Blog 7

"The IMF generally didn't show up unless a country was already in trouble. But still, I'm amazed how the IMF and other institutions kept getting things wrong." (p. 242) I think it is one of the most impressive phrases in Economix for me. And more you think about, more you see that it is actually true: the IMF doesn't want to help you, they only want to keep things bad, maybe even worse than they were.

How does it actually work? Country gets into trouble with their budget and has no money to pay on their agreements. The government of that country asks the IMF for some money. The IMF agrees to loan that money under some conditions: freedom of capital movement, privatization, minimization of social programs and so on. These conditions actually make the situation in the country worse. Free trade open doors for the giant international corporations that buy everything they can buy and start to sell their products that most of the time are cheaper than the same products produced locally. Because of that native population start to lose money and jobs. And they don't get aid from the government because the IMF said to close social programs. Also the government starts to lose money because now people buy cheap products from foreigners who don't need to pay taxes to the country they invaded. In this situation it is impossible to pay their debts so countries borrow more and more money. Now they are completely dependent on the IMF. Can we really call it help?

If you look on the distribution of votes in the IMF you will also see inequity of rights. You can get votes for the country putting more money into the fund. Only the US has 16.73% of all votes (next is Japan - with only 6.23%). Top 10 countries have 53.3% of all votes. The rest 178 countries have less than a half!

Also to get some decisions approved the Fund needs to get the super-majority of votes by 85%. The US can block any decision with its 16+% of votes. If the United States doesn't approve something it won't be done. Is it fair to give so much power to just one country out of 188?

So does the IMF help in reality? And who: the whole world, a country that needs help or just these giants in world economy (especially the US) that need more market for their goods?