IMF 2.0: has the Fund really changed its tune?

IMF 2.0 or same old, same old - has the Fund really changed its tune?

OXFAM

Has the G20 revived the neoliberal, austerity-wielding IMF of the 1980s and 90s, are has it ushered in a new IMF 2.0 (in the words of Time Magazine) that cares about countercyclical economic policies, public services and jobs? In late April, IMF Managing Director Dominique Strauss-Khan wrote to NGOs saying ‘I would like to make it clear that we do not put conditions in programs that limit health and education spending. On the contrary, about one-third of Fund-supported programs in low-income countries have targets to preserve or increase social spending.’ Grumblings that the IMF is ‘going soft’ have already started among hardliners in Washington, surfacing in the Wall Street Journal. But is Strauss-Khan telling the whole story? It’s a crucial question in the global response to the economic crisis.

Over at the Center for Global Development, Nora Lustig is certainly in a celebratory mood, welcoming the IMF boss’s promises. She concludes that ‘It seems that the Fund is in the process of embracing socially responsible macroeconomics. For the sake of the world’s poor, we should all hope that it succeeds.’

Others are more sceptical – Third World Network and CEPR have both looked at post-crash IMF lending practices and concluded that the leopard hasn’t changed its spots. Even The Economist is sceptical, arguing that any policy changes are more about reacting to different circumstances than any profound rethink. In regions with ‘old school’ crises such as Eastern Europe (which the Economist sees as ‘reliving the Asian Crisis’), its ‘macroeconomic prescriptions are very much IMF 1.0’ – worry about inflation and jack up interest rates, even at the cost or recession.

This all looks like the gap between words and deeds, and between Washington and ‘the field’ (not that IMF staff spend too much time in fields….). But suppose both are right – there is a genuine desire for change from the Fund’s leadership, backed by its members, but little is changing in practice?

What set me thinking about this was a chapter by Nicholas Pialek in ‘Can NGOs Make a Difference’. Nick is currently a gender adviser at Oxfam, but before he got there, wrote his PhD thesis on what he sees as the failure of gender mainstreaming in NGOs (with a focus on Oxfam!). A lot of what he says could easily ring true for reform of the IMF, should it ever get past its opposition to all things heterodox, Keynesian, countercyclical etc:

Nick presents the problem as ‘why is there no change when there is no noticeable opposition?’ to the new ideas, or what he calls ‘consensual acquiescence’. He sees two kinds of resistance to change: passive and subconscious, both of which frustrate efforts at institutional reform.

What is required, he argues is to distinguish between ‘norms’ (policy statements, rules and procedures, explicit goals, all backed by edicts from senior management etc) and ‘values’ (what goes on in the heads of individuals employed by the organization). If you want to radically change an institution, you need to transform both, but so far all the effort to date at the G20 and IMF has been focussed on the norms. The trouble is that they are the easy bit. What will be needed to change the IMF’s DNA, the assumptions, default solutions, and logic of its staff when confronted with real life? Changing existing staff will be personal, intense and reflective (one author likens it to religious conversion) and slow – very hard to achieve through traditional command and control management systems. Nick’s proposed solution for the NGOs’ gender mainstreaming problems was for them to hire a load of feminists. Will the IMF also have to hire different staff? Probably, and perhaps someone should start monitoring the economic views of the Fund’s new recruits, but don’t hold your breath for a mass entrance of heterodox economists.