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November 19, 2003
A suggestion.
Why not scale back the role of the International Monetary Fund (IMF) to short term emergency lending for nation-state threatened by balance of payments problems and allow the private finance sector to step in and provide finance to poorer countries?
That is one way to reform the IMF. Cut back on the set of additional policy instruments and responsibilites that it has required over the last 20 years. Cut back on its expanded role of economic policy making. Returning the IMF to its basics would be one way to begin to reform international economic governance.
A scaled back IMF would return to its core function: to look after the public good of the international economy by counteracting movements in foreign exchange markets thst result in impect information and coordination among lenders, and which borrower countries are powerless to remedy themselves. Hence we have the standard policy conditions attached to such loans: cut backs in public expenditure, central bank borrowing and devaluation.
A scaled back IMF is not my suggestion. It is that of the US Treasury. It was made by one Lawrence Summers, the US Secretary to the Treasury back in December 1999.
It is not one I support for pragmatic reasons Shock therapy, or fast adjustment, means imposing stablization measures that create social tensions and conflicts within the nation state (Indonesia). These, in turn, undermine the government's ability to cope with them. That indicates that the short term corrective perspective is also a medium term one. So the IMF really has a broader role by default.
So why raise the Summer's proposal? Just to suggest that the IMF, as a part of the international financial architecture, is an instrument of global governance that was designed to open up other economies, their resources, labor and markets to US capital. Today, in the era of globalization, it helps to facilitate the internationalization of financial capital through removing impediments to its free and rapid movements around the globe.
Why so? Here is some crude thinking. The US economy was in recession for some time---going through a long downturn for the last couple of decades. Stagnation and declining profitability meant that the US State used its control of the institutions of governance to ease the movement of excess capital to seek profits wherever they could be found. That policy, called the Washington Consensus, involved a variety of measures to make troubled economies vulnerable to the pressures of US-led global capital.
Why mention this? Well, the proposed Free Trade Agreement (FTA) between Australia and the US is a similar instrument of governance. It means the opening of a subordinate economy (Australia) to US imperial capital, whilst the imperial economy (the US) remains sheltered as much as possible from the obverse effects (eg. dismantling its domestic forms of protection)
Globalization , in short, is about the careful control of trading conditions in the interests of imperial capital.
As I said, its crude thinking. Somehow it makes sense.
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