I have not until now really looked at the IMF: I propose to start doing so now because Ms Lagarde's remarks about Greece seem to me to have let her mask slip, showing the banker beneath. I wondered what the IMF is supposed to do, in principle and so I have gone back to the original statements as a starting place.
The first thing that is clear is that the IMF was set up as part of the Bretton Woods agreement in 1945. It was to operate under Articles of Agreement and started its work in 1947.
The Articles of Agreement are interesting. After an introductory paragraph they set out their purposes in a short section. It says this
QUOTE
The purposes of the International Monetary Fund are:
(i) To promote international monetary cooperation through a permanent institution which provides the machinery for consultation and collaboration on international monetary problems.
(ii) To facilitate the expansion and balanced growth of international trade, and to contribute thereby to the promotion and maintenance of high levels of employment and real income and to the development of the productive resources of all members as primary objectives of economic policy.
(iii) To promote exchange stability, to maintain orderly exchange arrangements among members, and to avoid competitive exchange depreciation.
(iv) To assist in the establishment of a multilateral system of payments in respect of current transactions between members and in the elimination of foreign exchange restrictions which hamper the growth of world trade.
(v) To give confidence to members by making the general resources of the Fund temporarily available to them under adequate safeguards, thus providing them with opportunity to correct maladjustments in their balance of payments without resorting to measures destructive of national or international prosperity.
(vi) In accordance with the above, to shorten the duration and lessen the degree of disequilibrium in the international balances of payments of members.
The Fund shall be guided in all its policies and decisions by the purposes set forth in this Article.
As you see, it specifically aims to maintain "high levels of employment and real income". This is in line with Keynes analysis that if you look after employment the economy will look after itself. It is the second purpose outlined, and that presumably reflects its importance. It seems to me that this is the only real outcome which is enshrined in the Articles of Agreement, because most of the rest of the purposes are rather an outline of the underlying assumptions about what will lead to that outcome: or descriptions of how those aims will be achieved in administrative terms. Thus is it is inherent in the Articles that stable exchange rates and an international system of payments without foreign exchange restrictions will enhance international trade; and that short term problems for individual members will be smoothed by a permanent mechanism for communication between states coupled with making funds available so that such problems can be dealt with without harming national or international prosperity: all of this will lead to high employment and high real income and good use of resources
as primary objectives of economic policyIt is not to be expected that the rationale for the underlying assumptions will be laid out in such a document. That does not matter because the theory is testable in its own terms. Either they are right that policy based on those assumptions will lead to high employment and prosperity for the people: or they are wrong. It is perfectly falsifiable in principle, and that is all we can ask of such a programme.
My understanding of the history of this is that they were very broadly right. From its inception in 1947 there was a period of stability and prosperity at least in the western world. Full employment was the central concern of the IMF and it was also the central concern of post war governments. That is no longer true of the governements, however, and it does not appear to be true of the IMF as currently constituted either. That is not so surprising, because the IMF is not independent: it gets its money from those governments and it has not apparently had the strength or the will to defend those original principles: how could it? He who pays the piper.............
