IMF Gaining in Power

Given the current economic problems of both Europe and the United States — well, the whole world really — the International Monetary Fund (IMF) is becoming more and more involved and gaining in power almost daily. As Rahm Emmanuel says, never let a crisis go to waste.

It’s time we paid attention to organizations such as the IMF and didn’t just take it for granted that they have our best interest at heart. They do after all control huge sums of the world’s money, most of which is taken from tax payers in various nations for the IMF to redistribute across the globe as they see fit, with no oversight, beyond their own internal “watchdog” group.

Their official line on accountability: The IMF is held accountable by multiple stakeholders, including by its own internal watchdog, member governments, the media, civil society, and academia. But no one with any power to actually make them behave themselves, avoid corruption, or seek redress in case of wrongs. A country may advise or even recall its representative, but has no recourse in case of actual differences. Once money is given to the IMF, the “donor” country has no more control over it.

The IMF is essentially to countries what government social programs are to citizens. If a country finds itself in need of monetary assistance because of stupid fiscal policies the IMF will take money from solvent, or at least rich, countries in order to help the “low to middle income countries.” It’s essentially redistribution of wealth on a global scale.

By now we should understand that when government holds the purse strings it also holds the power, so what does that mean in terms of the IMF? Nearly every country in the world is either beholden to the IMF and dependent on its loans or is in some other way inextricably tied into the IMF redistribution program. The IMF holds the purse strings for the whole world.

The IMF’s fundamental mission is to help ensure stability in the international system. It does so in three ways: keeping track of the global economy and the economies of member countries; lending to countries with balance of payments difficulties; and giving practical help to members.

That sounds all well and good, but in order to ensure the economic stability of the entire world economy, you have to wield massive amounts of power and that power must be usurped from sovereign nations. The IMF also has a track record of aiding and abetting financially dictatorships that routinely violate basic human rights, like Sri Lanka in 2009. When the IMF loan application from Sri Lanka was challenged by a lawsuit in the district court of the District of Columbia based on human rights violations, Timothy Geithner and Meg Lundsager argued that the court had no jurisdiction and the plaintiff had no standing anyway. They’re worried about a technicality when they are being sued over supporting massive human rights violations.

What court would have jurisdiction then? The IMF seems to be beyond the reach of any one government. It did approve the loan to Sri Lanka with the Britain, France and the United States abstaining from voting.

Meg Lundsager is one of a board of 24 directors who oversee the activities of the IMF and, coming from countries all over the world and supposedly representing those countries or groups of countries. She previously worked at the Treasury Department and was appointed in 2007 by President George W. Bush and confirmed by the Senate to represent the United States as a member of the IMF board.

Usually these “spread the wealth” types are also all about human rights, but not in the case of Sri Lanka. They argue that to not approve the loan would mean hardship for the general populace of Sri Lanka; a weak argument since the aid would not be sent to the people of Sri Lanka, but to the government of Sri Lanka. If you want to aid the people of Sri Lanka, you’ll have to resort to voluntarily funded private charities. But the IMF is not interested in aiding people; they are only interested in manipulating markets.

But the IMF doesn’t limit itself to monetary transactions; they also want to control invisible gasses. If you thought the failed Copenhagen Conference on global warming was the end, you thought wrong. The IMF with its already massively funded programs has taken on global warming, setting up “Climate Funds.”

These funds, which currently consist of the Clean Technology Fund and the Strategic Climate Fund were launched at the G8 in July 2008. So far, $6 billion has been committed by the different nations involved.

Not paying attention to powerful organizations like the IMF could very well be fatal to the economy of the whole world, including the “poor and middle class” countries they claim to help.

Comments

  1. I share some of your concerns, specifically about the way that the IMF is funded yet lacks strong oversight. But I don’t like to think of the Fund as some sort of charity organization that “redistributes” wealth. It’s not as simple as that.

    Yes, money from some member states, usually the wealthier ones, is invested in others, usually the poorer ones, at times — though as the recent turmoil in Greece goes to show, “poor” is a relative term. More importantly though is that the money isn’t simply handed to them, no strings attached. Quite to the contrary, in exchange for loans, the receiving countries have to enact dramatic economic reforms, as IMF intervention in Latin America in the ’80s and in East Asia in the ’90s amply demonstrates. They may get help from the IMF when they’re in trouble, but only if they pledge to liberalize their markets, privatize state-owned companies, abolish trade restrictions, etc., etc. In effect, the IMF is forcing them to do all those things we free marketers so like.

    The receiving countries may protest and indeed, they have. But just look at Latin America today. Look at East Asia today. I’m quite convinced that many of these countries would have been worse off if it weren’t for the “shock therapy” as some call it that the IMF prescribed.