In town for the Annual Meetings, Dominique Strauss-Kahn, our Managing Director, paid a visit to Bilgi University in the heart of Istanbul. He spoke to a gathering of students about the role of the IMF in the current crisis, and took some of their questions.
The Managing Director likened the IMF to an “economic Red Cross” because its goal is to help solve a country’s economic problems while avoiding social unrest and war. He noted that the relationship between peace and economic stability was well understood by the people who founded the IMF in 1944, in the aftermath of the Great Depression and the second world war.
Continuing with the medical analogy, he pointed out that countries only need IMF resources when they are “sick”—when they face serious balance of payments problems requiring policy adjustment. If you go to the doctor with a liver problem, he mused, the doctor will treat you, yes, but will also insist that you stop drinking. So policy conditions are necessary. Still, the Managing Director admitted, the medicine had sometimes been too bitter in the past. The IMF had developed a “harsh image”—not paying enough attention to local circumstances, political realities, or social consequences. It was seen as more of a policeman than a doctor.
But the IMF has learned lessons from the past, he noted. Today, our lending is more flexible, taking country circumstances into account, focusing only on core conditions. The Managing Director also emphasized the role of “social conditionality,” where our lending programs have elements explicitly dedicated to protecting the most vulnerable. He also noted that the IMF is lending dramatically more to low-income countries, and is doing so at zero interest.
The students asked some good questions about the Fund’s role. Some wondered if IMF involvement was really good for a country at all. Perhaps the IMF was the problem rather than the solution. The Managing Director stressed that even though mistakes were made during the Asian crisis, the countries that took the IMF medicine are in pretty good shape right now. And today, he noted, our programs are better designed and hence more effective. In many countries today—including in Africa—the IMF is seen as more of a solution than a problem.
Strauss-Kahn argued that the international cooperation on display during the crisis was one of the main reasons why the global economy averted disaster, and why a recovery is now on the horizon. A big worry, he noted, had been that this experiment would end when danger fades into the background. But the G-20 decided to go on working together after the crisis. This was a good sign, and he expressed the hope that we may be entering an era in which a global economy will be managed at the global level.
On the whole, it was a good debate. Unfortunately, a small group was not interested in debate, and instead tried to disrupt the event as the Managing Director was on the verge of wrapping up. One threw a shoe and tried to rush the stage, while another tried to unfurl a banner. Nobody was hurt, and it was quickly over. After the event, the Managing Director stressed the importance of having an open debate. He was glad to meet students and hear their views. And with a touch of humor, he noted that Turkish students were polite—they waited until the end to complain!