Affectionately known as big brother to various countries of the world (especially the third world), the voice of the International Monetary Fund speaks loudest in times of dire distress.
Their mission of offering help to countries in an economic crisis (protracted talks are still on-going with Zambia) has given rise to this name. But is the IMF really the good big brother?
Well, this is a question that invokes so much debate. To many politicians and other mainstream thinkers especially in the Washington corridors of power, its formation together with its twin brother institution the World Bank down Bretton Woods was a stroke of genius and its work is highly noble. According to the protagonists, the IMF clean up the mess of a little child who cannot think for himself and to dare question the nobility of the IMF is sheer foolishness on the part of the critics. When a child messes up, he shouldn’t dare say anything; he should just let the elders do the necessary clean-up, they have argued.
As a result of such perspective, the IMF always see themselves as the clean-up guys, coming with as much force and authority to the negotiating table. Sit back and let us handle your mess is the unspoken rule of the game for the men in black suits from Washington DC.
Critics on the other hand are highly vocal of their detest for the IMF. The sound of the name IMF itself is like a sharp knife slowly being driven down through their bowels. It’s painful to say the least. To them, the IMF is an angel of death bent on bringing nothing but suffering to the common man and creating an illusion of nobility that only benefits their paymasters and a few elites in host countries. The voting structure has especially been one grey area that has been subject to much ridicule by the critics.
Under the IMF, voting structure is based on a quota system assigned to each country based on its relative position in the world economy. Under this system, it is basic votes (same for all countries) plus one vote for every SDR100, 000 held. In layman language, the more financial contribution a country makes, the greater the voting power. The USA alone has an 18 percent voting rights and the only nation with power of veto, this further grows to 38 percent when you add Germany, Japan, France and Britain as of 2016 data.
This quota based voting system has in a way divided countries into two broad groups, that is, creditors and debtors and has effectively put them on a collision course with differing interests. This according to the critics has been the root of all the “silent evil” associated with the institution as it endeavors to pursue the interests of its largest shareholders in most of its dealings, after all, “he who pays the piper calls the tune”. The verdict for this group is very clear, anything but the IMF. Former Tanzanian president, Julius Nyerere had some misgivings about the IMF as he was fearful that debt-ridden African states were ceding sovereignty to the institution and once famously asked “who elected the IMF to be the ministry of finance for every country in the world?
As a result, there have been calls for an “alternative” financier of the last resort that would work within the dynamic and context of emerging markets economies proposed by this group. An idea that has given birth to regional or block financial institutions like the New Development Bank by the BRICS nations. However, this initiative has not yet gained traction to challenge the mighty IMF, needless to say, it’s a step in the right direction.
The author’s perspective? Well, it’s not so much of a perspective as it is a riddle wrapped in a mystery. A riddle that I haven’t yet solved. On the one hand, a good grounding in Economics gives me some insight into their way of thinking. A country in dire economic stress needs committed and disciplined fiscal and monetary reforms coupled with other structural reforms to put it on the road to recovery.
However, what puzzles me the most is how the IMF since time immemorial has relied on what I call the “Red pill” to cure “all” its patients. The proverbial red pill is simply the neoclassical reforms that the IMF imposes on every other country that comes knocking on its doors. To treat countries as diverse as Ghana, Greece, Bolivia, Zambia and Argentina just to mention a few as the same simply puzzles me. I believe Economics and economies in general are dynamic, always to be interpreted within a certain context. Any chance of successful reform in my view should take into consideration the unique context of a particular economy. The red pill in my view is not some magic wand that will observe the law of gravity in any part of the world it is used. This is misguided thinking. In some cases, it has to be taken whole, in others, half a tablet and in still other cases with a pinch of salt.
For now, however, the IMF puzzle is one am yet to solve. However the case, it’s a puzzle in which something somewhere is amiss. What is your verdict on big brother?
The author of this article is an Economist, Writer and Business Executive. The views expressed herein are solely my views and do not in any way represent the views of my employer, church and any other organization I am affiliated to.