Would Lenin have approved of the IMF?

An indispensable organization

A simple-minded answer to the question is, No. The IMF is entirely dedicated to  preserving the world capitalist system and any socialist must disapprove of it.  I think this answer is wrong. But before I explain it, I have say a few words about the Fund.

Recently, I have been involved more with the IMF and have witnessed how keen they are to remain an influential player in the 21^st century. Moreover, to do that as a truly international organization under the conditions of extraordinary high worldwide tensions, threats of wars, and mercantilist trade policies.

My relations with the Fund go back to my early years in the World Bank. In those days, the Fund missions would ask the World Bank to provide one of their (junior) economists to join the Fund ostensibly to maintain communication and give to the World Bank the appearance of some decision-making role regarding social sectors and public expenditures. I thus went, very young, to about five or six Fund missions to Turkey.  

The Fund missions were impressive. They benefited from an unparalleled access to government officials and to the data, but they also had excellent people to study these data. Their great advantage was (and is) access to government knowledge and information; their great disadvantage was/is lack of contact with the rest of the country. Yet, as I will argue, this never was the Fund’s mission—nor should it be.

The Fund’s  mandate was, and I hope stays, narrow, In that I am interestingly in full agreement with Adam Posen from the Peterson Institute in Washington who at a recent conference at the IMF called on the Fund to remain focused on its core mission and avoid both politization and the “mission creep” into the areas for which the Fund is neither the best vehicle nor has the expertise. Adam wrote eloquently about the difficulties of doing so under the present extremely politicized conditions:

The increasing politicization of international finance and commerce by China, the European Union, and the United States has, however, put at risk the IMF’s ability to assist member countries and limit exploitative behavior by the governments of the three largest economies. For the sake of global economic stability, the IMF must get out in front of these dangers.

The core mission of the International Monetary Fund is so simple that can be understood by any high-school student.

Make sure that the borrowed money is paid back;

Do not spend (over a cycle) more than you have collected in taxes;

Maintain macroeconomic stability.

Most of the critique of the Fund comes from the failure to understand its core mission. It is a mission of disciplining  people and countries. That particular mission is, given the capitalist world system, meant to reinforce the capitalist system and discipline workers. Austerity, often brought about by Fund’s policies is not, as Clara Mattei in The Capital Order: How Economists Invented Austerity and Paved the Way to Fascism and Mark Blyth Austerity: The History of a Dangerous Idea have rightly reminded us, politically neutral.  But that mission, if the system were different, would be equally needed. Socialism is not general irresponsibility. What Lenin most emphatically stressed in his 1922 speech to the Eleventh Congress of the Russian Communist Party (Bolshevik), at the time of New Economic Policy, was the need for fiscal responsibility, discipline and orderly international trade:

We are going to Genoa [a conference on post-War rebuilding of Europe—a Bretton Woods that failed] as merchants for the purpose of securing the most favourable terms for promoting the trade which has started, which is being carried on, and which, even if someone succeeded in forcibly interrupting it for a time, would inevitably continue to develop after the interruption.

We must start learning [economic management] from the very beginning. If we realise this, we shall pass our test; and the test is a serious one which the impending financial crisis will set—the test set by the Russian and international market to which we are subordinated, with which we are connected, and from which we cannot isolate ourselves. (See the whole text here.)

The organization that enforces this discipline is needed in any system. If the world has gone Leninist, and Lenin had found the IMF around, he would have taken it entirely as is and the Fund  would have played exactly the same role that it has played in the past eighty years.

That role is both ideologically neutral and not. It is ideologically neutral because the three key rules mentioned above are the rules of discipline that must exist in any coherently organized system of governance; the role is not ideologically neutral once the overall context (the world capitalist system) is given. But the issue there is not the organization that is enforcing the rules, but the system. Thus if the critique be, it should be directed at the system, not at the enforcers.

Sun Yatsen had argued that there should be four branches of government. In addition, to the well-known three, he thought that there should be a control branch of government (the control Yuan) that would check the legality and transparency of the other three branches. The roots of the fourth Yuan go back deeply in Chinese history. Its quasi equivalent may be seen in the US Government Accounting Office, but the Yuan would be endowed with greater political and even some judiciary power. Within the Chinese Communist Party the same function is fulfilled by the Central Committee Disciplinary Commission.

Project the fourth Yuan to the global level. This is what the International Monetary Fund is. It checks whether the three simple rules are observed and thus makes the smooth functioning of the system possible.

Lenin, the old-fashioned supporter of discipline and order (the son of a school inspector), would have loved it. It would serve his purposes, but the approach, the seriousness with which questions are examined, the narrow-minded dedication to the three top issues, would be all the same. Lenin would have kept the same people and the same approach. Whether the IMF  would have been located in Washington D.C., is difficult to say because Lenin never thought much beyond Eurasia. But if the Fund ever moves to Beijing, it will remain the same. Because it fulfills the function that the world needs.