The IMF and its criticism - does the IMF need a reform?

The IMF and its criticism - does the IMF need a reform?

International Monetary Fund - salvation and the last resort for countries in need or imperialist tool for imposing the brutal economic policies? The first determination would have adopted a fan of capitalism, the second disappointed anti-globaliser.
Increasing integration of world economies has brought the need for establishing an international organization that could help stabilize the economic situation in the world and monitor the global financial system. And for this purpose during the United Nations Monetary and Financial Conference in Bretton Woods ( on July 1944) the IMF was appointed.
According to the IMF, most of the world's economic problems result from imbalances in the balances of payment, which may even lead to economic crises. This happens when a country's currency depreciates rapidly, making foreign goods and capital are becoming increasingly expensive, which in turn can lead to distortions in the economy. These problems may also spread to other countries. For this reason, the IMF helps achieve stability through the various patches (Structural Adjustments Policies) and loans.
IMF assisted member countries in implementing reforms and adjustment programs to restore good conditions for sustainable economic growth, employment growth and increase investment. Implemented programs vary depending on the unique characteristics of each country, the causes of problems and many other factors. To obtain a loan the government of a country must agree to the introduction of reforms and commit to monitoring their progress. This is to ensure that funds received from the IMF will be used to solve the problems of imbalance in the balance of payments. The Fund assumes that after the eradication of these problems and return to economic and financial stability of the country will be able to repay borrowed funds, which will subsequently be made available to members of another organization.
Under the IMF operates the Poverty Reduction and Growth Facility program. It is interest-reduced credit for poor countries. Currently it is available for 78 countries. The interest rate is 0.5%. Debt followed every six months, but begin in 5.5 years, and ending at 10 years after the receipt of funds by the state. IMF loans are very attractive for the member countries. Not only are low-interest, but also (in the case of developing countries) are often the only available source of capital for the country. As at end March 2008 the IMF has a current budget of EUR 209.5 billion, which can be used to provide loans.
IMF seeks to promote economic stability, reduce vulnerability and sustainable growth. Shall also analyze the current situation of the global economy, and encourages closer cooperation between member countries. The Fund also provides technical assistance, consisting of counseling and organization of various training in the conduct of fiscal policy, monetary and currency, legal system, economic statistics, or to supervise the financial system.
IMF works with many financial institutions worldwide, including World Bank, regional development banks, the WTO (World Trade Organization) and UN agencies. These organizations participate in joint work on various projects, exchange information, research results and statistics, as well as cooperate in setting international standards. IMF is also a member of the Financial Stability Forum. Belong to the FSF's economic and monetary authorities of the country (central banks, financial, treasury departments) and international financial institutions, including IMF, World Bank, the Bank for International Settlements (Bank for International Settlements). Forum focuses mainly on promoting financial stability, improvement of the market and reducing the risks arising from the operation of the financial system.
These laudable, lofty and noble goals were not be so easy to implement and what is not suprising they came across with huge critics.
Fire of criticism leveled at the twin organizations, the IMF and the World Bank focuses primarily on their activities in developing countries. There is no doubt that the greatest controversy raised by these organizations designed adjustment programs (Structural Adjustment Programs, SAP) implemented on a large scale in order to resolve the debt crisis in 80s.
Following the oil shocks in the 70s, developing countries began to finance the deficits on current accounts by means of external, largely from commercial banks. When in the early 80s it became clear that most of them are languishing in honor of debt repayment, the IMF and World Bank hastened to their aid, earmarking for this purpose its own loans. Condition for receiving the loan has been implemented by these institutions recommended package of reforms that deptor countries have restore external balance, and thus the solvency and creditworthiness. Adjustment policies focused not only on stabilization operations. The debt crisis has revealed many profound structural distortions in the economies of developing countries, and this in turn required to improve the economic market mechanisms.
Adjustment programs, in principle, to focus on balancing the balance of payments, which according to income and absorption, and monetary concepts of balance of payments, which is a supporter of the IMF, is achieved through the suppression of internal demand. Already, after a short time it became clear that adjustment policies pursued so often there just is not effective, but also leads to the impoverishment of 'countries-customers'.
High interest rate policy, the goal was to encourage savings, reduced supply of credit and triggered a recession, which in turn often led to the closure of companies and a shortage of basic goods and services. Most acute for those countries undergoing reforms have cut spending to curb budget, waste and restore inner balance.
The first, who put in an open criticism of IMF policies are different anti-global organizations, where demonstrations have occurred in the acute time of great economic forums, including in Seattle and Genoa. They assume a very aggressive and disorganized nature, which facilitated their discredit, the more that these organizations did not initially succeed in a slightly more concrete way to argue their views. This kind of criticism was ridiculed by worldwide media as the protests of bored rich teenagers who, under the pretext of solidarity with the poorest of the world wanted to simply live it up.
Everything changed when the radical critique of the IMF put the Nobel economic laureate Joseph Stiglitz.
Stiglitz begins withering criticism of the theory linking the welfare gains from free market mechanisms. Exposes the mechanisms of neo-liberalism and the applied implications of reform for developing countries through such institutions as the World Bank, International Monetary Fund and World Trade Organization. Examines the undemocratic and elitist nature of the IMF - an institution set up to oversee the global financial system, in which the richest countries have the most votes and where de facto dollars vote.
"The current system is unfair to developing countries which, instead of a partner, is now a shield for the rich North".
In 2003, the IMF acknowledged that in many developing countries, liberalization of capital markets rather than to growth led to further destabilize their economies. Liberalization of trade and capital markets are the main components of the Washington Consensus - an agreement between the IMF, the World Bank and the Ministry of Treasury of the United States, where the emphasis is on reducing the role of the state, changing trade regulations and the rapid liberalization and privatization.
According to Stiglitz the mostforcible argument against the consensus are the defeats of Latin America, which accepted it without any reservations, and the successes of East Asia, rejected the IMF guidelines. Once approved by Argentina suggestions IMF and World Bank there has been a consumption boom - rising GDP and national wealth shrink. Lasted for seven years growth, followed by a recession, because economic growth was based on loans taken out from the outside and the privatization of national assets sold to foreigners.
Stiglitz said bluntly: the IMF has failed to meet its core mission - to ensure global financial stability.
Also American politicians like senator Bernie Sanders or Polish like Professor Grzegorz Kołodko openly criticize the actions of the Fund. Sanders on the pages of Christian Mirror said: "Biography IMF indicates that the institution is a veritable virus, shifting the economic belt tightening and economic disaster from one country to another. IMF only helps the spread of the disaster". Howewer Kołodko who worked for IMF for some time says: "IMF cares mainly about the free movement of capital internationally, which requires just a refill of money, and what is best realized in conditions of low inflation and a balanced budget. But the fund too rigidly sticks to its principles and not enough adapts his actions to a specific case."
So what to do to the IMF's actions were more effective?
Recipe of the former World Bank vice president for global trading system, which will promote the welfare of the poorest countries, but also would be beneficial for developing countries, is to open markets, the latter for developing countries - without reciprocity and without economic and political conditions. Stiglitz also suggests that middle-income countries opened their markets to the poorest countries, while the second one, and should give each other preferences without having to grant them the rich countries.
To sum up, good economic policies can be based only on good economic theory. We must therefore try to influence the thinking IMF and World Bank, because of this also depends on their mode of action, and in turn from this course of action (whether we like it or not), very much depends also in our part of the world, because we are after just turn to the global economy. Today the question is therefore how to play in the modern world, to irreversible globalization as much as possible tilt in our favor.