Imf: Protagonist Or Antagonist?

Perfection is an idea which is difficult to strive for, when the concept is applied to decision making. The perfection - or more precise, the suitability of the final decision, must be evaluated. Generally, it can be assumed that when more individuals are involved in the decision making process, their knowledge combined together will produce a better outcome. As an international organization, the International Monetary Fund has hundreds of individuals putting their heads together to contemplate actions that should be taken to ensure a better flow of the economy. With their 'man-power' and abundant resources, their decisions should likely be correct for the majority of times. Nevertheless, human error may factor in the process and cause mistakes to be made - however, such mistakes should not be repeated as it may be detrimental to economies. Moreover, if certain 'mistakes' tend to reappear, it may be questionable whether it was accidental or even consider whether it was caused deliberately by human intention. The IMF seems to be neglecting the true needs of impoverished countries continually making unsuitable decisions allowing these countries to take on huge debts which they cannot possibly repay. The outcome is that strong countries, such as the U.S., maybe able to control third-world economies.

It all began on July 22nd, 1944 in the United States of America, at Bretton Woods, New Hampshire. A Conference was held between Fabian Society member, John Maynard Keynes and the Assistant Secretary of the United States Treasury, Harry Dexter White to discuss the reconstruction and worldwide economic development. The agreement of the Bretton Woods Conference, as it has come to be known, was officially called the United Nations Monetary and Financial Conference Keynes's suggestion of creating an International Clearing Union as part of a post World War II reconstruction plan and was contained in this agreement. Consequently, the IMF was founded in the aftermath of the Great Depression and World War II. The International Monetary Fund was set in motion on March 1st, 1947. Since then, the IMF had gone though two major economic time frame changes; the Keynesian Welfare State era and the era of neoliberal globalization, which lead to the shifting position of the IMF. The first stage that the IMF experienced occurred after the Bretton Woods Conference, and was based on the economic theory and ideas by John Maynard Keynes. These ideas were widely accepted by the most economists in the western countries, and this initial operated time period became known as the Keynesian Welfare State era. The second era was the neoliberal globalization. The era of neoliberal globalization was the time when fundamental questions about the state, government, politics, property and law were raised, and when their major implications on government politics were considered.

The Keynesian economic theory was presented in John Maynard Keynes's book, The General Theory of Employment, Interest and Money, in 1936, and the key of the Keynesianism was the use of fiscal to measure produce high and stable levels of income and employment. It was concluded that by Keynes "demand creates its own supply" , up to the limit set by full employment. During the Keynesian Welfare State era, which last IMF until 1971, the IMF was running under the concepts of the Keynesianism. The initial role of the IMF was to provide short term loans to stabilize exchange rates. After the removal of the par-value exchange rate system in 1973, the original role of the IMF started to collapse. Further fueled by the widespread of neoliberalism ideology in the 1980s, which rejects positive government intervention in the economy, the role change of the IMF becomes more evident. In contrast to Keynesianism, neoliberalism is focused on social justice by encouraging free-market methods and less restricted operations of business and development. Another belief is that net gains for all under free trade and capitalism will offset the costs in the majority of cases. Following the introduction of the neoliberal globalization system, the role of the IMF had switched from being a stabilizer to a creditor, loaning funds to Third World or developing nations under the monetary system.

The International Monetary Fund had transformed into a global financial organization of 184 member countries. As stated precisely by Robbins:

The IMF constituted and agreement by the major nations to allow their currency to be exchanged for other currencies with a minimum of restriction, to in form representative of the IMF of changes in monetary and financial policies, and to adjust these policies to accommodate to other member nations when possible. The IMF also has fund that it can lend to member nations if they face a debt crisis. For example, if a member country finds it is importing goods at a much higher rate than it is exporting them, and if it doesn't have the money to make up the different, the IMF will arrange a short term loan.

In other words, the IMF helps the impoverished. The IMF now ahs two preliminary functions: (1) to provide countries with sufficient funds during and economic downturn to pursue expansionary fiscal policies; and (2) to exert influence and promote countries to choose expansionary, rather than 'beggar-thy-neighbor policies."

The economy crisis of Argentina is a good example of the International Monetary Fund's failure. Argentina's economy had been on a roller coaster ride, and since the late 1970s the country had accumulated huge external debts, of which billions of dollars are from the IMF. At the same time, Argentina's inflation reached 200% per month in some months of 1989-1991. To further complicate the problem, economic output was dropping drastically. In an attempt to stop the economic crisis, the government pursues a path of free trade. And in 1991, it applied fundamental monetary development which pegged the peso to the US dollar.

It can be reasoned that the reason to why Argentina was stuck in this economic crisis was partly due to actions of the IMF. The IMF was trying to load the country with billions of dollars of debt to hold up the overvalued of peso. Consider an example in 1998 when the IMF did the same thing to Brazil and Russia, and ended up with the same results. In both of the cases, both countries' currencies collapsed, instead of quickly increasing to partially finance their loans. The IMF's argument was that if the currency was devalued, the inflation problem would be solved. However, that was never the case, and inflationary problems still preoccupied Argentina. The IMF also went to uphold budget reinforcement for Argentina, by cutting retirement funds, government officials' incomes,