The IMF is interesting to US policymakers for the wrong reason

The International Monetary Fund is an immensely useful organization, able to deliver substantial amounts of financial and technical assistance at short notice to almost any place in the world. It also has the great advantage of almost always being perceived as incredibly boring…

In the realm of international economics, being perceived as boring confers power to the extent that it allows major decisions to be made without a great deal of external scrutiny. From 1918 to 1939, international economic cooperation was hard to come by – in large part because all of the attempted deals were put together at high-profile international conferences. Following the creation of the IMF in 1944, many of the same decisions became routine, a lot less interesting, and much easier to implement…

The US does not dictate what happens at the IMF, but it does have a disproportionate influence. Given the Fund’s origins in helping to rebuild Europe after World War II, European countries are also very well represented on its executive board and in terms of ownership shares (and thus voting weight on important decisions).

One major goal in recent decades has been to shift representation at the IMF somewhat away from Europe and toward the world’s emerging markets. These countries’ global economic and financial significance has grown rapidly, yet they have relatively little representation at the Fund.

A package of reforms has been agreed. Like most products of international negotiations, the agreement is not perfect; but it does move the ball forward…These reforms need to be agreed, in legislative form, by the US Congress before they can take effect. For whatever reason, President Barack Obama’s administration did not push this item hard in 2013 and early 2014 – and the agenda of encouraging further IMF reform has therefore languished.

The Obama administration proposed to tie IMF reform to the presumably imminent approval by Congress of funding for Ukraine. This is sensible legislative tactics but not appealing as an economic strategy. In effect, the administration tried to make the IMF more interesting, particularly to encourage Republicans in the House of Representatives to support the reforms.

The latest indications are that the Republicans will not be so enticed. But the bigger problem is that Ukraine does not really need a massive loan from the IMF. What Ukraine needs is a sharp reduction in corruption, as well as real legitimacy (through the ballot box) for people who want to rein in the influence of oligarchs – a group that has sapped the economy through plunder and incompetence over the past two decades.

Mostly, what looks like happening is typical of Congress and Congressional Republicans. Money for war is always available – so, the White House and the Pentagon will make Ukraine aid sound like war is imminent.

The need to reform the IMF and why – will probably be swept under the rug.

The need to reform Ukraine will simply be ignored. Most of Congress has no interest in anything concerned with real reform vs. the phoney sort they talk about all the time. The kind that means screwing working people even more.

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