There is no meaningful role for the International Monetary Fund (IMF) and /or the World Bank in a modern international financial system

Résumé du document

IMF describes itself as "an organization of 184 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty".(IMF website)
The International Monetary Fund has been created in 1945 during the Bretton Woods conference and was signed by 29 countries in order to design a new international monetary system with full employment and price stability and allowing countries to attain external balance without imposing restrictions on international trade (Krugman and Obstfeld, 2006) The IMF was created in order to avoid the repetition of financial crises that took place during the interwar years. The abusive printing of money and the reduction of labor had created an increase in price levels so that countries faced with inflation. The reconstruction process had also contributed to print more money so as a result money supplies and prices levels increased.
As a doctor who prescribes medicines to afflicted countries, the IMF tries to help countries facing financial issues. Member states with balance of payment problems request loans and/or organizational management of their economies. In return, the countries are required to launch certain reforms. These reforms are generally made because countries with fixed exchange rate policies can engage in fiscal, monetary, and political practices which may lead to crises. For example, nations with budget deficits, inflation, or strict price controls run the risk of facing balance of payment crises in their future.
In order to "cure" these countries, the IMF has adopted a strategy summarized in its structural adjustment program. This program has different objectives and has been adopted in many IMF's interventions. First the IMF's goal is to reduce the size of government budget by reducing government's expenditures. It also requires the privatization of the state-owned enterprises, financial liberalization by removing interest rates ceiling on banks, the depreciation of exchange rate to improve the balance of payment's position and finally to remove price control on fuel, commodities and utilities. The effects on such decisions will be discussed more in details but we first have to understand IMF's role in order to discuss its actions.

Extraits

[...] The main question that occurs is: is IMF still adapted to the actual globalizing international financial system? Did it succeed in resolving financial crises, its main role? And does the World Bank achieve its goals? A lot of criticism can be made to both organizations but before studying the reasons why these two organizations are not as efficient as expected we must bear in mind that both objectives are so huge, making poor countries rich, that failures are not so surprising. [...]

[...] Argentina was also an early volunteer for assessment against international standards and codes for policy transparency. So what went wrong? First, fiscal policy was too weak during the crisis. Argentina should have been able to pay its debt with an increase in tax. The convertibility plan brought overvaluation, because of the lack of flexibility in the domestic economy. And the problem of the debt was not solved quickly enough. In other words, Argentina entered a vicious circle of weak activity, overvaluation, and increasing debt. Another example is Indonesia. [...]

[...] So instead of resolving developing countries' issues, the IMF has been as most world organizations influenced by the American supremacy and its lobbyists. Keynes, the intellectual godfather of the IMF used to say that when countries face a downturn, monetary policy often would not suffice to restore the economy to full employment. Keynes argued that governments should increase expenditures (or cut taxes), but he also recognized that due to capital market imperfections, some countries would have some difficulties to have access to the funds needed to finance such a policy. [...]

[...] So this organization has not been able since its creation at the end of World War Two to change its way of seeing economic issues, and they still, as the IMF does, give the same solutions in response of financial issues, crises. “What strikes you as you look back over the decades is this repeated cycle where we've all thought there was one key factor that would transform poor countries into growth economies. At one point, it was family planning. [...]

[...] (Stiglitz, 2003) The logic conclusion is that the International Monetary Fund, whose responsibility it is to ensure the stability of the global financial system, has failed in its mission to stabilize international financial flows. The actual situation in developing countries is that the capital flows are pro-cyclical, coming in good times and leaving in bad so they make the booms more intense and the busts worse. Capital flows are one of the primary causes of economic fluctuations. The bankers and speculators are responsible for this situation but after all it is the way they do business. [...]