Cutting the IMF and World Bank Down to Size

CAMBRIDGE: In recent weeks, debates over the future of the International Monetary Fund and the World Bank have grabbed headlines. A US Congressional Commission of experts, on which I served, issued a report, dubbed the Meltzer Report (after the Commission’s Chairman, economist Allan Meltzer), calling for dramatic reforms of both institutions. Then, Trans-Atlantic bickering over the selection of a new IMF Managing Director broke out. The selection process was unpleasant (for example, developing countries had no real say), but in the end, the excellent choice of German Finance official Horst Kohler emerged. As another important factor in the debate, US Treasury Secretary Lawrence Summers issued his own calls for modest World Bank reforms, following proposals that he made earlier for modest IMF reforms.

The real debate is about the scope of the two institutions. During the past 20 years, the IMF and the World Bank played a large role in developing countries and in the postcommunist transition. Rich countries, especially the US, used the IMF and World Bank as instruments of financial diplomacy. Both institutions have been used by the US and Europe to get money to favored countries – Mexico, Russia, or East Asia – in times of crisis. Both the IMF and World Bank have also been empowered to impose strong conditions on the economic programs of countries that turn to it for help.

IMF and World Bank critics, including members of the Meltzer Commission, think that the two institutions are too big, too powerful, and too over-extended. The IMF tries to manage the economic operations of more than 50 countries. In many cases, the IMF imposes its programs for years or even decades, far after an economic emergency ends. It maintains its influence because the US insists that poorer countries should have IMF programs if they are to receive relief on their debt or receive other kinds of financial help from outside the IMF.

To continue reading, please log in or enter your email address.

Registration is quick and easy and requires only your email address. If you already have an account with us, please log in. Or subscribe now for unlimited access.

required

Log in

http://prosyn.org/yPLVeba;
  1. Chris J Ratcliffe/Getty Images

    The Brexit Surrender

    European Union leaders meeting in Brussels have given the go-ahead to talks with Britain on post-Brexit trade relations. But, as European Council President Donald Tusk has said, the most difficult challenge – forging a workable deal that secures broad political support on both sides – still lies ahead.

  2. The Great US Tax Debate

    ROBERT J. BARRO vs. JASON FURMAN & LAWRENCE H. SUMMERS on the impact of the GOP tax  overhaul.


    • Congressional Republicans are finalizing a tax-reform package that will reshape the business environment by lowering the corporate-tax rate and overhauling deductions. 

    • But will the plan's far-reaching changes provide the boost to investment and growth that its backers promise?


    ROBERT J. BARRO | How US Corporate Tax Reform Will Boost Growth

    JASON FURMAN & LAWRENCE H. SUMMERS | Robert Barro's Tax Reform Advocacy: A Response

  3. Murdoch's Last Stand?

    Rupert Murdoch’s sale of 21st Century Fox’s entertainment assets to Disney for $66 billion may mark the end of the media mogul’s career, which will long be remembered for its corrosive effect on democratic discourse on both sides of the Atlantic. 

    From enabling the rise of Donald Trump to hacking the telephone of a murdered British schoolgirl, Murdoch’s media empire has staked its success on stoking populist rage.

  4. Bank of England Leon Neal/Getty Images

    The Dangerous Delusion of Price Stability

    Since the hyperinflation of the 1970s, which central banks were right to combat by whatever means necessary, maintaining positive but low inflation has become a monetary-policy obsession. But, because the world economy has changed dramatically since then, central bankers have started to miss the monetary-policy forest for the trees.

  5. Harvard’s Jeffrey Frankel Measures the GOP’s Tax Plan

    Jeffrey Frankel, a professor at Harvard University’s Kennedy School of Government and a former member of President Bill Clinton’s Council of Economic Advisers, outlines the five criteria he uses to judge the efficacy of tax reform efforts. And in his view, the US Republicans’ most recent offering fails miserably.

  6. A box containing viles of human embryonic Stem Cell cultures Sandy Huffaker/Getty Images

    The Holy Grail of Genetic Engineering

    CRISPR-Cas – a gene-editing technique that is far more precise and efficient than any that has come before it – is poised to change the world. But ensuring that those changes are positive – helping to fight tumors and mosquito-borne illnesses, for example – will require scientists to apply the utmost caution.

  7. The Year Ahead 2018

    The world’s leading thinkers and policymakers examine what’s come apart in the past year, and anticipate what will define the year ahead.

    Order now