A new job for the IMF: as global policeman

Elliot Wilson

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

All in all, it hasn’t been a red-letter year for the multilateral. Yet in a hugely ironic twist of fate, this financial crisis could lead not to their demise but their salvation.

We live at a crossroads in our economic history. What we need, now more than ever, are sturdy, widely respected structures blessed with decades of institutional capability and accumulated wisdom. Since we have nothing of the sort, the only option left is to trust the IMF and the World Bank. Both may score a full ten on the dunce scale this year, but they employ thousands of analysts and academics who do nothing but sit at their desks all day coming up with ways to prevent everything going belly-up. And in recent weeks they have acted with surprising alacrity: in the first two weeks of November, the IMF spent $50 billion bailing out five nations: Iceland, Hungary, Serbia, Pakistan and Ukraine. Some critics warned that the fund, which is capitalised to the tune of $250 billion, would soon run out of cash. Though senior executives quickly scotched the notion, it reminded many observers how threadbare the IMF’s finances remain.

What then should become of these institutions? IMF chief Strauss-Kahn wants the fund to monitor member countries’ policies more strictly, winkling out any regional financial discrepancies. That sounds reasonable, if a little vague and late in the day. Perhaps better would be to force the IMF to become the international financial regulator none of us want and all of us need: something akin to the serpent monitoring apple consumption in the Garden of Eden.