My Time at the IMF

This post will be more personal than most. Some of you know that I spent two decades working for the International Monetary Fund (IMF) in Washington DC. I want to talk a bit about my experience there and why I left.

I joined the IMF in 1998, fresh out of graduate school. I had just gotten my Ph.D. in economics from Columbia University and was delighted to have received a job offer. I wasn’t too keen on the academic path, and I really wanted to work in the policy space. The IMF seemed like an ideal job.

I should point out that I was trained in the neoclassical tradition and believed in neoliberal policies. This was the 90s. This was standard.

I should say a few words about what the IMF does. It was founded in 1944, when forty-four allied nations gathered in Bretton Woods, New Hampshire, to devise a more cooperative global economy, in the pursuit of sustained peace and shared prosperity. The IMF and the World Bank were both born during this conference. While the World Bank was tasked with economic development, the job of the IMF was macroeconomic stability, especially in the context of a system of fixed exchange rates.

The following decades were successful. The industrial north enjoyed the “thirty golden years” of high growth, low inequality, and strong financial stability. The underdeveloped south started the slow process of economic convergence, especially in the wake of decolonization. The IMF played a role in this system.

Now, it turns out that the system of fixed exchange rates fell part in the early 1970s. This was going to change the role of the IMF. Exactly how is beyond the scope of this short post. For my purposes, it’s simply worth noting that the IMF has three core goals.

The first goal is policy advice (called by the dreadful term “surveillance.”) Every year (typically) a country gets visited by an IMF team. The team talks to the government and to other relevant stakeholders. This is called an “Article IV consultation.” The team then presents its report to the Executive Board back in Washington, which issues recommendations. Important point: this board is political. Consisting of twenty-four members, it is appointed by governments (the largest shareholders get their own chairs, others have to share). The idea behind the Article IV consultation is that peer pressure should goad members into following the advice of their fellow members, knowing that every country will be in the hot seat. Does it work? Not really.

The second goal is lending. When countries face an acute balance of payments crisis, they can approach the IMF for a loan to help them get back on their feet. This has been stretched over the years to allow for a wider array of loans, including for dealing with issues like natural disasters and climate shocks. This flexibility is well and good. It is here, though, that the IMF tends to attract the most criticism, as loans typically come with “conditionality” - the funds will only be disbursed if the government agrees to undertake certain corrective policies. The idea is that putting the economy on a sound footing requires certain policy fixes - because without this, the IMF would be throwing good money after bad. That’s the theory anyway. The reality is a bit different.

The third goal is technical assistance and training - in areas such as monetary policy, public financial management, tax administration, and financial regulation. This is relatively uncontroversial, even though it consumes a lot of resources.

So what is controversial? Surveillance can be, especially if the IMF pulls its punches when it deals with rich and powerful members. This tends to happen. For example: like most, the IMF did not sound the warning bell in the run-up to the global financial crisis. Part of this reflected a lack of awareness of the complexities of the financial plumbing. But part of it reflected an unwillingness to criticize the US and the UK too harshly. More recently, when the IMF launched its governance and corruption framework, it did not criticize these countries either, even though they are the destinations for ill-gotten gains. Instead it focused on countries such as … Ukraine!

A big problem with how the IMF approaches policy advice is that it has been heavily influenced by neoliberalism. This was certainly truer when I joined than it is today, as the IMF now talks a lot about issues like inequality and climate change. But, especially at the country level, you will still see neoliberal policy advice. This often manifests as a overriding belief in the superiority of market “efficiency.” Just to give some examples: (i) the one-dimensional focus on carbon pricing as the solution to climate change; (ii) the insistence on labor market “flexibility” (which usually means making it easier to fire people, including by curbing union power); (iii) support for financialization and free mobility of capital (more true before the global financial crisis, as the IMF has improved a lot in this area).

What about lending programs? This is where the IMF tends to get hammered. Critics accuse it of prolonging economic hardship by insisting on tight monetary and fiscal policy. For sure, there is some logic to IMF advice - the country is often in dire straits due to domestic policy misadventures. But I think the critics have the stronger argument, especially on the harmful effects of fiscal austerity. Just look at the Greek economic program, which insisted on severe austerity restore debt sustainability. But this austerity deepened the recession so much that debt sustainability actually got worse. To be fair, the IMF had the intellectual honesty to admit it was wrong here.

It used to be so much worse. When I joined the IMF, it was regularly promoting privatization, deregulation, labor market flexibility, tax cuts, and paring back social spending. Today, at least it pays lip service to protecting social spending. And it has largely moved away from recommendations on these kinds of “structural” policies (though based more on the need for a more focused mission than on a suspicion of neoliberalism).

When push comes to shove, the main problem with the IMF is one of groupthink. It’s an incredibly hierarchical organization that functions with military efficiency. But the downside of this is that it allows for little in the way of dissenting views, or anything outside of the mainstream. For example: there were some economists in the building who were warning about risks building up before the financial crisis. These people were not rewarded; they were instead marginalized. Groupthink is powerful.

What about my role in all of this? Well, I worked as an economist on such countries as Bulgaria, Uganda, Sri Lanka, Ghana, the Euro Area, the UK, and Poland. In 2009, I shifted gears a bit to become a speechwriter to the Managing Director. I did this for about six years, first for Dominique Strauss-Kahn (best forgotten!) and then for Christine Lagarde. I really enjoyed this role, and was able to have some quiet influence.

But, as I relate in my book Cathonomics, I became increasingly disillusioned with economics after the global financial crisis. While most economists looked at this as a technical crisis requiring technocratic solutions, I saw it as a moral crisis that required a fundamental reorientation of the global economy. That took me further down the path of Catholic social teaching and eventually out of the IMF.

Before I left for good, I took a three year leave of absence (from 2015 to 2018) to work with Jeffrey Sachs at Columbia University in the areas of ethics, economics, sustainable development, and Catholic social teaching. Already in my mid-forties, it felt like I had finally found my calling. Things started to finally come together and make sense.

Going back to the IMF was hard after this. I felt like I didn’t fit in. It seemed like I spoke a different language. Nobody was interested in what I had done at Columbia. Nobody was interested in giving me a position working on sustainable development, which the IMF was starting to focus on. Instead, I was marginalized and even blackballed. It all took a toll on my mental health. I had to leave.

I left in 2020. Yes, right in the middle of a global pandemic. Not the best time to upend one’s life! But still, I knew I had made the right decision. Once I left, I was able to write Cathonomics, and pursue other writing and teaching opportunities. I was able to have a voice, something that is denied to an IMF employee.

I have mixed feelings about the IMF today. I think it has not fully jettisoned the neoliberalism and it remains in the grip of groupthink. But most of the people who work there, including some close friends of mine, are dedicated public servants, devoted to making the world a better place. Although it became an increasingly poor fit for me, I will always look back fondly on my time there.