The ability of troubled countries to weather financial crises largely depends on the willingness of wealthy nations to offer loans, but such investments can often seem like ride through a hurricane for all parties involved, faculty members said in a forum Monday.
Much of the discussion focused on the conditions that countries must meet to win loans from the International Monetary Fund, the consortium of nations that organizes investment capital for nations in need of stabilization. Professors almost unanimously agreed that the organization needs some changes, possibly including more representation from developing countries in the decision-making process.
"The IMF is an agent of powerful countries," said panelist Robert Keohane, James B. Duke professor of political science.
The United States, which provides the IMF with much of its funding, controls about 17 percent of the vote within the IMF, Keohane said. He noted that changes in representation could be difficult to implement because wealthier nations hold the purse strings.
"Institutions that operate one-state, one-vote, do not have any money," Keohane said.
Research Professor of Economics Gianni Toniolo agreed, saying that a less self-interested IMF would first require a different mind-set on the part of creditors.
"It is unavoidable that those who give the money want to control how the money is spent," Toniolo said, adding, "Until we want to pay more taxes we cannot talk about having better [international development] policies."
Many students expressed skepticism about the involvement of private institutions in IMF activities. One student argued that American banks take advantage of the IMF because, when a borrower defaults on a loan, officials know the United States will guarantee a repayment. Banks, therefore, continue to make bad loans at U.S. expense.
"Pursuing public goods can be captured by private interests," Keohane said.
Most agreed that greater transparency in IMF transactions is the only clear solution for the problem of private influences.
Debate also arose over whether the IMF 'abused' its leverage as a creditor to draw borrowing nations into harsh political conditions domestically in exchange for financial bailouts.
"Structural adjustment programs [have become] a policy tool to push neoliberal objectives," said John French, associate professor of history, criticizing the tendency for IMF policies to adversely impact the poor through cuts in health care, education and welfare.
Toniolo agreed that social programs were often the first to go once the IMF pressures nations to reform, but he added that although the IMF generally receives much of the blame for such policies, they are often a product of the borrowing countries' political inequities. He said that most developing countries are governed by elites, which makes it difficult to raise taxes or decrease defense spending-consequentally, health care, education and welfare programs are cut to generate much needed revenue.
Monday's forum was the first in a series of panel discussions sponsored by the newly founded Economics Student Union.
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