The Unassuming Economist

From a new post by Frank Vogl:

“The International Monetary Fund is awakening from a long sleep with regard to combating corruption. If the IMF’s new policy announcements are followed by tough action, then the global fight against corruption could make real headway.

The IMF and the world’s leading central banks as well as finance ministries across the globe have been laggards in that fight. They have too often ignored corruption, even when it has been a direct cause of national economic disaster.

For many years, the IMF argued that its charter precludes it from getting involved in politics and that it had to focus exclusively on economics. That was always a lame excuse.

Devoted as it officially is to promoting sustainable economic growth, it has come to the realization that massive income inequality is due in large measure to corruption, as well as direct plunder of state coffers by leading public officials and politicians. Letting that practice fester, however, runs directly counter to achieving sustainable economic growth.

A more intrusive IMF

That is why the IMF’s Board of Directors has now at long last approved an anti-corruption “framework” to guide the work of the Fund’s staff. IMF Managing Director Christine Lagarde has issued a clear warning to governments everywhere: “We are going to be more intrusive.”

The last time the Fund firmly challenged a government on the issue of corruption was in the late 1990s when the Asian financial crisis hit. As Indonesia’s economy fell off a cliff, the government of then-president Suharto and the nation’s rotten banking system were in the IMF’s crosshairs.

Thereafter, as Argentina and Greece sought IMF rescue packages, the Fund seemed to have forgotten about corruption. This was all the more perplexing as cheating the national tax collector was a leading popular sport in both countries.”

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