| 09 November 2008
Where are you , when we need you, John Maynard Keynes? Keynesian
economic demand management as a remedy for recession is outmoded and discredited,
but the man was a giant who was almost single-handedly responsible for bullying
and persuading the world's political leaders into the financial structure which
has underpinned growth and stability ever since.
Today there is no comparable figure, and we witness pigmy political
figures running around like so many headless chickens without a clue as to how
to restructure the system now that it has run into trouble.
'More regulation', they bleat, and reach for Keynes's IMF as a
cowboy reaches for his six-gun. In fact the IMF is one of the first things they
should be getting rid of.
The IMF and its advisory sibling the OECD are the standard-bearers
of economic orthodoxy. But it is arguable that the IMF, whose primary stated
purpose under Keynes's rules was exchange rate management, not economic management,
lost its way after the system of fixed exchange rates broke down under the weight
of economic forces in the 1970s.
The IMF's own (modernized) 'mission statement' is: 'The IMF is an organization
of 184 countries, working to foster global monetary cooperation, secure financial
stability, facilitate international trade, promote high employment and sustainable
economic growth, and reduce poverty.'
Paradoxically, the nation states which fund the IMF probably see it as actively
helpful towards their individual economic well-being; whereas the reality is
that it forms part of a developing global carapace of regulation whose clutches
individual member states are no longer able to escape. From this aspect, the
crucial work of the IMF is standard-setting, an activity shared by all of the
'multilaterals', including also the World Bank and the Basle Committee on Banking
Supervision on a fiduciary level and the OECD in fiscal affairs, to mention
just the most prominent of global economic standard-setting bodies.
The IMF has also given its name to a Code of Conduct that emerged from persistent
sovereign debt crises: The Principles for Stable Capital Flows and Fair Debt
Restructuring in Emerging Markets. This was formulated in 2004 between the representatives
of emerging market countries and private sector creditors.
In the popular mind, though, the IMF is seen as the world's fireman, running to the assistance of individual countries that get themselves into trouble and stiffening their fiscal moral fibre. The future of the IMF in this role, which has largely been taken over by the markets, is problematic, and it may not
survive the first half of the 21st century as an independent institution. It
has played a useful part in helping the development of sound fiscal regimes
in many 1st, 2nd and 3rd world countries, but its task is nearly done.
The solution to today's problems will not come about by thickening the regulatory
exo-skeleton of the world economy in some top-down kind of way, it will come about by strengthening the bones
and sinews of the financial markets, and encouraging the markets to police themselves
according to an agreed set of global guidelines.
As for the IMF, let's give it to the World Trade Organization and make it responsible
for agreeing those guidelines between nations. It's high time that trade in
money joined goods and services under a unified regime, to prevent such nonsenses
as Brazil's transaction taxes.
You have been reading an entry on the following blog:
Jeremy Hetherington-Gore Unleashed
Jeremy tackles the difficult issues head on!
Contact: jeremy@lowtax.net
|
Lowtax Network Portal
Front Page
Tax Jurisdictions
Featured Content
