Triple Crisis blogger Jayati Ghosh published the following opinion article in the Guardian on the string of recent IMF failures and whether the organization’s rethink on capital controls is the start of major reform.
In appearing to veto Gordon Brown’s chances of becoming the next head of the International Monetary Fund, David Cameron says the organisation needs someone who “understands the dangers of excessive debt, excessive deficit”. But if that is all the new person understands, then he or she will make little difference to an institution badly in need of real reform.
For years the IMF has been caught wrongfooted during almost every major global economic event. Before the great recession of 2008 it was an international institution on life support: ignored by most developing countries; derided for its failure to predict most crises and then for its counterproductive responses; even called to book by its own auditors for poor management of its own funds.
The IMF encouraged financial liberalisation that pushed many countries to crisis, and became famous for congratulating bubble economies on healthy and sound financial management (Thailand in 1997; Argentina in 1999; most recently Ireland and Iceland in 2008) – often just months before their spectacular financial crashes. Its policy prescriptions were widely perceived to be rigid and unimaginative, applying a uniform approach to very different economies.