criticism of the IMF

Question 1

Introduction

Answer 1

Introduction:
• The question:
o IMF was profoundly criticised by academia during the 2008-2009 financial crisis due to its inability to foresee, prevent or respond to the crisis
 Lead to great structural changes
• Criticism didn’t stop
• The answer:
o Hasn’t been able to predict, prevent or respond successfully to the crisis or future ones, for example the Greek crisis
o another reason for which the IMF has greatly been criticised is the is the structure and regulations of institutions
 hierarchy with the US at the top
• making it unfair and unequal
o loans are given based on the US’s will
o another reason for which the IMF has been criticised because it’s a new form to colonise the south
 not successful, however still used because it’s a way to spread neoliberal ideas

Question 2

Point 1:

Answer 2

Hasn’t been able to predict, prevent or respond successfully to the crisis or future ones
o As mentioned by Swiminathan IMF’s track record in predicting crises is rather poor
 This makes it subject of criticism because ever since the great recession the IMF was put in charge of overseeing economic stability and surveillance
• The G20 agreed to increase its resources to do so
o Economic Stability Board carried out stuff like the
 Financial Sector Assessment Programs
• every five years of 29 countries whose financial sectors are deemed systemically important
o such reforms were implemented with the belief that it would have allowed the IMF to predict and prevent financial crisis and control free-riding countries
• nevertheless this didn’t occur
o put the IMF under a subject of criticism

Question 3

point 2

Answer 3

• Point: another reason for which the IMF has greatly been criticised is its inability to mitigate power play
Wade: US sole oversized
 Contrary to neoliberal scholars which believes that through the development of international institutions liberalist values of cooperation and equality would spread shaping the actions of countries within them,
• IMF still present a great power difference within them = less fair
o In fact, its policies and actions are lead by the most powerful countries, in particular the US
 Has been subject of great criticism
• In particular the ability the us has in influencing who receives loans from the IMF
o Has been greatly studied and criticised in the past few years
 Makes IMF less fair

Question 4

point 3

Answer 4

o Point: another reason for which the IMF has been criticised because it’s a new form to colonise the south
Jahn: an example of neo-clonialism
structural adjustment programs are made to
 extend neoliberal idea to underdeveloped countries
Economists such as Stiglitz have greatly criticised the IMF he claims that structural adjustment programs is failing to take the best policy to improve the welfare of developing countries
criticism has raised because developing countries have a lack of credibility and faith in the International Financial Institutions and their structural adjustment packages, leading developing countries to walk a path of their own, opposing traditional neoliberalism.

Question 5

Example point 1

Answer 5

o IMF failed at predicting or preventing the Greece government debt-crisis
 output increased in nominal terms by 40%, while central government primary expenditures increased by 87% against an increase of only 31% in tax revenues
• this caused much criticism towards the IMF because it was one of the worst debt crisis of a western government since the US great Depression

Question 6

example point 2

Answer 6

after the 2009 financial crisis the g20 encouraged the IMF to meet short-term liquidity needs for emerging market economies without conditionality attached
o The imf created the flexible credit line (FCL) and the precautionary credit line (PCL) and the countries that were approved for it were only US allies
 Can go back to the fact that the US is the country with the highest voting quota among members (17.46%)
• Meaning that it can exert pressures on the IMF as no other country
o As mentioned by Cohen it has used such pressure to pressured the Fund to offer assistance to countries that are close allies to the US
 Mexico which is part of NAFTA
• Meaning that the US could gain back from such lending
o This created particular concerns among developing countries

Question 7

exmaple point 3

Answer 7

o Free trade
o Privatisation
o Lower government intervention
 Basic of market friendly principles of neoliberalism

Question 8

scholarly debate to respond to crisis

Answer 8

Swiminathan: poor record at predicting crisis
Nevertheless, as mentioned by Jost and Seitz it has been argued that the fault was partly of Greece as in October 2009, the newly elected Greek government raised its projections for the 2009 budget deficit from 3.7 % to 12.5% of GDP (which were actually 15%) to the EU
o However this occurred within the EU
 Based on neoliberal institutionalism institutions are created in order to mitigate anarchy, lead states to cooperation and make sure that states don’t free-ride
 as mentioned the economic stability board and the financial assessment programs were made in order for the IMF to be able to independently predict and prevent financial crisis and control free-riding countries
 However this didn’t occur
• However, the inability of the IMF to predict the Greek debt crisis and its inability to stop Greece from free-riding was the main subject of its criticism

Question 9

scholarly debate power play

Answer 9

wade: outsized role
However, it is argued by Steinberg that developing countries actually have a fundamental role
• Nevertheless, has mentioned by cohen the Fund itself is subject to substantial leverage from the U.S. government, which still retains unparalleled influence over IMF decision making
o Through which the US achieves what it can’t achieve by itself
 Showing how the IMF works in a hierarchical structure with the US at the top
• Meaning that countries which apply for loans are treated differently depending on their relationship with the us
o Which ahs been a great subject of criticism

Question 10

scholarly debate new form to colonise the south

Answer 10

• Jahn: neocolonialsim
However, scholars such as Brett argue against such a view believing that SAPs are more usefule than critics believe
o However such a view is misinformed considering that SAPs never increased gdp more than 2%
 Average of 0.8%
• Since they aren’t so successful the only reason for which they keep it is because western countries that control the IMF want to spread neoliberal policies
o Making the IMF subject of growin criticism