The Downside of the IMF

                The International Monetary Fund (IMF) was created in 1944 with the goal of promoting international economic cooperation and provide its member countries with short term loans so they can trade with other countries. This idea is supposed to even the playing field so smaller countries can compete with the larger more powerful countries. The larger countries had a habit of threatening smaller countries with trade exclusions if they did not do as they said. One of the prime examples of this is when the United States refused to accept imports from Malaysia, India, and Pakistan due to the fact that the fishermen who caught the shrimp did not use turtles excluding devices (TED’s) which stops the turtles from being killed. Because of this environmental groups in the United States said that there was a moral obligation to protect these animals, and also a legal one under the Endangered Species Act. The World Trade Organization initially ruled in favor or Malaysia, India, and Pakistan, but later reversed its ruling saying the United States could ban the import of shrimp from these countries. Critics point out that this is a prime example of why organizations like the IMF and WTO should not be allowed to operate, they have policies that favor the rich and global north.

                There are many other problems that critics use as an argument against the IMF most notably the human rights group global exchange accuses the IMF of modern day colonialism, they say the bailouts offered to struggling countries come with a hidden cost that keeps already weakened countries in economic ruin. The IMF ensures debt repayment by requiring countries to cut spending on education and health; eliminate basic food and transportation subsidies; devalue national currencies to make exports cheaper; privatize national assets; and freeze wages (Global Exchange, 2011). These are the methods the IMF uses to control countries it “helps” if the countries refuse to abide by the conditions set aside the IMF will level sanctions against the country like  freezing all the countries assets and stopping international trade. A recent IMF loan package for Argentina, for example, is tied to cuts in doctors' and teachers' salaries and decreases in social security payments.

                The reason the IMF seems so global north friendly is that voting in the IMF is controlled not by a democracy but power is determined by the amount of money that each country pays into the IMF's quota system, the more money you put in the more influence you can have, and the United States controls 18% of the votes in the IMF (Global Exchange, 2011).  With this voting power the best interests of the United States and its allies are represented, and IMF sanctions rarely ever go against these countries.

                The IMF also tends to interrupt the natural economic growth of countries, the same mistakes that were made by the United States and other countries, and the incremental building blocks they developed are being ignored, while the IMF is attempting to fast track these countries and it is doing more harm then good. In many countries where the IMF is exerting an influence the focus has shifted from developing a strong domestic economy to one that is focused on exporting as many goods as possible to help pay off the loan. The United States started out as a country where most of its inhabitants were small subsistence farmers, as a result the exports were very low, it took decades of this type of living until a manufacturing revolution took over and the country became a great exporter, and in more recent years then number one importer in the world. The IMF is trying to deny countries the same experience that all developed nations have had, and used to achieve their current status and this has not been successful for any of them. Trying to have countries skip steps many seem like a good idea that it might let them achieve more faster, but knowledge given is never as good as knowledge gained.

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