Words by Ross Cathcart, Head of Local Comms and Events, Rethinking Economics
A report recently published by the United Nations raises some serious questions about the role that the IMF plays in financial and public life and calls on the institution to recognise, and live up to, its responsibilities.
The report, published by the UN Special Rapporteur on extreme poverty and human rights Philip Alston, confirms what is already widely known: that the IMF is the single most influential global actor in regard to fiscal policy. It runs the show and what it says goes.
The report, however, goes further and highlights the significant role it has in providing social protection. As much as its executive team would hate to admit it, the governance role the IMF plays in the financial world does not come without responsibilities.
The modus operandi of the IMF is to promote and support fiscal consolidation. However, while it is correct in saying that that other institutions provide a safety net and social protection on a national basis, social protection should not be seen as an afterthought to deficit reduction. As the report says, ‘social protection reduces the economic drain of emergency care, expands employment capabilities, facilitates educational opportunities for the children of the poor and helps to break the cycle of dependency’. It needs to be on the IMF’s radar not least of all because, given its leadership role in economic policy, national governments will follow the IMF’s lead.
If Alston’s critique of the IMF as “A Large brain but a tiny conscience” is going to be proven wrong, the IMF needs to get its act together. Abject poverty is a political choice, not a footnote to a bank balance sheet. The work of the IMF, and indeed the practice of economics in general, does not work in an apolitical vacuum; addressing issues of poverty and social protection should always factor into the IMF’s work.
The IMF also has a diversity problem. While its Managing Director Christine Lagarde may be a woman, only 25.2% of its ‘B-Level’ economists and three of 24 Executive Directors identify as female. There is a lack of cultural diversity as well: only 5.4% ‘B-Level’ economists were from sub-Saharan Africa and 4.8% from East Asia. By contrast, between 1980 and 2000 almost 40% of senior staff had been educated by just ten elite universities in Great Britain or the United States.
If the IMF is to shake its image as an inward-looking, out-of-touch boys club, it needs to start taking the issue seriously. The effect of the male dominance in macroeconomics can be seen in the policy direction of the organisation: female economists are more likely to be in favour of Government-backed redistribution measures than their male counterparts.
Of course, the parochial way in which economics is perceived by the IMF, as nothing more than the application of mathematical models, is nothing new. In fact, this is how mainstream economics is frequently taught in universities all over the world. Is it any wonder that the IMF has turned out as it is?
Crucially, it doesn’t need to be like this. Rethinking Economics are working towards a new economics in the workplace as well as the classroom. If the IMF are going to take their role in social protection seriously a change of strategic direction needs to be coupled with critical look at the composition of the organisation.
Rethinking Economics are calling on the IMF to demonstrate its commitment to change by making these four reforms:
– Take concrete steps to increase the level of female economists employed throughout the IMF and at senior level.
– Make issues of inequality a primary consideration in all aspects of IMF’s work. Poverty should never be an afterthought and the IMF must recognise its responsibility as a leader in tackling it.
– Recognise that the practice of economics and the institutions that oversee it do not operate in an ideological vacuum. The actions of the IMF are never value-free.
– Draw up and implement an ethical charter with values that will underpin the IMF’s actions, guide its approach to issues of poverty and social protection and act as an example to governments around the world.
Social protection shouldn’t be a footnote to the IMF’s work. Moreover, it doesn’t have to be. A more diverse, pluralist is a better economics and the IMF needs to recognise this.