Tinkering with the IMF

Time to try something completely new; sunsetting

The International Monetary Fund has been announcing that the world's baleout kings are reforming by re-weighting voting rights to make them more aligned with members' shares of the world economy. Eg people like China and India are to get more votes, smaller European countries less, some African countries up to what they should be etc.

But all this is just orthodox; it is time to try something hetereodox. The IMF has outlived its usefullness as the world's capital markets have become more and more integrated and as the cost of information (not least through the internet) has continued to decrease. The IMF basically provides (free, taxpayer supported) insurance to those wealthy enough to invest in more risky and larger quantities of lending to the governments of poorer countries. These investors get the higher returns but do not suffer the risk as the IMF will step-up and cover the payments if the governments do not.

This removes the incentives for IMF-supported nations to be prudent and economically-sound with their borrowing and spending policies, and is counterproductive for reform and sustainable economic growth within these countries and for creating independence from taxpayer subsidized international development institutions.

This shows that it is time to question the IMF's existence in the first place. The IMF and World Bank were created after World War II to 1) help rebuild Europe, 2) buy 'Western' allegiance from those countries in the non-aligned and developing world, 3) facilitate balance of payments between countries under the gold standard, and 4) to make long-term capital available to countries without a borrowing record and in times of uncertain inflation.

We no longer have the cold war, the gold standard has been replaced by a liberal exchange system, and excessive inflation has been tamed over the last 20 years of the Greenspan regime.

You could argue that during the break-up of colonialism in Africa and Asia in the late 1950s and early 1960s that the IMF might have had a valid new role - that of helping these countries establish sound post-colonial monetary and fiscal regimes. But these countries have now been in existence longer than most of us have been alive so maybe it is time to grow-up and leave the house so to speak.

MOST IMPORTANTLY: The whole construct of the developing world is a self-fulfilling prophecy. The more humanity labels a country as 'developing' and perpetuates institutions around this tautology, the more a country will continue to be 'developing'. It is always developing and never developed. The whole construct is askew. Economics is economics; it doesnt matter if applied to rich or poor. Growth through sound monetary and fiscal policies, sound and non-arbitrary rule of law and economic growth through free trade. These are the keys to 'development', rich or poor.

The Public Choice school of economics describes how bureaucracy have incentives to grow and perpetuate themselves. This is especially true of the international development bureaucracy as there is no domestic constituency demanding results for the spending. Plus development has been made out to be much more complicated than it really is so the 'expert fallacy' also perpetuates. Social change and the reform, or abolishment, of institutions takes time. But the IMF and World Bank are the exception to the rule of the Hegelian march towards freedom. Enough is enough.

For more on the World Bank, the IMF and the World Trade Organization (WTO), specifically in the context of the anti-globalization protest movement, see my paper "The Protestors are Half-Right" at cameroneconomics.com

A Tennis Game in Washington DC

A parable on manners and culture

Labor Day weekend I took the Chinatown bus from New York to Washington, DC to visit my parents and to play tennis with my ex-wife, who was a youth tennis champion in Thailand before she immigrated with her Mom to the USA. Duangjai usually has no trouble beating me in tennis (she is tall and has an awe-inspiring serve). We have played together in many different locations on three continents (Asia, Africa and North America) when I was in the foreign service and she a foreign service “spouse’.

I was looking forward to seeing my old friend Duangjai and to the game, I hadn’t played in 6 months or so as was recovering from a broken foot due to a motorcycle accident. After the game we were going to have lunch at Union Station where a mutual friend of ours, a painter and a philosopher, has restarted working his previous shift as the Sunday bartender at one of the restaurants at the station to get lunch and to say ‘adios’ before I headed up to New York to live and to start advanced studies in economics. Before starting his shift our friend buys the New York Times and Washington Post and Wall Street Journal and other reads for his customers and his bar has been the comings-and-goings spot for a lot of people, me included, for Amtrak rides to and from Washington, DC. As a poor graduate student I was taking the cheaper Chinatown bus instead of Amtrak this time around.

We decided to play at the University of District of Columbia public courts which would be an easy meeting point off the metro red-line from Duangjai’s house in Silver Spring, MD and for our Union Station point of departure. I knew the area pretty well as had studied math for a year at UDC in order to not fail-out of economics ! We got to the courts and two of the five courts were covered with tree detritus and the nets were down because of the recent rain storms. Two of the remaining courts were taken by singles games, two sets of middle-aged guys, with the ethnic mix one expects in DC (albeit not in Northwest which, except for UDC, is predominately white); a couple blacks, an Asian and a white guy. The last court was taken by a mixed doubles game, an attractive group of younger white people who were pretty good at the game and the women wore nice tennis attire.

