The Very Awful Truth About the IBRD/IMF

It is somewhat puzzling why these two Autonomous Agencies of the United Nations (IBRD - World Bank and IMF) with their highly trained and outstanding staff of Economic Advisers always seem to get it wrong when they undertake field missions overseas.

Why, and how, could this possibility ever happen is somewhat beyond belief, but perhaps a closer look at these two most powerful institutions might give us a clue to what is really happening.

Examining the actual founding of the International Bank for Reconstruction and Development (IBRD) and the International Monetary Fund (IMF) at the Bretton Woods Conference in 1944, it becomes immediately apparent that the world financial leaders had some unusual interests in common.

One of the most dominant, driving forces behind the meetings and representing the United Kingdom was the renowned economist, John Maynard Keynes. Representing the newly emerging financial powerhouse, the United States, was Secretary of the Treasury Henry Morgenthau, Treasury economist, chief adviser and confidant of President Roosevelt, Harry Dexter White and Dean Acheson, representing the State Department and soon to become Secretary of State under President Truman. This was the creme de la creme of the financial powers at that time. However, if one looks closely at these distinguished men, a similar strand of belief and thinking is common to all, particularly to Keynes and Dexter White. They were, to put it plainly, ardent Soviet sympathizers and avowed socialists in their economic beliefs, and you may have guessed, the founder and principle desciple of what became known as Keynesian School of Economic thinking.  From its  beginnings the IBRD/IMF has as its economic foundation a Keynesian bias and undercurrent structured into its economic thinking and organizational structure. This bias may be seen from its initial beginnings in the mid-1940s up unto even today despite the broad diversity available in current economic thinking.

We also must remember at this time that Keynesian economics was becoming the mainstay at leading institutions like Harvard, Yale, Brown and other Ivy League institutions where the US government heavily recruited its economic specialists and staff professionals.

However, what really set the ball rolling was the publication in 1948 of the classic textbook, Economics, by Paul Samuelson of the University of Chicago.  This was soon to become the "Keynesian Bible of Economics" and read by just about every student as the introduction to the study of economics. Today, it is in its 19th edition and is used in universities throughout the world as the introductory foundation to economics in the Keynesian tradition.

This is most important to recognize as almost all future professional economists are exposed to Keynesian thinking right from the very beginnings of their training, then into graduate school until completion of their doctorate recognition.  As you might guess, the best in class are recruited by the IBRD/IMF to become the future professional staff economists.

What  soon becomes obvious is the pronounced Keynesian Bias that continues to run through these powerful institutions from their very founding right into today's staff and future staffing requirements.  I guess we might say, similar to birds of the feather, economists that flock together stay together.

In part II of this essay to hopefully follow shortly, I shall attempt to take a more critical look at how the IBRD/IMF approaches their field assignments and formulate their country recommendations. Books have been written on this topic but I shall try to be both brief and direct, hopefully citing the experts in their own words.