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N° 2000 - 08 |
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| May |
The International Monetary Fund
And the International Financial Architecture |
| Michel Aglietta |
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The IMF is a perennial institution in a changing
environment. The institutional structure has stayed put, reflecting the lasting
prominence of the US in international monetary affairs. However the international
monetary system has undergone a sea change : the shift from a government-controlled
to a market-led system. It was both an origin and an outcome of the rise of global
finance.
In adapting to this structural change, the Fund has exerted new ways in
providing guidance to member countries and in regulating financial markets. But is has kept its former missions, so that no less than four models
of collective action can be depicted within a careful analysis of the Fund's mandate. The Fund has been an insurer in mutual assistance of its
member countries, an issuer admittedly aborted of a world currency (the SDR), a financial intermediary for development with respect to the Washington
Consensus, and lately an international crisis manager, even playing the role of an international lender of last resort.
Playing all those partly contradictory roles has overextended the Fund's capacities and eroded its speed of reaction to disturbances which come
more from markets, less from governments. A refocusing on prudential issues, both in prevention and crisis management, is what the new financial architecture
is all about. It leads to trimming existing facilities, involving the private sector in potential loss sharing schemes, strengthening international
supervision on active intermediaries in wholesale liquidity markets, inducing central banks to act or acting directly as an international lender of
last resort in a crisis management system.
The rationale for the new financial architecture is solving a basic prudential
dilemma inoculated by global finance. The twin benefits of market efficiency in allocating savings and a workable degree of global financial safety
can only be attained if national prudential independence gives way. But cooperation in prudential regulation cannot be achieved without a political
legitimacy. The IMF has no comparative advantage in competing with the Basel Committee to set standards, with national supervisors to check bank
internal control systems, with central banks to forestall a market liquidity crisis. The IMF should assert its leadership on world monetary politics,
in place of the G7, so that decisions of a global scope proceed from the universality of its membership.
This mission of global governance calls for an institutional overhaul which should entail two drastic changes : on the one hand, a substantial
revision of quotas to reflect the rising power of non-OECD countries; on the other hand, the creation of an executive policy committee with
authority on the services to implement the Fund's restated mandate. |
Abstract |
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| Adjustment, Conditionality, Debt crisis,
Exchange rate regime, Lending Facilities, International liquidity |
Keywords |
| F3 |
JEL classification |
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