The IMF is often perceived as a bulwark of neoliberal economics, imposing the “Washington Consensus” on unwilling developing countries. But if the IMF is meant to be spreading the evils of free markets around the world, it is a rather odd sort:
- The head of the IMF is selected by government officials
- The IMF is funded through taxation
- The IMF bails out governments who can’t balance the budget
At its founding, its purpose was to
help cash-strapped governments maintain their currencies’ fixed exchange rates as directed by the 1944 Bretton Wood system. But that system gasped its dying breath in the summer of 1971, when – with Pres. Nixon’s closing of Uncle Sam’s gold window – all pretense of an international system of fixed exchange rates was abandoned.
Now with its original purpose gone, its prime purpose is to prevent governments from defaulting on their debt due to foolish economic policies, and creates enormous moral hazard in doing so. It was created by governments for their own protection. It also benefits banks that have lent to risky governments, as when countries get bailed out, a large sum of the money goes to their creditors. If we’re getting rid of the Bank of England, the ECB and the Federal Reserve, let’s include the IMF as well.