When Duangjai and I arrived we were the only people waiting. A few minutes later another couple showed up. After waiting about an hour there was no movement off the courts from any of the games. I usually like to give people the benefit of the doubt and give them enough space and freedom to do the right thing – one can be disappointed and waste time this way but the alternative is jerk-like behavior which begets similar jerk-like behavior.

There was still no movement off the courts so I asked Duangjai what we should do. Thai people are very mindful of manners and social etiquette, and tennis is supposed to be the epitome of manners in sports (which is probably why John McEnroe is such a famous and entertaining iconoclast) plus Duangjai was the old tennis hand, she said go down and ask how long they would be.

I went to the nearest court and asked the nearest player how long they might be. He said non-committally that they arrived the same time as the doubles court, had been playing for 45 minutes and it was second set 2-5. It was now obvious that we were waiting and that time was ticking. One of the guys on the doubles court was starting to get that guilty look that said maybe he and his friends weren’t doing the right thing; he was my guy for coming through so that we could get on.

After another ten minutes it was obvious that this was going to be a typical day in Washington, DC where important people are doing important things and not thinking of others, because, well, perhaps they know best the way things should be. I spoke to the guy next to me who was waiting with his friend and said that one of my theories is that there is a direct correlation between the respect that one has for him or herself and society and how people treat each other in public like waiting in line, or, in this case waiting for a tennis court. (There is a big difference in waiting for a bus in Dakar, Senegal and in Amsterdam, Holland, with the half-way point being maybe Rome, Italy; these all being places where Duangjai and I had waited for buses.)

I asked the guy next to me what we are going to do. He said after an hour he was going to try to get on. I timed the wait on my cellphone and it had now been 15 minutes since the first guy said they had been on for 45 minutes. Our new acquaintance went down to the doubles court to say hey its time. Immediately the biggest guy (we’ll call him Buff Guy) came over to my new acquaintance and said the other people were on the court first – a typically DC attitude of denying responsibility I thought to myself- and that he would throw him off the court if he didn’t get off. I said that there are two groups of people waiting, and both courts had been on more than an hour (Duangjai told me that it was clearly posted that courts are limited to one hour if people are waiting). Buff Guy ignored me and was spoiling for a fight for the person who stepped on “his” court.

I told my new acquaintance not to worry about it, that this was typical DC behavior. It turns out that yes, the other people waiting for the court were indeed from out-of-town, so this type of rudeness was new to him. His woman friend laughed and said, “I like New York better.”

Of course by this time I was thinking that the uncouth young people playing doubles were probably regulatory attorneys or otherwise in the business of wealth redistribution who thought that the rules only apply to other people and that what belongs to everybody belongs to them. Washington DC is famous for people honking their horns at the instant a traffic light changes or at the drop of a hat for anything. But these are mostly: 1) longtime serving bureaucrats who have worker alienation because their government programs don’t work and/or those they regulate just don’t seem to follow their every anachronistic rule so that the only sense of control they have is when driving to and from work; 2) people who have made it out of DC’s welfare state-imposed poverty and are expressing their new found independence and SUV wealth, or ; 3) those feeling guilty and acting-out for their take-from-poor and give-to-the-corporate welfare state way of making a living, so this rudeness could be somewhat forgiven. So when Duangjai and I finally made it on the courts after 90 minutes and the person I had originally asked about when the court would be available said, “sorry, I didn’t know the game was going to take so long,” I just said “don’t worry about it,” and chalked it up to cultural relativism.

So we finally got on the court and it was great to play again; the sun was coming out and my foot was cooperating. Duangjai asked the other couple if they wanted to join us but they said they would just wait to play some singles. But after about 30 minutes they just left because the doubles’ court people just played on. When the doubles court finally did get off Buff Guy and the two tennis women sat on the benches arguing loudly about something for about half of our set, I could ignore them; they bothered Duangjai. The one guy who I thought might do the right thing but was caught in a group-think had left right away. I lost 4-6 but played pretty well and had a great work-out in the sun. Because of the court delays I never did get to have lunch at Union Station but it was great to finally get back to New York; DC is just not much of a tennis town.