In a brutal global market where so many are losing so much, it is hard to find any organization that looks like it will emerge as a clear winner from the current financial turmoil. But the International Monetary Fund (IMF), which had been on the ropes until very recently, appears to be that winner (see our cover story on page 28). With countries around the world rushing to request its aid, the IMF has found itself thrust back into its old familiar role, rescuing economies in crisis.
Getting its old job back is not the IMF’s only recent coup, though. As politicians and market watchers around the world clamor for some reassurance that the financial meltdown we are currently experiencing won’t be repeated, the IMF has suddenly become the prime candidate for a brand new, potentially more powerful additional role as a pseudo global regulator.
Clearly, the IMF relishes its new-found prominence. The revived and rehabilitated multilateral lender has a huge and complex task to perform now, though. As the world leaders at the recent G-20 meeting in Washington, DC, made abundantly clear, they are counting on the IMF to be on the lookout for signs of future financial distress around the world and to provide a timely warning so the powers that be can deal with the problem before it becomes a crisis.
If the IMF can be trusted to perform its new duties responsibly and fairly, then it makes perfect sense for it to adopt some form of global oversight. That is a very big “if” indeed, though. The IMF is already involved in—and recognized in—many markets around the world, and it has a huge and talented team of economists at its disposal. Its track record, however, is less than stellar and—at least as far as its critics are concerned—its loyalties lie with the large, developed economies of the West. It also has a major credibility problem, particularly among countries in the Asia-Pacific region, many of which consider the IMF to have caused more problems than it solved when it waded into the Asian financial crisis of 1997.
The IMF’s response to the current crisis does give some cause for optimism. It has reacted in a measured and open-minded way to requests for help from nations such as Iceland, Hungary, Ukraine and Pakistan and has shown less of the heavy-handedness for which it became known during previous crises.
Part of the problem in the past has been that the IMF tended to focus more on pure, hard economics and less on people. If it can recognize that the populations of the countries it serves are made up of real, often vulnerable people and not just units of production, there is every reason to believe the IMF can rise to this new challenge. If it doesn’t, many tens of millions of people will be facing a needlessly bleak future.
Until next month,