Global Purse Strings

The Implications of the IMF on Traditional International Order

Copyright © 1999 Garret Wilson

University of London, School of Oriental and African Studies

MA International Studies and Diplomacy 1998/9

International Relations, Essay 2

March 26, 1999

Order, like most other words in the lexicon of international relations studies, is subject to a multitude of definitions. Taylor thinks order is present when the relationships between actors are stable and predictable (Taylor, 270). Linklater tends to see order as a description of a state of affairs, a classification of the "pattern" being followed in the international system (Linklater, 240)—this pattern as opposed to that pattern. Bull, the caricature of classifiers everywhere, devotes no less than 19 pages to "The Concept of Order in World Politics"—then spends 29 more determining if order even exists (Bull, 3-50).

Thankfully, for our purposes the crux of Bull's definitions coincides closely with those previously mentioned. At the broadest "dictionary definition" level, Bull and Taylor are in agreement: order means that a relationship between things are "not purely haphazard" but contain "some discernible principle"(Bull, 3)—that is, "order" as opposed to "randomness" or "chaos." Brought into the social realm, order can be more descriptive of a particular state, "a pattern of a particular sort" (Bull, 3), to which Linklater would surely agree.

In discussing the history and significance of the International Monetary Fund (IMF), it will suit our purposes to study both definitions of order separately, in terms of structure and stability. With Linklater's "patterns" in mind, does the presence of the IMF change the order or the pattern of relationships between states—the structure of the international system? Has the IMF been successful in making any aspect of international relations more predictable; has it contributed to international stability? If either is true, does the IMF only influence monetary patterns, or does it affect broader international relations as well?

The IMF is certainly a candidate for influencing both aspects of international order. As the guardian of Bretton Woods, "the most revered name in international monetary history, perhaps in economic history" (de Vries, 128), the IMF is portrayed as changing the structure of monetary dealings worldwide. Its very Articles of Agreement portray its intent to impose order on international financial conditions. To understand the basis of these claims and to evaluate them in even a limited way requires that one be aware of the evolution of the basis for the world monetary system: money itself.

Making Money

Long ago before bankers ruled the earth, in what might be called the PreBarclayan Period of the earth's history, an increased efficiency of hunting and gathering and the beginning of food production meant that, for the first time, societies had something left over after meeting their own needs. These "leftovers" could be traded for others' leftovers: barter was born.

As populations increased, barter became prevalent especially between separate societies. A tribe with extra animal skins but without enough grain could trade its extra skins for grain from another tribe that had a grain surplus, for example. The barter system was not without its share of problems. The core issue was that of the exchange rate. How many skins is a basket of grain worth? Other problems were present as well. What do you do if you want a plow that is worth a cow and a half (Morris, 4)? What do you do if no one wants grain? What if your grain rots in storage while you're making the trade? Where do you store all that grain in the first place? What if the other person's skins are of unequal quality? To solve these problems, people developed local substitutes that could be bartered in place of goods: money was made.

Money tackles the problems of barter in three main ways (Ethier, 402). First, it functions as a medium of exchange: it can be used in place of goods in a bartering situation. If you have enough money, you can always buy grain whether the other person wants skins or not. It serves as a unit of account: instead of having numerous prices for an a plow (in terms of cows, grain, and skins), everything is priced in terms of money. Lastly, money is a store of value: money stored away will in general still have value a year from now. Trading tomatoes a year after they are grown is quite tedious, yet one can exchange them for money and still participate in other exchanges for years to come.

Getting Gold

There was still a problem of exactly how money could store value. The earliest solutions were to make money out of precious metals which themselves held value. By mutual recognition (or in modern times, sanction of the state), coins of those metals having intrinsic value could also serve as a mediums of exchange and units of account. The dominant metal used throughout medieval times was silver. Copper was generally too heavy, although Sweden established a copper standard in 1625, under which a large-denomination coin weighed forty-three pounds (Eichengreen, 8).

In the nineteenth century, many countries were on bimetallic standards, permitting money to be circulated in more than one metal, usually silver and gold (Eichengreen, 9). Paper money became increasingly popular. Making the concept of money even more abstract, paper money was in essence promissory notes, guaranteeing the holder to a certain amount of the gold or silver. This extended the flexibility of a country's monetary system; the government could issue paper money, which could be stored and transported much easier than heavy coins, while "reserving" the actual gold and silver in the country's reserves held by the central bank. A dollar bill in the United States could then be exchanged with the U.S. government for a certain amount of gold, as could the British pound bill with the British government.

