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Sunday, September 29, 2002


This is the byline of a piece in today's Toronto star, and as it points out if the IMF had to be created today from scratch, there is no guarantee that in the current state of things the US would be supporting it.

If these institutions did not exist, we would have to create them. The bigger worry is that if we had to create them today, the United States might not support them. Rather than campaigning to abolish such institutions, which are essential to the functioning of the world economy, demonstrators should be campaigning to make them more effective — and their campaigns should be targeted as well at the governments of the rich countries, which run these institutions, and not simply at the institutions themselves.

The reality is that without such institutions, the billions of people who live in poverty in the developing world will not be lifted out of poverty. Campaigning against the very idea of globalization makes no sense. But campaigning for a better kind of globalization, one that balances market forces, the environment, cultural identity and social equity through better functioning institutions does.The last time the world rejected globalization, we ended up with the Great Depression of the 1930s, the horrors of World War II, and the terror of the Cold War that followed. The creation of the United Nations, and its sister institutions — including the IMF, the World Bank and the precursor to the World Trade Organization, the General Agreement on Tariffs and Trades — were acts of idealism designed to prevent a return to the anti-globalization of the 1930s.
Source: Toronto Star

Looking at all the angry demonstrators it is hard to remember the origins of the Fund in the depression economics of the 1930's. Obviously - as critics are quick to point out - mistakes too numerous to mention have been made. But this doesn't invalidate the objective of the IMF, to provide a more stable world economic order and to facilitate changes where capital arrives to capital starved. Remember it is capital, not labour, which is lacking in the Less Developed Countries.

The preoccupying problem is not that the IMF has - perhaps too often - got it wrong. So have we all (this is the point the majority of IMF critics seem to forget, except, of course, George Stiglitz who seems to think that things were just about fine at the World Bank when he had his hand on the tiller, somehow I don't think that all those anti-world bank demonstrators are too convinced!). It is always easy to see things more clearly after the event. Who in Europe - outside the extremes like Le Pen, or the anti-system people is really questioning if the Euro is a good idea. Ten years from now perhaps things will look different. No, the preoccupying thing is that we are moving towards a highly complex set of economic conundrum where comprehension and collaboration will be decisive - think eg of the problems of exchange rates in the G7 countries, or of third world sovereign debt - and at the same time the level of understanding and tolerance between states seems to be marking more ten years lows than the stock markets - think of the confusion this weekend with Japan banking reform, or the Schroder/Rumsfeld tiff over Iraq. It's hard to discern cause and effect here, but the reality is that we are a lot further away from global consensus now than we were twelve months ago, and this worsening in the political climate doesn't make the economic one any easier to manage.

One last point on the IMF. The star article argues that the IMF, like the other international institutions are on a learning curve (this is a point that has as much relevance for the IMF protestors as it does for the Bush administration in connection with the UN). Some commentators have suggested that the latest issue of the IMF World Economic Outlook should have presented a more positive and optimistic version of things. I couldn't disagree more. In recent years the Outlook has been moving steadily in the direction of a more quality and readable review, and the latest evolution under Kenneth Rogoff cannot but be welcomed by those who are tired of politically motivated economic forcasting (whether it come from Wall Street analysts or Japanese and Italian Finance Ministers)

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