In a first part, the IMF can be considered as a “disastrous” organization “in terms of the long term economic health of the countries”. Firstly, it is important to say that the IMF only lends to “friends” or “rich” countries; LEDC’s are thus punished. The best example is Argentina. After a disastrous year (1989) with an inflation rate of over 3000%, the IMF supported the convertibility plan (i.e. 1 local peso equalled 1 dollar) designed by the economist Carvallo. This help was granted partially because of the excellent relationship between the US president (i.e. Bill Clinton) and the local president, Carlos Menem, on the one hand, and because of the friendship between Carvallo and the IMF experts on the other. The fabulous aid reached over $100 000 million over a ten year period and helped Argentina to artificially maintain its currency. Nonetheless, with a rising productivity cost (their products were not competitive in the market) and an augmentation in unemployment, the IMF, in my opinion, did not enforce the structured reforms it should have done to promote long term development (this is to say, labour force flexibility, civil service cost reduction, etc). When Argentina changed president, the IMF changed attitudes (i.e. as if that country was not their “friend” anymore). I hence believe that the collapse of Argentina’s economy is due to the gradual mistrust of the IMF towards the new president (i.e. De La Rua) who originated the exit of millions of dollars to other countries leading to the devaluation of the peso. As said in this assertion, the IMF “bled the patient” when they obliged Carvallo to defend a “zero deficit” plan (i.e. reduction of pensions and public service salaries, increase of tax, etc). This led the country to poverty, plunging it into very high debts.
In addition, another point that I think is relevant is that the IMF has a particular policy, which consists of if there is no confidence, no money is provided. I see some unfairness here. In order to explain this, let me stick to the case of Argentina, this time in comparison with other South American countries. Whilst the IMF left Argentina without help, Brazil received millions of dollars from the global fund without restrictions or requirements. So, what I observe is that once the IMF damaged the country severely, it did not try to help it. Personally, I think this shows clearly that this institution is “disastrous in terms of the long-term economic health” of some countries.
I bring this a step further by saying that I totally agree with the idea of comparing the IMF to a “medieval doctor” who always applied the identical medicinal methods. In effect, the IMF constantly uses the same inflexible recipes, regardless of the local or regional environment. This means that it will apply the same measures to different countries and situations. It is important to state that it “thinks and acts global”; this is definitely, for me, not the best attitude and this, again, can be observed in its plan designed for Argentina, i.e. it led the country to the worst recession of the last few decades and pushed the population into hunger and desperation. I notice that for this situation the IMF used very similar tools to the ones applied in Russia to save the Russian financial system, but we see those methods cannot be applied to every country.
Now that I looked at why this institution can damage the economic health of a country, I will remark, in this second part, an interesting point regarding its successfulness “in steering the country’s resources toward paying debts”.
It is true that the IMF may help a country (e.g. Russia). Nonetheless, I think this point cannot be criticized, because as mentioned earlier, the IMF was created with the intention of avoiding bank “cracks” as they occurred in the pre-war period. The IMF is the “Central Bank” of each country’s Central Bank and therefore it is compromised to help banks with financial difficulties. This is its obligation; I look at it as the same duty parents have to carry out over their children (i.e. obliged to provide shelter, care…). The problem is that the IMF resources are limited and sometimes insufficient to help states in difficulties.
In conclusion, it can be said that I have adopted a structuralist point of view and agreed with the assumption. This is due to several reasons, one of the main ones being that I really believe the IMF creates huge damage in some countries’ economic health, e.g. It did not succeed to calm (but worsened) the Asian markets after the Baht (i.e. Thailand) crisis or the South American market with the Argentinean crisis. “Bleeding” those countries is surely not the best way to attract again FDI and to transmit a message of confidence in the country for further expansion. It is true that it helps to pay debts back to banks but in the long term, it generates more harm than gain. It has been suggested that the IMF’s adjusting policies push nations into a stronger recession; its aids can be valuable but it needs to adapt them to each region and must stop using a “global” ideology.