At the international level, this one more layer of abstractness reintroduced the exchange rate problem of the original barter system. Instead of trading skins and grain, those trading beyond the borders of their home country were again exchanging different mediums of exchange, be they U.S. dollars, British pounds, or French francs. The solution to this problem was the notorious "gold standard" of the late nineteenth century.

"Gold standard" is somewhat of a misnomer because the system neither relied exclusively on gold nor was an unchanging standard. Its thesis was that differing international currencies could be exchanged because each currency had a specified mint parity in terms of gold. In 1900, for example, the mint parity for the U.S. dollar was $20.67 (that is, the U.S. central bank would exchange an ounce of gold for $20.67), while that of the British pound was 3 pounds, 17 shillings, 10½ pence. To exchange U.S. dollars for British pounds, one would divide $20.67 by 3.17.10½, which produces $4.86 per pound after adjusting for the fact that U.S. gold coins had a somewhat greater gold content than did British coins (Aliber, 34).

The structure and stability of the system relied on the assumption that a country's central bank would, on the demand of a private party, buy or sell gold at the country's mint parity. A simplified flow of transactions might go like this: If someone in the U.S. wanted to make a large purchase from someone Great Britain, that person could purchase gold from the U.S. central bank's reserves at $20.67 an ounce. The gold reserves of the U.S. would go down, as would the supply of dollars in circulation. That person could then purchase the goods from someone in Britain by paying gold, which the seller could take to the British central bank and exchange for pounds. The British central bank would then print more money to give to the seller, and store the gold in its reserves (Aliber, 34).

A purchase of British goods by a person in the U.S. therefore had the following effects:

It follows that if the U.S. were to buy more abroad than it exported, creating in turn a balance of payments deficit, in which more money left the country than came in, there would be less U.S. dollars in circulation. In simplest terms, as Hume explained and later the Cunliffe Committee clarified (Eichengreen, 26), this would lower prices in the U.S. because less money was available domestically. Lower prices locally would mean less goods purchased from abroad. It would also mean more foreigners would find domestic prices attractive, increasing foreign exports (and thereby domestic imports), which would reverse the entire process so that an equilibrium would be maintained.

The function of each country's central bank is not just to print money; it also has the job traditionally attributed to banks: borrowing and loaning money, either directly or through intermediaries. The bank has a certain interest rate it will pay for money it borrows from individuals, and another (inevitably higher) rate it will charge to those who in turn want to borrow from the bank. If a bank raises its interest rates, less money will be borrowed from the bank; instead, money will be deposited (that is, money will be loaned do the bank) to take advantage of the higher rates.

In the earlier scenario, if the U.S. buys more than it sells, its local currency circulation and gold supplies would both decrease until lower prices tempted currency and gold back into the country. If a central bank wanted to stop gold outflows quickly, it could, instead of waiting for falling prices, simply raise interest rates, attracting currency and gold reserves back into the country (Eichengreen, 28).

Thus, for a variety of reasons, usually domestic, central banks intervened from time to time in order to manipulate the flow of gold into and out of the country. Many countries elected from time to time to "go off" the gold standard and either change their parity rates or refuse to convert their currencies into gold. Sporadic gold discoveries altered the textbook model of the gold standard (Aliber, 36).

Nevertheless, since 1870 until World War I the gold standard "worked" in that parity rates (and consequently currency exchange rates) remained more or less stable and the currencies of the countries on the gold system could be exchanged for gold. This occurred not because of any formal international agreement (Aliber, 34), but instead because capital flows were relatively restricted, central banks limited their manipulation of gold movements, and there was a credibility that a currency could be exchanged for gold. In short, the gold standard "was a socially constructed institution whose viability hinged on the context in which it operated" (Eichengreen, 30).

World War I and its related upheavals brought about scarcity and higher prices. Many European countries, needing money for the war, printed more money that was not backed by gold reserves (Brown, 568). Economies fell into recessions, and end of the war agreements assigned high reparation costs to Germany. This inflation, economic upheaval, and suspension of the "rules of the game" meant that the social conditions needed for the proper functioning of the gold standard had been forever lost. Countries left the gold standard and let their currencies float, allowing the market to decide how many units of one currency could be exchanged for another, instead of relying on gold.

