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Fund for Unsolvable Problems: is the IMF the new UN?

Scarcely another G-8 handshake goes by without piling another responsibility on the International Monetary Fund. The communiqué after the latest G8 Finance Ministers’ meeting last weekend asked the Fund to help devise “exit strategies” from stimulus at the exact right time in the exact right manner, which nobody knows and the G-8 cannot agree upon. Then they asked IMF should do more concessional lending to poor countries. So the IMF is only being put in charge of (1) the rich countries, and (2) the poor countries.

Of course, no G8 country would really yield sovereignty on policy to the IMF, or even allow it to determine its bilateral foreign aid policies. What seems to be going on is the same kind of shadow play the Great Powers have long played with the UN: (1) a terrible international problem appears, (2) the Great Powers do not want to commit any real capital to reach a solution, or they cannot agree on a solution, or they simply don’t know the solution, (3) but the Great Powers must appear to act anyway, (4) so they put the UN in charge of the unsolvable problem, and then (5) blame the UN when the problem remains unsolved.

This five-act shadow play has worked out so well for the Great Powers in places like Somalia, the Congo, and Darfur that the G8 appears to have decided to try the same thing with the global financial crisis. Here, they don’t want to commit real capital to international coordination or cushioning the blow to poor countries, they can’t agree what to do anyhow, and they really don’t know the solution in the first place. So let’s put the IMF in charge! And then blame the IMF when things continue to go badly!

In other news, the G8 Finance Ministers hid out during the meeting in a previously unknown place called “Lecce” somewhere in Italy in a medieval castle, but still couldn’t escape protesters who shouted out their own much shorter communiqué: “G8, economy, lies.”

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One Comment

  1. samot wrote:

    The government of Pakistan released its budget for 2009-2010 last week. The IMF originally set a deficit target of 3.5% of GDP, but a presidential advisor suggests 5.5% is more likely. Pakistan is relying on an IMF $4 billion “stand-by” loan as “insurance” as part of a $7.6 billion package to make the budget balance out on paper. At the same time, the Foreign Minister says Pakistan needs $2.5 billion from the international community to deal with IDPs and fight terrorism. Is there anyone who believes that the government will NOT ask for and receive the standby money? Which means, money being fungible, that the IMF is not only the new UN, it will also now be the main funder of the Pakistan military’s anti-terrorism strategy.

    Posted June 16, 2009 at 2:38 pm | Permalink
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    The Aid Watch blog is a project of New York University's Development Research Institute (DRI). This blog is principally written by William Easterly, author of "The Elusive Quest for Growth: Economists' Adventures and Misadventures in the Tropics" and "The White Man's Burden: Why the West's Efforts to Aid the Rest Have Done So Much Ill and So Little Good," and Professor of Economics at NYU. It is co-written by Laura Freschi and by occasional guest bloggers. Our work is based on the idea that more aid will reach the poor the more people are watching aid.

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