A new job for the IMF: as global policeman

29 November 2008

The International Monetary Fund was beginning to look like a has-been, says Elliot Wilson, but in the aftermath of the current crisis it may find an important new role

Once upon a time, the role of the multilateral was set in stone. Founded at the tail end of the second world war at the New Hampshire resort of Bretton Woods, the leading agencies have stuck pretty much to their original remit. The IMF acts like an austere patriarch, attempting to provide global macro- economic support and stimulus by checking and balancing exchange rates, international trade policies and balance-of-payment issues. The World Bank prefers the guise of a nanny figure, gently admonishing sovereign states on their domestic failings and occasionally topping up their pocket money.

Both Washington-based Bretton babies are now preparing to celebrate their 65th birthdays — the IMF in July 2009, the World Bank in December 2010 — a good pensionable age in much of the developed world. And as senior citizens go, both earn a generous annual stipend. Last December, Britain pledged £2.8 billion to the World Bank, leapfrogging America to become its largest sovereign donor. One might reasonably query why our government should have wished to achieve this pinnacle of global financial largesse months before being forced (with zero multilateral aid) to bail itself out.

Indeed, until very recently the future of the multilateral was in doubt. ‘A year ago, I would have said that the IMF and the World Bank would be gradually phased out,’ says Pieter Bottelier, a lecturer at Harvard university who worked at the World Bank for 28 years, ‘but recent events have changed everything.’

Those events surprised the two Washington institutions just as much as they surprised you and me. Like the CIA in 1989, which was comically underprepared for the toppling of the Berlin Wall, the current crisis found the IMF and the World Bank asleep at the switch. Both leading multilaterals have been shedding staff for years, with the IMF losing 500 employees in 2007 alone. It is now desperately scrambling to rehire.