The Interwar Period

The brief period of currency floating was chaotic. Since currencies were non-convertible, they could not be exchanged at the central bank for gold. Instead of having mint parities in terms of gold, currencies were valued in terms of other currencies. When one country bought more abroad than it exported, for example, this would create a balance-of-payments deficit. To buy foreign goods, citizens would have to change currencies by selling their local currency and buying foreign currency. This increased selling of the domestic currency meant that its price would drop; market forces would thereby cause the exchange rate would fall.

Remembering the stability of the gold standard in the years before and attributing this to the gold standard itself, countries elected to return to the earlier system in the 1920s. France realized that its currency was worth less than before the war and returned to the standard with a lower mint parity. Other countries such as Britain, however, hoping to somehow roll back the clock, elected to return to their previous pre-war parities.

Conditions had changed. After all the economic changes of World War I, the British pound could buy much less than its cost in gold reflected—it was overvalued. The French franc, on the other hand, had been devalued (through a lowering of its mint parity) more than the price of French goods relative to those of its trading partners—it was undervalued (Aliber, 38).

Some countries reacted to these unrealistic mint parities by changing parities several times. Many had persistent balance-of-payments deficits, buying more abroad than they exported, which as mentioned earlier depleted their gold supplies (Eichengreen, 68). Domestic interest rates were manipulated to try to control gold outflows. Many countries would lower their mint parities, after which domestic prices would stay the same yet local goods would be less expensive to neighboring countries because the exchange rate had been changed. Foreigners were more likely to buy the cheaper domestic goods, raising the country's exports, domestic production, and consequently domestic employment. This policy of manipulating exchange rates for domestic purposes, referred to as "beggar-thy-neighbor" policies, had the side-effect of exporting unemployment.

Without the social setting that provided the backdrop for the first gold standard, the second gold standard was doomed to fail. One by one, countries again decided to leave the arrangement. If the second gold standard is marked as beginning with France's stabilization in 1926 and ending with Britain devaluing its currency in 1931, the interwar gold standard as a global system was only in operation for less than five years (Eichengreen, 48).

The IMF Steps in

In July 1944, 44 Allied nations met at Bretton Woods, New Hampshire to determine the shape of the international monetary system after World War II, which would not end until the next year. Out of this conference rose two institutions: the International Monetary Fund (IMF) was designed to oversee the monetary system, while the International Bank for Reconstruction and Development (IBRD—better known as the World Bank) was to provide loans for reconstruction and development purposes (Ethier, 468). A third organization, the International Trade Organization (ITO), was planned but did was not realized until the World Trade Organization (WTO) was formed in1990s.

Those forming the new Bretton Woods System, as it came to be known, had seen how the gold system had worked in the past. They understood that simply "pegging" fixed rates of exchange to gold, as previously formulated, was unlikely to work under postwar conditions. They had also seen that floating exchange rates had in all previous incarnations caused wide fluctuations in exchange rates.

A pure floating exchange rate, as noted earlier, implies that the amount of foreign money that can be bought with domestic money—the exchange rate—is determined by the market price of that currency. This price, in turn, reflects a number of variables. A balance-of-payments surplus or deficit can change the exchange rate, yet so can changing domestic prices or changing interest rates. Other conditions from trade policies to treasury bonds have been so far ignored, but these, too, can affect the exchange rate and reflect methods a state can use to manipulate its domestic economy - causing foreign exchange rate changes in the process.

In an attempt to avoid what they saw as inevitable drastic fluctuations in a flexible exchange system, but in recognition that a return to pegged exchange rates was futile, those at the Bretton Woods conference designed a system of adjustable pegs. Countries were allowed to let their currencies float, as long as the exchange rate stayed within a certain band on either side of a currency peg. When the value of a domestic currency would fall toward the floor of its band (due to a balance-of-payments deficit, for example), the central bank would buy the domestic currency in return for its reserves (be they gold or other foreign currencies), raising the price of the domestic currency. The pegs were adjustable in light of the fact that, if a currency drifted too far outside its band and could not be contained by central bank intervention, the country was allowed to adjust its peg by setting a new exchange price.

The adjustable peg system therefore attempted to have the best of both worlds: the exchange rate was essentially on the gold standard again, yet was allowed to float to an extent like a flexible exchange system. Those forming that IMF knew that even having a band in which a currency would float was too restrictive, so eventual peg adjustment was allowed. In an attempt to prevent pegs to be "adjusted" for domestic-serving purposes, such as the recent "beggar-thy-neighbor" policies, it declared that any member country must get the IMF's permission before a peg could be adjusted.

