OPINION: IMF Superfluous
August 25, 1997
Some experts in international finance say there is less need for the International Monetary Fund now than ever before. Moreover, when the IMF makes loans to economically troubled countries it often gives bad advice and requires them to follow it.
"The IMF is a classic case of how government institutions tend to grow and find new purposes for themselves to sustain their existence," says Steve H. Hanke, an international economist at Johns Hopkins University.
Hanke stresses that private capital markets are already providing all the funds necessary to developing countries:
- The flow of private capital to developing economies has climbed from less than $40 billion to more than $250 billion in less than a decade.
- The IMF was part of the 1944 Bretton Woods agreement which set up a pegged exchange-rate system; but when Bretton Woods was effectively ended in 1971 the IMF didn't go away.
- The IMF claims that one of its primary missions is to try to stave off banking crises, but 75 percent of member countries have had banking troubles in the past decade.
- Critics say IMF usually advises higher taxes, bigger government and more austerity -- when what client countries really need is lower taxes and more economic freedom.
Hanke has found that the average economic growth rate in developing countries without central banks is 2.1 times higher than in those with central banks. They also have lower inflation -- averaging only 19.8 in those with other monetary arrangements, such as currency boards, compared to 68.8 percent annually in those with central banks.
Source: Charles Oliver, "IMF Again Comes Under Fire: Does it Really Need to Exist?" Investor's Business Daily, August 25, 1997.
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