The IMF Files: They Want to Believe

By Elizabeth Palmberg 07-29-2008

Andrew Berg, an International Monetary Fund African department policy adviser, is a nice man. I know this because he spent some time talking earnestly with me after an IMF press conference in which I'd asked a pretty confrontational question about Malawi, whose 2002 famine is often partly attributed to IMF (and World Bank) advice, and whose current bumper crops are attributed to ignoring it.

Berg looks a tiny bit like The X Files' Agent Skinner, but what this conversation brought into focus for me is that the IMF is not a vast conspiracy of evil, cigarette-smoking men. It's a large, overly influential group of people who earnestly push policies that are often disastrous.

While many civil society advocates insist the IMF is imposing its will wholesale on poor countries, it insists it's just inspiring them to choose sound policies. Given the huge power imbalance here -- very poor countries often need IMF approval to help get other international loans and aid -- many critics, like me, view the IMF's claim as a farce. Berg's and his colleages' earnestness, however, convinced me that they genuinely believe they're empowering government officials to do the right economic thing in the face of their citizens' political pressure to, say, raise the salaries of civil servants when the price of food shoots up.

And the IMF's critics, including me, are wrong sometimes in blaming the IMF rather than other challenges poor countries face. Take Malawi's 2002 famine. After talking with Berg, I did more research, and discovered that he was basically right: The famine really was caused much more by bad (and likely corrupt) national governance, bad forecasts, bad weather, and bad roads, rather than by the country's agreement with the IMF to partly reduce maize reserves. (I wasn't taking Berg's word for this, but rather frequent IMF critic ActionAid's.)

It was clear that folks at the IMF did care about the food crisis (and, at least somewhat, about years of criticism from advocates for the poor). Berg agreed that policies like grain reserves should be considered on a country-by-country basis, and he was strongly supportive of crop insurance for small farmers. The IMF panelists I heard said that governments should respond to the food crisis by spending money on social safety nets. This may signal a partial change from the IMF's traditional preoccupation with cutting government spending, partly so governments can make national debt payments and partly on the theory that government spending would somehow "crowd out" otherwise-eager private investment.

Overall, though, the IMF is still disastrously wrong in its unjustified overemphasis on "market signals." Take Malawi's current abundance of grain, which happened largely because the government decided to subsidize fertilizer. In recent decades, various international "experts" have advised many poor countries to stop helping their farmers with affordable loans, seeds, and fertilizer. The theory was that it would be better for farmers to buy these things themselves after selling their crops on the world market -- a great idea if it worked, which it really hasn't.

Malawi's fertilizer program ran directly counter to the advice of the World Bank (which has since repented). And this advice was seconded by IMF executive directors' brief expression of concern last year that Malawi's "government interventions in grain and fertilizer markets have continued to impede private sector development." (At the same time, the IMF assented to the need to "protect ... pro-poor spending," and a recent IMF report says its Malawi staff is now "generally supportive" of the fertilizer program).

Perhaps the most relevant kind of market signal is the way in which, over the last four years, almost all the middle-income countries who had borrowed from the IMF (including 90 percent of its loan portfolio) have run for the exits to escape the IMF's policy, um, advice -- so that it is now mostly the world's poorest countries who are dependent on the nice, but wrong, people at the IMF.

Elizabeth Palmberg is an asssistant editor of Sojourners.

Don't Miss a Story!

Get Sojourners delivered straight to your inbox.

Have Something to Say?

Add or Read Comments on
"The IMF Files: They Want to Believe"
Launch Comments
By commenting here, I agree to abide by the Sojourners Comment Community Covenant guidelines

Must Reads