To assist countries in maintaining their currencies within certain bands, the International Monetary Fund was created to be a fund of currencies from its members. Each member state was assigned a quota which more or less reflected the value of its wealth and trade (Brown, 578). This quota consisted of one quarter gold and three quarters currency (Brown, 579), and was paid to the Fund and was used to assist member countries in maintaining their pegs.

If the U.S., for example, were to find itself in a series of balance-of-payment deficits, the value of the dollar would fall towards the bottom of its currency band. It could raise the exchange rate by buying dollars in exchange for its reserves of foreign currencies or gold, but each time it did this it would lower the amount of foreign currencies in its reserves. If it were low on foreign currency reserves, it could borrow foreign currencies from the IMF until this temporary balance-of-payments problem could be resolved by other domestic measures (Walmsely, 59). When the currency began to rise towards the target ceiling, the U.S. could repay its loan by buying back foreign exchange in exchange for the dollars it had borrowed, stopping the rise of its domestic currency price (Brown, 573).

Borrowings occur in a series of "slices" called tranches. The first is a reserve tranche which consists of the country's original quota. This loan is routinely granted, since the money belongs to the country in the first place. Borrowing more money than the reserve tranche required permission of the Fund, with more and more overview of the country's monetary policy at each successive level (Brown, 579).

Third Strike for the Gold Standard

Why did the system of adjustable pegs fail? There are many reasons. One of the most important is that, mainly due to advances in technology and communication, the rate of capital flows increased worldwide. This reduced the extent that many central banks could effectively intervene to control the exchange rate of their currencies.

There were three aspects of the system that were therefore in conflict: constant exchange rates, autonomous domestic economic policies, and increasing international capital mobility (Ethier, 478). The existence of Bretton Woods did not stop states from using domestic economic policy (manipulating interest rates, changing trade policies, selling treasury bonds, and the like) for domestic reasons, whatever their long-term effects on the exchange rate. Capital mobility simply makes the effects of domestic economic policies on the exchange rate happen sooner than they otherwise would (Ethier, 478).

Furthermore, the presence of a currency peg increased exchange rate fluctuation through currency speculation. Normally, speculators bet on the direction the exchange rate will go, buying a currency when it is less expensive in terms of other currencies and selling when its price rises—before its price decreases. If a currency falls too far below its peg (outside its allowed band), there is a high likelihood that the currency will be devalued—the country will lower its peg. Speculators in this case, sensing that a devaluation is imminent, will sell the currency, making the exchange rate drop even further, which will force the currency to be devalued and the peg lowered. Adjustable pegs then present the market with a one-way option; speculators may not know for sure whether the peg will be adjusted, but they know in which direction it will go should it be adjusted, and their reactions increase the likelihood of adjustment (Ethier, 479).

To compound the complex situation, the dollar began to be used as a reserve, as gold had been before. When the dollar would begin to depreciate, the United States central bank would not intervene by buying dollars in exchange for gold. Instead, foreign central banks during the 1960s bought dollars with their own currencies and used dollars for reserves instead of gold (Kenen, 497). There began to be a dollar overhang, in which about 85% of the world reserve-currency holdings were in U.S. dollars (Ethier, 485). There began to be more dollars in central banks around the world than the U.S. could possibly back up by its gold reserves; other countries began to realize that they could not dispose of their huge dollar reserves without drastically upsetting the foreign exchange market.

The Vietnam War served as a catalyst to the instability. Increased government spending increased the circulation of dollars, but the U.S. did not want to reflect the change in value of the dollar by increasing the U.S. dollar price of gold. This effective devaluation of the dollar would have, among other things, undermined President Nixon's popularity during the war. Central banks began to convert their dollars into gold. To halt the loss of gold, in 1971 Nixon "closed the gold window" by refusing to provide gold to foreign dollar holders and imposed a 10 percent surcharge on merchandise imports—all without consulting the IMF, as was required by Bretton Woods (Eichengreen, 133). In December 1971 an agreement was reached in which the U.S. would increase its dollar price of gold at the same time other countries would realign their currency pegs (Aliber, 50). It was not enough.

