An Analysis of the International Monetary Fund and Its Politics

The International Monetary Fund, established in 1944, to foster long-term economic growth and stability in an environment of weak international capitol markets. Making it originally good economics. Todays International Monetary Fund has become more of an international force and lender. President Clinton wants the IMF to devote more attention to preventing crisis rather than responding to them(Calomiris). The International Monetary Fund today is good politics rather than good economics.

As a result of the 1929 market collapse the International Monetary Fund was shaped.

It was not until 1944 the International Monetary Fund was created at Bretton Woods with the World Bank; it is here that the gold standard for currency was also fashioned (Skinner). This was to bring stability to the dollar, Marks, Yen, Lira and pound (Strada, 110). In 1971, Richard Nixon broke the gold standard. Tarnishing the value at which currency was valued. It was before this event that I believe that the International Monetary Fund was good economics, but after 1971 it became a political system, especially for the United States power.

There are 182 members in the International Monetary Fund today (Sach, 200). Each member contributes a predetermined amount or measure of national currency. This is how their voting power is determined and the amount of resources they can utilize from the fund.

Since the early 1980s the International Monetary Fund has helped out many counties in need. Not only aiding them financially, but also forcing structural adjustments on them. This is where the controversy arises. Should the International Monetary Fund have the power to force change? I say yes.

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A privately owned bank will restructure a company that they are providing with a loan. You have to keep in mind that these countries who are assisted by the International Monetary Fund have been, in most cases, turned down by all other banking systems. Therefore they should be required to fallow some sort or restructuring program to prevent another fall in their economy. With all this said I believe the International Monetary Fund it is purest form is a worthy system, but like most things politics corrupts.

I feel that the International Monetary Fund has aided the countries we are most likely befit from. Example Mexico in 1982, if the Mexican economy had failed it would have drastically affected this collapse. This is also true with Asia and Russia. With Clinton especially he has used the International Monetary Fund as his own foreign political gain, to make friends and improve foreign relations.

As I have stated before the International Monetary Fund as it was originally created was a good economic policy. Today it is a political pull. Not necessarily bad politics, just politics, not economics.