The International Monetary Fund (IMF) was founded in 1944 for the sake of facilitating international trade. Its purpose is largely to lend money to struggling governments that cannot pay for necessary imports. It is financed largely by powerful banks attached to its larger members such as Japan, the United States and Germany. The role of the IMF remains intensely controversial.
Pro: Role in Global Economy
Writing under the direction of the IMF, The Center for Financial Studies issued a major policy report in 2009 stating that countries should continue to borrow money from the IMF because of its expertise and experience in international economics. The IMF assists poorer countries in reforming their economies to facilitate needed foreign investment. The IMF, the paper holds, serves to monitor capital, currency and investment flows internationally, and can serve as an early warning service when trouble arises. The IMF, finally, serves as a “gatekeeper” for global investment, advising its clients what to accept and what to reject. The IMF, in short, is a needed institution for continued global financial reform.
Pro: Reform and Risk
Economy Watch, a well-known online journal, writes that the IMF serves primarily to reduce global financial risk. The journal points to IMF success in Poland, the Czech Republic and much of Asia. The IMF has helped reform economies and make them into substantial successes. The risk of letting poor countries simply fail is immoral, since this would penalize the poor and middle classes for the sins of its elite financial class. According to Economy Watch, governments are too irresponsible in macroeconomic reform to be trusted with these major decisions. An experienced, outside agency should be entrusted with the task to root out corruption and mismanagement.
Financial writer Carolyn Lochhead, writing in the "San Francisco Chronicle" during the 1997 Asian meltdown, holds that the IMF has empowered mismanagement, not reformed it. She points to major IMF failures in Pakistan, Russia, Indonesia and Thailand as proof of IMF incompetence. What the IMF does, according to Lochhead, is bail out the bankers and firms who have destroyed the economy in the first place. Rather than root out this kind of incompetence, the IMF loans more money to it.
Con: Austerity and Poverty
Development economists John Cavanagh, Carol Welch and Simon Retallack wrote in 2001 that the IMF demands structural change, in the form of austerity policies, that creates poverty. If you want to borrow money from the IMF, be prepared to give up national sovereignty and independence. The IMF demands that social spending be cut, wages frozen, the public sector slashed and unions eliminated. The result has been wealth for a tiny elite, and dire poverty for the masses of the population. The IMF cares only about GDP growth and stability, not the good of workers, the poor or the middle class. IMF dictates that come with loans mean the oversight of the economy by the IMF, which means oversight by major bankers. It is a formula for not only poverty, but also a new form of colonialism and domination by the rich.