Author Finds The Human Side Of The IMF
SCOTT SIMON, HOST:
The initials IMF are in the news most days. But what does the International Monetary Fund do? Is it a banker of last resort for failed economies and a hand up for sputtering ones, or is it sometimes a scold that says - you don't get a penny until you change your ways? When news reports say the IMF says - who's actually talking? Liaquat Ahamed, who was once head of the investment division at the World Bank, has advised hedge funds and won the 2010 Pulitzer Prize for history for his book "Lords of Finance: The Bankers Who Broke The World." He's now collaborated on a new book with photographs by Eli Reed that try to show the IMF as a human institution. Their new book is called "Money And Tough Love: On Tour With The IMF." Liaquat Ahamed joins us in our studios. Thanks so much for being with us.
LIAQUAT AHAMED: Well, thank you for inviting me.
SIMON: You first came to the IMF for the food, right?
AHAMED: Well, I was a summer intern in 1978 and I was invited in for lunch because in those days, it supposedly had the best institutional food in the city. And over lunch, I was introduced to a woman who is now my wife.
SIMON: In your book, you suggest the IMF has become both less powerful than maybe its supporters had hoped, but more powerful than its detractors are comfortable with. What's happened?
AHAMED: Well, when it first was set up - it was set up to run international finance. And we had a very tightly regulated system of exchange rates and countries - if they wanted to change their exchange rate, had to get permission from the IMF. And so that was - I mean, that's a very powerful role. And this is all countries, this is not just poor countries. And that whole system collapsed in the early 1970s. But since then, as financial crises have proliferated, the IMF has stepped in as the principal emergency doctor for countries in trouble and it tries to figure out how the country has to change its behavior so that its finances get put on a more sustainable basis.
SIMON: Where did it get its money?
AHAMED: The best way of thinking of the IMF is it's like a credit union that countries put deposits into the IMF, and then the IMF uses those deposits to help countries in trouble. And it's got about 400 billion of deposits and another 400 to 500 billion of borrowings. And that gives it close to a $1 trillion, which it can then apply to helping the poorer members who've got themselves into trouble.
SIMON: You visited a couple of IMF missions - how popular are they in countries where they've taken a major role?
AHAMED: Generally, people have always thought of the IMF as unpopular. Now, maybe this was a process of selection where the IMF allowed me to go to countries where they're relatively popular. In Ireland - the Irish trouble was so great that the amount of money the Irish needed was much greater than the IMF could afford. So the IMF went in and bailed out Ireland in association with the European Commission and the European Central Bank. The IMF played good cop to the Europeans' bad cop. So the IMF was relatively popular. In Mozambique, the IMF has established an unusual role as a trusted advisor. And they're not always very successful at doing this, but Mozambique is a place where they seem to have succeeded.
SIMON: There's an old tradition, and I think it skips national boundaries, of the money that's intended to help a country is often pocketed by the most powerful people in the country, leaving the poorest people poorer than ever. The whole idea that they lend money, yes, but a lot of it disappears.
AHAMED: Yeah. In fact, the major problem is not that the money gets pocketed by the richer people in the country. The major problem is the money gets pocketed by banks. So essentially the IMF steps in when a country has borrowed too much and the last thing the IMF wants to do is hand over money to the country, which then goes and pays Citibank or Chase and in effect, it's a sort of back doorway of bailing out Citibank and Chase. So it always has to try to ensure that the banks don't rush for the doors the minute the IMF walks in through the front door.
SIMON: In the end, has the IMF been a force for good? What has it done that might otherwise not have been done?
AHAMED: You know, I think the comparison is with what happened in the '20s and '30s - that was a world in which we did not have a international lender of last resort. And it was a world in which countries went bankrupt. There was a massive retreat from globalization, countries lost confidence in the way the international financial system worked. And I think the proof of how valuable the IMF has been is the onward march of globalization.
SIMON: But you're aware of the fact that when the IMF meets, there are going to be protesters outside who are saying that globalization is the problem.
AHAMED: Yeah and I think they're mistaken. They are objecting to some of the cultural consequences of globalization. But I don't think anyone can object to an institution that's committed to preventing people from going under.
SIMON: Liaquat Ahamed - his new book "Money And Tough Love: On Tour With The IMF." Thanks for being with us.
AHAMED: Thank you.
NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.