IMF is not a capitalist institution
Many of us capitalists don't like many of the IMF implementations but for different reasons than typical IMF foes. Many of us would prefer market based fixes for predicaments such as the Argentina or the D.R. A proper capitalist approach would be to simply let the D.R. default on its loans. In the future, foreign lenders would be more hesitant to loan money carelessly to profligate spenders and the cost of borrowing would rise as the government acted less responsibly. Right now, lenders are fairly assured of bailouts so lend money more easily. The cost of borrowing would accurately reflect the risk involved. This is the same problem with debt forgiveness. It creates a moral hazard by punishing developing countries that pay their debt and rewarding countries that borrow more than they can pay. Better for a country to default, soak the lenders, and let the lenders be more cautious in the future lending for silly monuments, public boondoggles or state corruption mechanisms. The reason that many countries are struggling with debt is because they have had access to imprudent lenders who have known that their loans would be repaid by the IMF in case of a potential default.
The IMF itself is not an evil institution, but it makes it too easy for countries to be fiscally irresponsible and then when the countries get in trouble, they beg the IMF for money and get to paint the IMF as the bogeyman for domestic political consumption. The IMF never made anyone borrow money. Countries choose to go to the IMF when they get themselves in trouble. Let all countries borrow at market rates backed by a real ability to repay (as opposed to a perceived IMF co-signer) and over time these messes will become infrequent. Who keeps loaning the D.R. money long after it is apparent the government finances on shaky ground (more like quicksand)? Bankers who expect to get their money back from the IMF.
For a fleshing out of IMF problems from a capitalist viewpoint, I would recommend "Global Fortune" by Ian Vazquez. It's available in paperback.
-Loren
Many of us capitalists don't like many of the IMF implementations but for different reasons than typical IMF foes. Many of us would prefer market based fixes for predicaments such as the Argentina or the D.R. A proper capitalist approach would be to simply let the D.R. default on its loans. In the future, foreign lenders would be more hesitant to loan money carelessly to profligate spenders and the cost of borrowing would rise as the government acted less responsibly. Right now, lenders are fairly assured of bailouts so lend money more easily. The cost of borrowing would accurately reflect the risk involved. This is the same problem with debt forgiveness. It creates a moral hazard by punishing developing countries that pay their debt and rewarding countries that borrow more than they can pay. Better for a country to default, soak the lenders, and let the lenders be more cautious in the future lending for silly monuments, public boondoggles or state corruption mechanisms. The reason that many countries are struggling with debt is because they have had access to imprudent lenders who have known that their loans would be repaid by the IMF in case of a potential default.
The IMF itself is not an evil institution, but it makes it too easy for countries to be fiscally irresponsible and then when the countries get in trouble, they beg the IMF for money and get to paint the IMF as the bogeyman for domestic political consumption. The IMF never made anyone borrow money. Countries choose to go to the IMF when they get themselves in trouble. Let all countries borrow at market rates backed by a real ability to repay (as opposed to a perceived IMF co-signer) and over time these messes will become infrequent. Who keeps loaning the D.R. money long after it is apparent the government finances on shaky ground (more like quicksand)? Bankers who expect to get their money back from the IMF.
For a fleshing out of IMF problems from a capitalist viewpoint, I would recommend "Global Fortune" by Ian Vazquez. It's available in paperback.
-Loren