Summers retains surprising faith in judgment of IMF

Stephen Jaffe/International Monetary Fund

Greece's Finance Minister George Papaconstantinou participates in the "BBC World Debate: Stimulate or Consolidate" October 8, 2010 at at the IMF Headquarters in Washington, DC.

Article Highlights

  • IMF supports adjustment programs that involve major devaluations or depreciation of currency

    Tweet This

  • If IMF truly did not allow economics to give way to politics, euro exits would be on the table for peripheral countries

    Tweet This

Sir, Larry Summers bases his call for a greater International Monetary Fund role in resolving the European financial crisis on the view that the IMF has consistently stood for the proposition that the laws of economics do not and will not give way to political considerations (“Time to turn to the IMF to rescue the eurozone”, December 9).

To support his view, he cites the IMF’s experience in dealing with economic crises ranging from the problems of the UK and Italy in the 1970s, to the Latin American debt crisis of the 1980s, and to the Mexican, Asian, and Russian financial crises of the 1990s.

It appears to have escaped Professor Summers’ notice that in virtually all of the IMF programmes that he cites the IMF was supporting adjustment programmes that involved major devaluations or depreciations of the currency. And it did so in cases where the internal and external imbalances as a percentage of gross domestic product were but a fraction of those in the European periphery.

This would suggest that if the IMF truly did not allow the laws of economics to give way to politics, debt write-downs and euro exits for the European peripheral countries would now have to be on the table.

One also has to be surprised at Prof Summers’ great faith in the IMF’s judgment considering its recent highly unfortunate experience with its Greek programme, which is by far the IMF’s largest lending operation in its entire history. In going along in May 2010 with the European charade that Greece did not have a solvency problem, was the IMF really standing for the proposition that the laws of economics do not and will not give way to political considerations?

Desmond Lachman is a resident fellow at AEI

Also Visit
AEIdeas Blog The American Magazine
About the Author

 

Desmond
Lachman

What's new on AEI

Making Ryan's tax plan smarter
image The teacher evaluation confronts the future
image How to reform the US immigration system
image Inversion hysteria
AEI on Facebook
Events Calendar
  • 25
    MON
  • 26
    TUE
  • 27
    WED
  • 28
    THU
  • 29
    FRI
Wednesday, August 27, 2014 | 3:00 p.m. – 4:15 p.m.
Teacher quality 2.0: Toward a new era in education reform

Please join AEI for a conversation among several contributors to the new volume “Teacher Quality 2.0: Toward a New Era in Education Reform” (Harvard Education Press, 2014), edited by Frederick M. Hess and Michael Q. McShane. Panelists will discuss the intersection of teacher-quality policy and innovation, exploring roadblocks and possibilities.

Event Registration is Closed
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.