Last week the annual meetings of the International Monetary Fund and the World Bank Group took place in Washington, D.C. Policy elites discussed economic uncertainty, private enterprise and eradicating hunger. All are worthy topics. Still, the real problems affecting the global economy include China’s mercantilism, its restrictions on rare earth exports, the war in Ukraine, and the sharp rise in sovereign debt since COVID-19.
The IMF and World Bank are failing on these counts.
The IMF enables poor economic policies that lead to serial defaults. The World Bank’s approach to development is outdated. Real progress comes through sound economic policies that promote free-market capitalism.
Founded in the final days of World War II, both institutions reflected post-war optimism about cooperation among nations. Today, that spirit is gone. The purpose of any nation-state is national security and economic growth — and neither the IMF nor the World Bank contribute to America’s pursuit of either.
What does the IMF really do?
The IMF enables bad policy in countries trapped by serial economic crises. Argentina is the poster child for serial sovereign bailouts. It has defaulted on its sovereign debt nine times, including 3 times in the past 25 years — 2001, 2019 and 2020. Each time the IMF has stepped in. It is time that Argentina solved its own problems. The IMF should stop pouring drinks for a financial drunkard.
Egypt is another habitual offender. Since 1962, it has sought IMF assistance 11 times. Once a net gas exporter, it is now the Middle East’s second-largest importer. A balance-of-payments crisis looms, and another bailout is almost inevitable. The IMF cannot fix Egypt’s deep economic and political dysfunction.
Pakistan has turned to the IMF 24 times since 1950, yet its economic record remains dismal. Chronic fiscal mismanagement, weak savings and investment, and entrenched political dysfunction have stunted growth. The IMF should learn to say no to Pakistan.
Economic history is clear: the path from poverty to prosperity is marked by productive cultural values and an embrace of capitalism. The World Bank’s concessional loans have had little to do with which countries escape poverty.
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Asia’s success stories — South Korea, Taiwan, Thailand — share two traits: distinctive national cultures and a broad commitment to capitalism. By contrast, most of sub-Saharan Africa remains mired in poverty, held back by corruption, instability and low domestic savings. The World Bank’s role has been irrelevant.
The United States should step back from both institutions. The IMF and the World Bank are ineffective, outdated, and no longer serve American interests. Washington’s focus should be on strong growth at home and a robust national security posture.
James Rogan is a former U.S. foreign service officer who has worked in finance and law for 30 years. He writes a daily note on the markets, politics, and society. He can be followed on X and reached at [email protected].
