Most Powerful Groups in the World - International Monetary Fund Part 3
About the history of the organization known as the International Monetary Fund or IMF bank which helps oversee the global economy.
WHO'S IN CHARGE?--SIX POSSIBLE CONTENDERS
INTERNATIONAL MONETARY FUND
In order to further expand its role as enforcer of the international economy, the IMF recently initiated a surveillance program, in which it assesses the performance of member countries against an agreed-upon global policy. Under the program, the Fund encourages any nation with a large payment imbalance to submit to an IMF analysis to show how it should deal with that imbalance. The IMF also began acting as an intermediary between OPEC countries and less developed countries whose oil debts skyrocketed in the 1970s. Its attempts to coax Saudi Arabia and other OPEC countries to pitch in and invest their surpluses with the IMF for loans to deficit countries suffered a setback, however, when the IMF and World Bank voted to bar the Palestinian Liberation Organization from their 1980 annual meeting--a move which displeased Saudi Arabia. OPEC countries have also been unenthusiastic about active participation in the IMF unless they are guaranteed some semblance of power in the organization--a condition that the Western-dominated Fund has been reluctant to grant.
Famous Members: Renowned economist Lord John Maynard Keynes had a grand vision of the IMF as a central world bank that would issue legal tender and provide centralized economic direction to the world. Although Keynes's idea was squelched by the U.S. delegation at the original Bretton Woods conference, the Fund today bears a curious resemblance to Keynes's original proposition. When H. Johannes Witteveen, an economics professor and former finance minister of the Netherlands, took over as IMF managing director in September, 1973, the Fund was at its nadir. Although Witteveen, an austere, somewhat withdrawn man, didn't endear himself to IMF staffers as did his predecessor, Pierre Paul Schweitzer, the Dutch economist succeeded where Schweitzer had not--in creating a clear mission for the IMF. An advocate of expanding the Fund's resources and activities, Witteveen was committed to the idea of the IMF's eventually becoming a centralized global bank with control over some of the activities of national central banks. One of Witteveen's ambitious projects was to establish $16 billion in new financing for the IMF, which became known as the "Witteveen facility." Although Witteveen did much to recoup IMF's status in the world, he was also faulted for perpetuating the Fund's conservative economic outlook, viewing the cure for inflation as holding down demand rather than controlling prices. Jacques de Larosiere, former director of the treasury in France, became managing director of the IMF on June 17, 1978. His economic policies seem to follow the same conservative path as Witteveen's. He feels that the U.S. should slow economic growth in order to reduce inflation. The IMF's continued conservative path has caused a Brookings Institution economist, Robert Solomon, to remark that the Fund tends "to apply classical, well-accepted policies when something more innovative, imaginative, and less traditional is needed."
How Much Power: Although the IMF supposedly was established to aid the international financial situation, third-world debt skyrocketed from some $64 billion to $376 billion between 1970 and 1979. It is certainly not the world's financial elite who will be repaying the IMF at a rate of 6.875% interest for a five-year loan. It will be the poor of borrowing nations who will be (and have been) forced to suffer through painful austerity programs for the sake of IMF favors.
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