The IMF & its critics.

Don't fire the fire department

If your neighbor's house is burning down, do you begrudge the fire department spending your tax dollars to put out the fire - even if your neighbor caused the fire himself by throwing a cigarette in a trash can?

Odds are you don't mind at all, perhaps because your neighbor is your friend, and certainly because you don't want the fire to spread to your property.

Keep this analogy in mind in the coming months. Unfortunately, we will be hearing a lot about the International Monetary Fund and its plans to bail out various economies around the globe. It's part of the world economy's fire department, trying to stop panics and economic catastrophes before they engulf us all.

Right now, South Korea faces a mess and the IMF has already gotten pledges of more than $55 billion to help keep the place afloat. It's not at all clear if that will be enough, or if the bailout will work. There's a good chance of other bailouts - in Brazil, perhaps, and elsewhere in Asia.

Attacks on the IMF are common these days, and they'll get louder as it's forced to do more bailing. The criticisms come from all over the political map. Nationalists such as Pat Buchanan simply don't like the idea of spending American money to prop up foreign economies. They worry that the IMF violates the sovereignty of nations. Libertarian-minded conservatives don't like any international body ever messing with the workings of the free market.

Some on the left see the IMF as the agent of international banks and big capitalists, as do some of Buchanan's followers. And a fair number of economists, left, right, and center, worry that the IMF imposes austerity plans that actually slow economic recovery.

There's something to every single one of these criticisms. The IMF does operate against national sovereignty - it dictates policies to countries that borrow its money. Yes, the United States puts some of our money at risk. There is a "moral hazard" problem, as economists call it, when governments and investors know they'll be bailed out if they get in trouble. The IMF thus does interfere with the pure operation of the market.

It's entirely true that the IMF has more of a Wall Street than a Main Street mentality. It's more concerned with keeping big financial institutions from collapsing than with saving mom and pop stores. And its heavy emphasis on austerity may well slow economic recovery in some places - and austerity tends to be borne most heavily by people at the bottom.

But if the IMF and its sister economic institutions didn't exist, we'd create something like them. The big lessons of the global catastrophe of the Great Depression and the global economic success that followed World War II are (1) it's better to have some checks and balances on the free market than to let it fly off into panics, bank runs, and ruin; and (2) you can't have economic growth, in your own country or around the world, without international rules and institutions.

The genius of the architects of the economic arrangements built during Harry Truman's administration after World War II is that they understood these things. They wanted stability, growth, and no more cataclysms. With all the ups and downs of the last fifty years, that's what they bequeathed us.

It's true that the world is very different now with the rapid industrialization of Asia, Latin America, and Eastern Europe. It's also true that when Dr. IMF prescribes an excess of austerity, it can keep the patients it's trying to save sick for longer than they have to be. And the IMF has shown, at best, sporadic concern for democracy, human rights, and labor rights.

But all these are arguments for fixing the IMF, not junking it. There are moves in Congress to push the IMF to condition loans not only to economic performance but also to respect for basic democratic rights. When governments embark on austerity programs, it's especially important that the most vulnerable people on the farms and in the factories have a chance to voice their grievances and push for a fairer apportionment of the pain. Supporters of global institutions take note: opposition to them will grow if taxpayers see their dollars used regularly to prop up oligarchies and dictatorships.

As for the nationalists Buchanan courts, they might consider taking pride in the United States' leadership in creating institutions such as the IMF, which may not have solved all economic problems but have done fairly well in resisting the worst catastrophes. That isn't globaloney. It's an amazing achievement.