Is The IMF Doing More Harm Than Good?

            The economies of many countries in today’s world are intertwined and work together toward a common goal of stability and prosperity. However, this is easier said than done. In class, we have discussed in the past few weeks how countries have collaborated with one another to form institutions that will create security for its members. These organizations include the UN, NATO, and the IMF. Some of these organizations have been more successful than others. In the last 20 years, the IMF has failed to properly handle economic crises, which causes many people (including myself) to question the legitimacy of the organization.  

            The first major blunder the IMF improperly dealt with was the Asia crisis of the 1990s. During this time, currency fluctuation was rampant and foreign investors began to worry. This lead to the first major currency crisis in the time of the IMF. Nobel-winning economist Joseph Stiglitz has been noted for his criticism of the handling of the crisis by the IMF. Stiglitz argues that the IMF bowed down to the demands of Wall Street, who wanted to create the new markets for their own gain. He also believed that the poor austerity measures lead many foreign investors to improperly handle the funds and led to a prolonged recession in the region. I agree with the views of Stiglitz, as the IMF did more harm than good in this situation. Rather than allowing the country to receive a capital influx, the IMF allowed for foreign investors to count their losses and take what money they had. By allowing for the divestment in the country to occur, the countries in the region were irreparably harmed for many years to come.

            The next poor handling by the IMF was in the recent European Debt Crisis of the late 2000s. During this time, many countries of the Eurozone had major debt and liquidity issues, leading these countries to default on their loans. Countries like Greece and Cyprus went into a massive recession, causing their GDP to crumble and their interest rates to skyrocket. In an attempt to combat this, the IMF and the World Bank introduced major austerity measures to entice investors to stay in the region. The IMF believed that the influx of capital from the IMF would stabilize the economy and move towards growth. However, this did not work out as hoped. Although the IMF handling of the European Debt Crisis was not as bad as in Asia, I believe that the measures that the IMF took could have been stronger. One of the major flaws of the IMF capitalization is that they enacted repayment measures that are very far out of reach for countries to be able to attain. This caused the countries, such as Greece to have difficulty pulling themselves out of the recession.

            I believe that organizations such as the IMF are a good idea in theory, but the execution of such organization has failed to prove itself. The IMF on countless occasions has failed to provide realistic austerity measures for the countries having difficulties controlling their debts. This lack of optimistic methods has caused for countries to continue spiraling down into deeper debt. Some of these countries may never recover to the same levels. If the IMF were to introduce difference austerity measures, it would give these countries a chance to grow back to their pre-crisis glory.