ment. In addition, the total funds in the international economic system could
be increased by the Fund simply announcing that each share held by member
countries was increased by a certain percentage, as has happened on several
occasions to meet the permanent pressure for increased international liquidity.
If the IMF system was to avoid the anarchy of the period after the
abandonment of the gold standard, however, its automatic control had to be
replaced with some form of international political authority. Thus the IMF was
given the power to impose economic policy restrictions on member countries
wishing to borrow large amounts, and these controls, which have often been
imposed, usually take the form of requirements to reduce inflation, especially
by cuts in government expenditure and tax increases. The IMF restrictions on
credit have often been seen by left-wing parties, and even by sections of
cabinets which have borrowed, as involving undue interference with more
socialist-oriented economic policies, and have thus been blamed for prevent-
ing the growth of welfare state policies in nations with economic problems.
Originally it was also intended that no member state should be able to devalue
its currency without consultation with the Fund, but this has never been
observed, partly because devaluation decisions are usually taken in great
urgency and secrecy.
It would probably be agreed by economists that the IMF has not been the
great breakthrough in terms of international economic management that was
hoped for, although it has certainly produced stability without the harshly
automatic consequences of the gold standard. Probably its greatest drawback
has been its failure to expand international liquidity to meet demand. In part
this comes from the initial unwillingness of the USA at Bretton Woods to agree
to the British idea that member nations who were enjoying a long-term and
strong balance of payments advantage should be required to increase imports,
thus easing the debt problem for the rest of the world. As the USA was in such a
position from 1944 until at least the mid-1950s, this was not surprising. The
absence of this restriction, however, has allowed countries like Germany and
Japan to benefit from their economic strength without regard to the impact it
was having on the rest of the international economy.
As the IMF is inevitably linked to capitalist economic systems and theory, it
was spurned by most members ofCOMECON. Since the collapse of the
Soviet economic system, however, most former Soviet republics and Eastern
European countries have become members of the IMF, even though the
economies in question will not be in a fit state to benefit or help for years.
Increasingly, since the mid-1970s, the IMF has become much less important to
Europe as theEuropean Union (EU)developed its own monetary control
system, The completion of the union of currencies with the creation of the
new euro for most EU countries has created a huge economic unit, ‘Euroland’,
within which the IMF can not hope to have much influence.
International Monetary Fund (IMF)