The G20 claimed a special accomplishment in having worked to expand the resources of the International Monetary Fund in order to combat the global economic downturn. Yet, as Desmond Lachman points out, when one gets down to it, the IMF ain’t all that, as the kids are wont to say these days:
To be sure, the prospective enlargement of the IMF’s lending capability should be helpful in cushioning the blow of the global economic crisis on the emerging market economies in general and on those in Eastern Europe in particular. With substantially increased loanable resources, the IMF can be more effective in shoring up the external finances of these countries as they grapple with shrinking export markets and with a sudden drying up in capital inflows from abroad.
The key point, however, is that increasing the IMF’s resources does virtually nothing to ameliorate the unprecedented slump presently afflicting the world’s major industrialized countries. And until one gets a meaningful recovery in those countries, the emerging market economies will continue to be under severe pressure. They will remain so as they find their export markets continuing to shrink, their commodity prices continuing to decline, and their foreign bankers reluctant to roll over their loans.
Another Obamaesque triumph of style over substance on the diplomatic front? It would seem so. Sad to say, the Obama Administration got help in pushing style over substance when it came to trumpeting IMF enlargement over actual policy successes that have something to do with combating the economic downturn. Beating up on hedge funds and tax havens will do nothing to augment the state of the global economy. And neither will IMF resource-expansion.