The new IMF annual report carries the title "Working Together to Support Global Recovery." The document contains all of the content that most annual reports do about mission and profits, as well as plans for the future. The two cornerstones of the comments from IMF directors about how the world should work to emerge from its massive recession crisis and international financial trouble have to do with structural reforms within the world's countries and a mandate to help the world's poor and helpless. While each goal is laudable, neither will be reached.
The IMF management describes its primary goals:
In advanced economies, governments had to address fiscal risks and start to put public debt on a firm downward trajectory without killing growth in the near term. Measured near-term fiscal adjustment was needed, accompanied by strong medium-term consolidation plans that included reforms to entitlement programs.
All countries needed to work to ensure that the most vulnerable groups in society were protected from the fallout of the financial crisis.
The struggles of a "recapitalization" of Europe's weakest economies and the battle among politicians in the United States over the country's debt crisis show how difficult it is to reach the IMF's goals. Most of the fights are politically based, and ultimately they are founded on the power of voters. Angela Merkel, for example, can only tap her country for so much bailout money or face a reaction that could push her out of office. The heads of several European countries, which include Greece, France and Spain, have been thrown out already. The debate among the region's leaders over which is more important - austerity or stimulus - may go on for a long time while Europe slips further and further into recession. The U.S. faces similar problems, to which can be added the risk of the fiscal cliff. Bickering has made a resolution to these problems in America nearly impossible, too.
As for the vulnerable groups – the poor, war torn and hungry – most nations do not have the financial means to aid them, or they are ruled by totalitarian regimes that will not. And, if countries like those in sub-Saharan Africa do not have the ability to help their own people, the chances for foreign aid dwindle as the finances of developed nations crumble. Single-party systems, run by a handful or people, or often just one man, can help the poor as they like or not. In most cases "not" is the operative word.
Plans by the International Monetary Fund and other global agencies that like to state their cases in terms of all or nothing might be better off if they acknowledge the troubles within the systems needed to solve problems and restrict their suggestions to things that might actually work.
Douglas A. McIntyre
Filed under: 24/7 Wall St. Wire, International Markets