As the IMF gets ready to choose a successor to Dominique Strauss-Kahn, who resigned following his arrest on charges that he sexually assaulted and raped a hotel housekeeper, it would be a good thing to step back for a moment and ask: What should the IMF do?
Yes, it’s a powerful global economic agency. It’s also one with a very checkered past. Usually opting for austerity policies, such as currency devaluation and tax increases, the IMF has bungled a lot of rescue missions down through the years.
There was Turkey, Mexico, and the Asian Tigers. More recently, there was the Greece bailout plan, which has not succeeded. Neither have the Portugal and Ireland plans. Though the EU’s involvement in these European states has been larger than the IMF’s, the IMF was supposed to be the tough cop for budget cuts that have not materialized. The necessary debt restructuring also hasn’t occurred.
Socialist Strauss-Kahn restored IMF prestige with his political-economic activism. But he didn’t restore prosperity to the southern-tier European countries.
So, to some extent, the IMF has become Bailout Nation Europe. (I note that the U.S. owns about 20 percent of the IMF, and Bailout Nation is very unpopular among the Tea Partiers and independent voters.)
According to news reports, it is widely expected that French finance minster Christine Lagarde will get the IMF’s newly vacated top post, although there’s some talk of Jean-Claude Trichet, the able central banker.
The point is, however, will the IMF ever adopt a true economic-growth model for the basket-case countries it is trying to fix?
