Tuesday, June 16, 2009

IMF dinosaur, let it fade away

There is a discussion in the Center for Global Development (CGD) blog where the think tank's president, Nancy Birdsall, testified before the US House Foreign Affairs Subcommittee on Terrorism, Nonproliferation and Trade last week. Ms. Birdsall argued that support for the G-20 commitments to increase lending resources at the IMF is a critical part of ensuring U.S. recovery from the economic crisis and global prosperity and security.

see the blog entry here:

June 15th, 2009
Birdsall Tells Worried House Subcommittee Why U.S. Support to IMF Makes Sense
By Sarah Jane Staats


While Ms. Birdsall made good arguments saying that economic instability in the rest of the world, especially the large emerging economies, will also have negative effects on the US economy and national security, her argument is still too statist: the US government should increase its contribution for the IMF's new arrangements to borrow (NAB) by an additional $100 billion.

I think it would have been better if the US government would borrow less to finance its ever-bloated expenditures and ever-rising public debt, and learn to cut spending. This move for fiscal responsibility should send a signal to other governments, especially in poorer countries, that they too, should take on more fiscal responsibility, not to expand expenditures if local revenues (taxes, fees, privatization proceeds, etc.) are not enough, so they don't fall in ever-bigger debts that can contribute to their external account imbalances, which force them to borrow from the IMF and other multilateral institutions.

The IMF is a dinosaur that has achieved its initial goal of helping stabilize global finance especially after WW2. It is time for it to slowly fade away, not expand even bigger.

No comments: