An Austrian view of the IMF
By Martin Hutchinson, a Reuters Breakingviews columnist. The opinions expressed are his own.
It’s a great pity we didn’t close the IMF down in 2005-07, while we had the chance. It had such a small loan volume outstanding that it was running losses, with operating expenses being paid by depleting its capital. The central problem of the institution is that it represents yet another conduit by which resources are diverted from the productive private sector into propping up unproductive state entities. This reduces overall welfare, prevents the liquidation of malinvestment and is the principal reason why economic recovery from the 2008 recession has been so sluggish in the US and Europe.
Under Strauss-Kahn, the IMF’s propensity to pour money down rat-holes has greatly intensified and the political influence its money grants it has often been used for malign purposes – for example the IMF’s role in the replacement of the liberal “Orange Coalition” government in Ukraine with the current kleptocracy is as yet unclear but was undoubtedly substantial. If the EU wishes to bail out its less successful members, it should do so from its own resources, and allow the cost of bailouts to concentrate minds.
International development finance is best carried out by the private sector, as it was before 1914. The IMF and the World Bank drove the London merchant banks out of this business and have a track record of supporting corruption and draining resources from free-market development. At the next available opportunity, they should be wound up.
Photo caption: A Filipino protestor wears a skull mask during a rally against the International Monetary Fund (IMF) and World Bank outside the World Bank’s office in Pasig city, suburban Manila, September 20, 2006, to coincide with the last day of the IMF – World Bank meetings in Singapore. REUTERS/Romeo Ranoco