The International Monetary Fund (IMF) was the post-war brainchild of John Maynard Keynes, who thought future economic downturns could be reduced by establishing a source of funds to stimulate the economies of countries without the resources to provide stimulus packages from their own reserves. As an international institution, the Fund would provide impartial aid and offset the protectionist beggar-thy-neighbor policies that had made the Great Depression a global phenomenon.
In the 1980's, however, the Fund's mission was derailed by the new brand of market fundamentalism that marked the Reagan/Thatcher years: the market always knows best, and the best thing a government can do is to stay out of it as much as possible. Subsequently, the Fund's loans have come with a number of restrictive conditions, forcing recipient governments to balance their budgets and keep inflation down, quite the opposite of what Keynes had initially intended.
The evidence through the 1990's, particularly with respect to the Asian financial crisis of 1997, and the transition to capitalism of the former Soviet bloc countries, is that the IMF's market fundamentalism has been a terrible mistake. Stiglitz argues convincingly that the IMF has not only failed to prevent the disasters in Asia and Eastern Europe, but that its policies have been a leading cause of the disasters in the first place, and its subsequent actions only made matters worse. Sending huge aid packages to Russia to hold off devaluation of the ruble only meant that the super-rich oligarchs had a little more time to pocket their cash, ship it out of the country and transform it safely into hard currency.
The IMF looks only at the limited set of numbers, like inflation and deficit, that affect the lives of Wall St ...