The IMF, which was supposed to have been guarding the system in the first place, met throughout 1972 in an effort to deal with the growing problem. By 1973 it was close to proposing a more relaxed form of pegged rates in response to the instability, but in February the member countries moved to floating rates in complete violation of the IMF rules requiring them to declare their parities and limit fluctuations of their currencies. The IMF realized the end, and with the Jamaica Agreement of 1974 "allowed" countries to continue their policies of floating exchange rates. "Within a few years, all that remained of the IMF system was the IMF—a pool of currencies modest in size and largely irrelevant in function, given the rapid growth of international reserve assets, and 1,800 well-paid international civil servants, to police a set of rules that no longer existed" (Aliber, 52).

Life after IMF

What is an international organization to do after seeing its rules flouted by its members, its authority ignored, and its existence made irrelevant by changing international conditions? In the words of Milton Friedman, "Nothing is so permanent as a government agency, especially an international government agency. And so the IMF looked around to see what function it could perform" (Friedman, 53).

The first thing it saw was its store of foreign currencies and its ability to lend to countries in need. Although the original function of the Fund was to lend currencies to finance temporary exchange rate adjustment problems, it became first a consultant and then a more general lender of funds. Throughout the oil shocks of the 1970s, however, the Fund's relatively small resources limited its ability to assist countries with their monetary needs, as spending on oil imports greatly outdistanced many countries' exports (Gibson, 317). Low interest rates available elsewhere caused developing countries to borrow from private lenders rather than through the IMF (Ethier, 387). The IMF did not even play a role in distribution, and in the end private banks began to lend more to several countries than was prudent (Gibson, 317).

Unwise lending practices eventually caused a debt crisis in the 1980s. Seeing that "private bankers bore part of the responsibility for the debt crisis inasmuch as they had lent so freely to developing members without determining the repayment ability of the borrowers," the IMF stepped in and helped debtor members negotiate with private bankers (de Vries, 138). Since the Fund has always practiced conditionality—the use of its monies have always came with certain conditions with which the borrowing country had to comply—the IMF was able to monitor the economic policies of debtors to ensure their ability to repay.

Its conditionality and surveillance of domestic economic policies have drawn much fire from those who claim that whatever the IMF claims that its policies are flexible in regards to the political economic situation in a country, its actions tend to favor free-market monetarist economics (Gibson, 323). During the 1980s more and more countries failed to meet the requirements of the IMF, and debtors grew more hostile to the IMF, in some cases refusing to deal with it (Kenen, 516).

The most recent use the IMF has found for itself has been involved with the states of the former Soviet Union. After the collapse of communism, the Fund has "assumed this new responsibility with vigor"(de Vries, 139), seeing an opportunity to advance its free market goals with these former command economy countries. Through its lending, the IMF has attempted to train government officials, reform the tax system, and improve the operations of the central banking and finance system in these countries.

The 1990s has shown the IMF as willing as ever to lend its funds to those countries in need, increasing its surveillance of domestic economic policies and raising conditions as countries became more indebted. But its low resources have meant that its effectiveness in global terms has been limited to smaller, poorer countries—major industrialized countries "have no need for IMF assistance and its accompanying conditionality. In fact, no major industrialized country has borrowed from the IMF since 1977" (Gardner, 192).

Order as Structure

From the creation of the IMF until 1973, it is clear that the structure of the international monetary system was unique. It is the only time when a system of adjustable pegs were used to determine international exchange rates. Yet to say that the IMF was directly responsible for any real modification of international monetary interaction is to gloss over some very important points.

First, the IMF has been from its creation more of an effect of international patterns of events than their cause. It was created at a time when patterns of monetary flows were going through radical changes, and had been for several decades. The creation of the IMF was brought about by an agreement of sovereign states in a states system that was by no means new.

If one could say that by this agreement the sovereignty of each member state was compromised, the IMF could be seen as changing the pattern of state interaction. Instead, however, although state interaction was modified, this modification was contingent upon state participation. Although the Fund required states to get permission before modifying exchange rates, in reality the states with more economic clout simply changed their pegs and informed the IMF as an afterthought. The fact that the system of adjustable pegs was destroyed when the U.S. decided to break the rules of the Fund shows that the IMF had no real control over state policy. Like the gold standard of the nineteenth century, the power of the IMF of imposing order on the international scene was contingent upon a certain social setting—the IMF was only valid for a specific time because its formation was more reactionary than influential.

