International Monetary Fund
Conceived in 1944 at Bretton Woods, New Hampshire, US to help establish a framework
for international economic cooperation.
Post Cold War
The IMF is an international organization that oversees the global financial system by
observing exchange rate and balance of payments, as well as offering financial and
IMF says economic stability is a precursor to democracy
IMF advocates a Keynesian approach. IMF frequently advocates currency
criticized by proponents of supply-side economics as
. Secondly they link
higher taxes under "
That said, the IMF sometimes advocates "austerity programmes," increasing
when the economy is weak, in order to generate government revenue and balance
, which is the opposite of Keynesian policy. These policies were criticised by
Joseph E. Stiglitz
former chief economist and Senior Vice President at the World Bank,
in his book
Globalization and Its Discontents
He argued that by converting to a more
Monetarist approach, the fund no longer had a valid purpose, as it was designed to
provide funds for countries to carry out Keynesian reflations.
One of the IMF policies harshly criticized by Stiglitz is the forcing of developing
economies to open up their markets to foreign competition before they are ready to do so.
Even the most advanced industrial societies, such as the
, built up their
economies by selectively protecting certain industries deemed unfit to compete with
foreign markets. Only when these industries became strong enough were they opened up.
The IMF seems to completely ignore this fact when they provide funds contingent upon
rapid trade and
liberalization. Doing so destroys jobs rather than creating
them, especially in agriculture where poor farmers simply can’t compete with highly
subsidized goods from
and America. There are no safety nets set up in these
developing countries to deal with a
. They have no
working condition standards, and they certainly do not have
systems. In summary Stiglitz writes, “Small developing countries are like small boats.
Rapid capital market liberalization, in the manner pushed by the IMF, amounted to
setting them off on a voyage on a rough sea, before the holes in their hulls have been
repaired, before the captain has received training, before life vests have been put on
board. Even in the best of circumstances, there was a high likelihood that they would be
overturned when they were hit broadside by a big wave (p. 17).”