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| Author: | Peter B. Kenen, Adjunct Senior Fellow for International Economics |
|---|
May 2007
48 pages
ISBN 978-0-87609-404-4
$10.00
Council Special Report No. 29
The International Monetary Fund’s purpose and scope of work have changed dramatically since its founding after World War II. Whereas at first the Fund aimed to maintain monetary and exchange-rate stability among a mostly industrialized membership, today most members are developing countries, ranging from large, emerging markets to small, impoverished states. The Fund’s surveillance of macroeconomic issues has expanded to cover topics with little direct relevance to its mandate. Moreover, though no industrialized country has drawn on the Fund for more than twenty years, such countries still dominate the Fund’s decision-making.
These developments have sparked calls for reform. Proposals to modify the Fund’s activities, lending facilities, and governance have come from many experts, including the Fund’s managing director. Others, who find the Fund illegitimate or obsolete, have called for its abolition. This Council Special Report, written by Peter B. Kenen under the auspices of the Council’s Maurice R. Greenberg Center for Geoeconomic Studies, rejects the urgings of the abolitionists and goes on to contend that efforts to reform the Fund deserve U.S. support. Many countries remain at risk for financial crises, and a strong Fund that can take the lead in responding is in the U.S. interest. With well-managed reform, the Fund could also play a useful role in resolving global economic imbalances. Overall, the report argues, the United States should not try to achieve unilaterally what the Fund can and should achieve multilaterally.
In making this case, Dr. Kenen offers a balanced assessment of the managing director’s reform proposals in both the Fund’s substantive areas of work and its governance—endorsing some, criticizing others, and urging a more aggressive role in confronting global imbalances. Reform of the International Monetary Fund demonstrates that with reasonable reform of its activities and structures, the Fund can remain relevant to the pressing global economic challenges we face.
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Peter B. Kenen is an adjunct senior fellow for international economics at the Council on Foreign Relations and Walker Professor of Economics and International Finance Emeritus at Princeton University. He taught at Columbia University from 1957 to 1971, and then moved to Princeton, where he taught in the economics department and the Woodrow Wilson School and served for many years as director of the International Finance Section. He has written or coauthored several books, including Asset Markets, Exchange Rates, and Economic Integration; Managing Exchange Rates;and Economic and Monetary Union in Europe. He has published papers in many professional journals and edited several books, including Managing the World Economy and Understanding Interdependence. He has served as a consultant to the Council of Economic Advisers, the U.S. Treasury, and the Federal Reserve, as well as the International Monetary Fund. He was a member of President Kennedy’s Task Force on Foreign Economic Policy and the Economic Advisory Panel of the Federal Reserve Bank of New York. He has held research fellowships at the Center for Advanced Study in the Behavioral Sciences, the Royal Institute of International Affairs, the Bank of England, and other institutions. He recently completed his new book, Regional Monetary Integration.
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