Sunday 22 Jul 2018 | 19:02 | SYDNEY
Sunday 22 Jul 2018 | 19:02 | SYDNEY

IMF rejoins capital flows debate


Stephen Grenville

17 January 2011 10:17

Having belatedly realised that its advocacy of open slather for foreign capital flows was misguided, the International Monetary Fund is now trying to establish that it was an innocent bystander in this decades-long debate.

In a November 2010 strategy document, the Fund opines that: 'In the aftermath of the global crisis, and especially now with resurgent capital flows requiring a considered policy response, it is not tenable for the Fund to remain on the sidelines of a debate so central to global economic stability'. This conveniently ignores the Fund's long-standing vigorous policy advice against any form of restriction on foreign capital flows, and indeed its attempt in 1997 to have this presumption in favour of free capital flows built into the Fund's Articles.

Still, better later than never. Having wasted more than a decade since the Asian crisis in studiously ignoring the damage done by large and flighty capital flows, the Fund has now embarked on a research agenda to see what might be done. This process will not go unopposed by the free-market proselytizers. Howard Davies, who was founding head of the UK Financial Services Authority until 2003 (just a few years before the Northern Rock debacle in 2007), offers a rear-guard defence of free capital flows here.

Photo by Flickr user Candor.