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Where was the IMF during the recent years of handwringing as China's current account surpluses fueled U.S. foreign indebtedness and a growing and worrying global imbalance? "Hamstrung" is the answer because to quote Arvind Subramanian, the IMF "has rarely, if ever, effectively influenced the policies of large creditor countries even where such policies have had significant negative effects on others." That's a point also made forcefully by Stan Fischer, former Senior Deputy Managing Director at the Fund, speaking (by phone) to a conference at the time of the October IMF/World Bank annual meetings.
Subramanian proposes that to discipline the creditor countries (and oddly the U.S. is still fundamentally a creditor country, since it can borrow dollars at will from itself, i.e. its taxpayers, to lend to others -- as the recent Federal Reserve emergency swap arrangements for big emerging markets indicated) requires moving enforcement on exchange rate issues from the IMF to the WTO. "Power and influence evolve organically in the WTO because they flow from market size rather than being historically determined as in the IMF."
Well yes. But surely before resorting to the WTO (with after all its culture of mercantilist bargaining driven by market power -- not really an advance on the cooperative culture in principle at the IMF), it would make sense to offer China the votes and influence in the IMF itself commensurate with its economic power -- surely that ought to be on the agenda for the G-20 meeting this weekend. China has indicated it wants that role as reported in the Wall Street Journal and National Public Radio. Until China is satisfied on that score, I doubt it will accept a shared mantle of stewardship of global stability with the United States and other major economic powers.