As Mikesell points out, "if the IMF... had not been created in 1944 at Bretton Woods, it is highly unlikely they would have been established at all" (Mikesell, 29). The conditions expected at its creation did not materialize after the end of World War II; instead of a depression, as there had been in the first world war, there was a growth of output in many countries (Bernstein, 92). And even had the IMF survived Nixon's closing of the gold window unscathed, "it could not possibly have handled the oil shock and subsequent events as well as did the more flexible [floating exchange] arrangement actually in place" (Ethier, 484).

The modern incarnation of the Fund provides evidence of a greater control only in some aspect of international money patterns. The main activity of the IMF today is to lend money to developing countries, something that private institutions have done before the IMF was even created. The major differences are that the IMF imposes conditions on its lending, advancing its free market capitalist bent, and has loaned money even when private lenders have had enough. It is the smaller, highly indebted countries, then, which are likely to see their domestic monetary policy patterns compromised, or at least supervised, by the IMF.

The IMF has been integrated into the world monetary structure and has provided countries with an extra chance at solving their economic problems while at the same time promoting free markets. Its true structural effect, therefore, may have been more social in nature, by "creating structures for cooperative international problem solving" (Gardner, 185). The IMF and the international monetary system have in many ways evolved side by side as states went through a social learning process. Indeed, the current floating exchange regime mirrors several periods of floating exchange rates before Bretton Woods, as explained earlier. The fact that its most recent rebirth is not as chaotic as earlier incarnations shows that states, possibly in part through experience with the IMF, have better learned how to cooperate to control the fluctuations a floating exchange system.

The Fund's influence on patterns of non-monetary actions among states could be as important as its affect on monetary conditions. A case in point involves reaction against NATO's strikes of Yugoslavia on March 24, 1999; the fact that another round of talks with the IMF was set to begin in Moscow only days later has led some to speculate that this could temper the criticism of Russia, which still needs billions of dollars in loans from the Fund (Gordon). The IMF, through its votes system based upon quota allocation, must have the approval of many NATO countries before allocating funds. The ultimate power of IMF loan promises to influence international policy, however, is far from certain.

Order as Stability

It should also be obvious that "stability" and "international monetary system" seldom belong together in the same sentence. The IMF was formed when the monetary system was going through enormous changes, and the Fund did not have the clout needed to keep the adjustable peg system in operation. In the post-Bretton Woods era, the Fund has invented new uses for itself by, for example, integrating the states resulting from the collapsed Soviet Union into the capitalist world economy (Pettman, 178), yet ten years later Russia looks anything but integrated. Joseph Stiglitz, Senior Vice President and Chief Economist at the World Bank, believes the IMF "failed in Russia" and "has done a poor to mediocre job throughout Africa where it has been deeply involved for 15 years" (Stiglitz, 32).

The IMF played a strong role in turning around the Mexican debt crisis of the 1980s, which is usually termed a success, but overall the IMF's dealings have had mixed reviews. Friedman, for example, believes that the recent Asian crisis would not have happened had the IMF not existed: "The experience of Mexico persuaded lenders around the world, understandably, that they could take chances on those [countries which still used] pegged exchange rates because if anything happened to them the IMF would come in and bail them out" (Friedman, 55).

The IMF has been very much involved in the modern international monetary order. This is not to say, however, that the present international monetary order was created solely, or even mostly, by the IMF. The international monetary situation has been evolving for thousands of years, and the IMF is but one player in the arena of international political economy. International order has inevitably been influenced by the existence of the IMF, but the real influence seems to have been the other way around. The Bretton Woods system, though "created largely by conscious human decision" (Ethier, 484), was nevertheless a temporary step in a long process of evolution. Instead of saying that the IMF created the international monetary system, it might be more accurate to say that the evolved international monetary system has allowed the IMF to exist, on the condition that the Fund modify itself as the need arises.

The world economy is becoming increasingly integrated; capital flows are increasing, and states are finding their sovereignty jeopardized by changes outside their control. The IMF, with its surveillance policies and liberal bent, will no doubt add some momentum toward changing to more open market economies to those states who elect to use the Fund's adjustment facilities. Its ability to issue loans may in small ways influence certain policy decisions of debtor countries. But the Fund's power to change international monetary patterns and stabilize world financial conditions is highly situational. To expect the IMF to attempt to exert any control outside the context of the already existing liberal social monetary system would be a tall order indeed.

Works Cited