The wrong signal -- IMF's role in Asia
The wrong signal -- IMF's role in Asia
By Christian von Hiller
BERLIN (DPA): Indonesia is threatening to be a rerun of the scenario that the world has already been observing in South Korea. After President Soeharto agreed to bow to the harsh demands made by the International Monetary Fund (IMF), Indonesia is to receive financial aid totaling US$43 billion.
The fund gave South Korea a total of $57 billion when the government there implemented a far-reaching clean-up program. IMF president Michel Camdessus and the international creditor banks believe that a global conflagration in the financial markets has been averted in the nick of time.
And nobody would like to imagine what would have happened if the international economic community had not stepped into the Asian crisis so decisively.
But the IMF's generous aid package to South Korea has meanwhile disappeared into thin air, as the currency continues its downward spiral and the region's debtors are looking worse as each day passes.
Isn't it possible that in its generosity the IMF has sown the seeds for yet more and even worse financial disasters? This question has grown more pressing since Camdessus raised the IMF's status to that of a global fire service, always hurrying with sirens wailing and full money tanks to the next economic bushfire.
Market economics rests on the principle that profits are the reward for risks and ventures. Conversely, this means that businesses must also be prepared to take losses. The IMF has made this premise inapplicable.
And the IMF has already broken these economic rules. Three years ago it stepped into the Mexico crisis, thereby setting a precedent for its Asian expedition. The expectation since then has been that they will always be at hand in an emergency.
In Mexico's case, it wasn't the private creditor banks which were expected to meet their suffering commitments. No, the IMF and the U.S. government happily paid the bill.
Similarly in this latest crisis, the IMF was impervious to German demands on the Monday before Christmas that private creditor banks be forced to share some of the cost.
The private creditor banks will not be called to account for their commitments in Asia. Yet it would be unhealthy for the whole economic order if the IMF fosters a system in which the profits are taken by private business players and the risks are covered, through the agencies of the IMF, by society at large.
Such a model is doomed to failure. Regretably such considerations do not seem to fit in Camdessus's concepts. While he has installed himself as the grand crisis manager, the consequences of his strategy can only mean that the IMF will forever be shelling out ever larger sums with no prospect of success.
Added to which, these large amounts only provide temporary relief and give the wrong signal.
In Asia's case, such objections are obviously too late. But if this debacle should teach us anything it is that this sort of crisis can only be avoided by effective preventive measures.
Camdessus, however, is trying to force the IMF into a role which, in a functioning global economy, it has no need for and anyway cannot fulfill.