being this helpful institution. However, I have seen it do more harm than good.