July 8, 2002
In the court of public opinion the International Monetary Fund is often presumed guilty of immiserating nations whose populations it is supposed to be saving from financial ruin. Unfortunately this judgment more often than not is true. The fund can with some justification be seen as an arrogant, shadowy arm of the US Treasury that acts as a debt collection agency for Wall Street's banks and undermines elected national governments. Its austerity measures in Argentina have failed to reflate the country's economy and have embittered large sections of the populace. In Malawi, the fund has been fingered for creating the conditions for famine by advocating a reduction in the nation's grain reserves. To dispel this view the fund, and western governments that effectively control it, need to enact some serious reforms.
In that context, the appearance last week of Horst Kí¶hler, the head of the IMF, in front of the Treasury select committee should be welcomed. That Mr Kí¶hler could be questioned by politicians was a good start, as was his insistence that poverty reduction was now central to his organisation's strategy. But Mr Kí¶hler's professed preference for transparency and democracy does not sit easily with his organisation's record. The fund is paid for by taxpayers around the globe - but it is not accountable either to the world's voters who finance it nor to those lives it affects. Rich countries dominate the decision-making process. Mr Kí¶hler's own position as managing director is not an open appointment but part of a cosy deal between America and Europe. Votes on key decisions are rarely taken as the fund prefers consensus; and even when they are, the spread of opinions between countries is not revealed.
The IMF does need to become more accountable and more open. It also needs to give poor nations a greater say: one of the tests for globalisation will be its inclusiveness. Africa, where the fund is heavily involved, is under-represented on the executive board - just two directors answer for 43 countries. The rich nations, which provide most of the capital, get the greatest say. This compares unfavourably with the World Trade Organisation, where even the smallest country has a veto and a vote. The IMF's historic role - to act collectively to stabilise the world's economy - has been compromised because the fund has governed without having proper government.
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