Ready for a Role Change?

If you think your job is thankless, try working at the International Monetary Fund. Not so long ago the IMF was the pin-striped fireman of global finance, dashing from one national conflagration to the next, and mostly praised for its work. Nowadays the "Fund" is just another word for "angry," which describes the mood of many government officials and ordinary citizens when they hear that the sober-minded Washington economists are around. South Americans are heaping scorn on the organization; last week Argentine Finance Minister Roberto Lavagna partially blamed the IMF for his country's economic collapse, accusing it of "blindness" for not spotting the policy missteps of the mid 1990s that by the end of the decade had helped push Argentina to the brink of economic collapse. The Fund isn't very popular with the home crowd either: 650 anti-globalization demonstrators were arrested in D.C. last week as the annual IMF-World Bank meeting commenced.

One expects the bandanna-and-Birkenstock set to shout at the beast of global capitalism. But lately prominent bankers, analysts and Ivy League luminaries have all taken turns flaying the Fund--for "losing" Russia, for making wrongheaded policy prescriptions in Asia after its 1997 economic crisis, for pushing market fundamentalism on poor countries that lack the institutions to handle it, for doing too much, for doing too little. Ian Vasquez, a senior economist at the conservative Cato Institute, calls the Fund's traditional economic bailouts a "disaster." Nobel Prize-winning economist Joseph Stiglitz, the former senior economist for the World Bank, devoted an entire book ("Globalization and Its Discontents") to bashing the Fund. "The Fund has done something no one else could. They've united the left and the right, the developed and developing countries against it," he told NEWSWEEK.

Some of the criticism is grossly exaggerated. With the global economy sputtering and U.S. stock market in tatters, everybody is feeling some pain. And yet even the staunchest Fund loyalists agree that the business of righting the world economy has gone wrong--especially in Latin America, where, after a decade of IMF-prescribed belt-tightening and market-friendly reforms, nation after nation is still choking on debt. Uruguay's banks are threatening to crumble. Brazil's by-the-book fiscal discipline has won plaudits, but that country remains a shaky bet in capital markets and, in August, needed a historic $30 billion loan from the Fund to keep the real from sinking. The International Institute of Finance, which represents 322 institutional investors, projects net foreign-capital flows to Latin America this year of $123 billion, the lowest level since 1992. And it's not only Latin America that is hurting. According to an IMF report, 44 client-nations are chronic borrowers--that is, they've never managed to pull themselves off the world's indigent list. "The IMF hasn't had a victory in a long time," says Alex Kazan, Latin American analyst for the G7 Group, a private consulting firm in Washington. "There really is a sense that they are becoming impotent."

The Fund argues that its basic policies--fiscal restraint, low inflation through tight monetary policy--are as sound as ever. But it's clearly been stung by the criticism, so much so that the organization has lately embarked on a process of self-examination. Last week the Fund even issued a few cryptic mea culpas. A report from an internal- review panel admitted that some economic-rescue programs were "deficient in ...