IMF reforms: nothing changes

The International Monetary Fund is reforming itself, or so we are being told. Rodrigo de Rato, the IMF's Managing Director made a statement yesterday that said, among other things:

"...the changed distribution of economic weight in the world demands that we reform our governance structure... I see a clear need for a rebalancing of quotas to reflect changed economic realities, especially the increased economic weight of major emerging markets... I also see a need to protect the voice and representation of low-income countries. Their voting power has been eroded over time... This gives rise to concerns about the adequacy of voice and representation for a number of countries that continue to borrow from the Fund but that have only a limited share in Fund voting... Why are these issues important? The Fund has a global membership and a global scope of responsibilities. It is the most important and sometimes the only forum for collective action on complex economic problems."

Interesting, if only it were true. The IMF certainly isn't the "most important and sometimes the only forum for collective action on complex economic problems" at all. Well, it wasn't supposed to be when it was created, but mandate creep has created a monster that needs to be tamed.

In today's Guardian there is a piece by George Monbiot which is well worth the read. It begins like this:

"The glacier has begun to creak. In the world's most powerful dictatorship we detect the merest hint of a thaw. I am not talking about China or Uzbekistan, Burma or North Korea. This state runs no torture chambers or labour camps. No one is executed, though plenty starve to death as a result of its policies. The unhurried perestroika is taking place in Washington, in the offices of the International Monetary Fund."

And goes on to detail the hypocrisy surrounding the much self-praised governance reforms the Fund is undertaking. Monbiot goes on to discuss the mandate creep I mentioned above, far more eloquently than I could:

"None of this would matter so much if it had stuck to its original mandate of stabilising the international monetary system. But after the collapse of the Bretton Woods agreement in 1971 the IMF more or less lost its mission to maintain exchange rates, and began to look for a new role... [w]hen it amended its articles of association in 1978 they were so loosely drafted as to grant the IMF permission to interfere in almost any aspect of a country's governance. It lost its influence over the economic policies of the G7 and became instead the rich world's viceroy, controlling the poorer nations at its behest. It began to micro-manage their economies without reference to the people or even their governments. Since then, no rich country has required its services, and few poor countries have been able to shake it off."

And concludes with the following statement, which just about sums up my thoughts too:

"I am among those who believe that the IMF is, and always will be, the wrong body - inherently flawed and constitutionally unjust. But if its leaders and supporters are to persuade us that it might, one day, have a legitimate role in running the world's financial systems, they will have to do a hell of a lot better than this."

For more info on the IMF and it's supposed reforms check out the Bretton Woods Project.