Standing on Dublin's Merrion Street on Thursday, I could just as well have been in Buenos Aires in 2003, Ankara in 2000, Lagos in 1989 or Kingston in 1979. The people were more pallid and generally better fed, but the anger and the slogans were identical. So was the graffito someone had spray-painted on the side of the building, as they do all over the world: “IMF go home.”
When that three-letter abbreviation becomes known and understood by people who take the bus to work, your country is in trouble. The International Monetary Fund was designed, in the 1944 Bretton Woods conference, to be part of the subfloor plumbing of the world's economy, to keep money flowing between countries and prevent the sort of inflationary debt-default disasters that put Germany in Hitler's hands. But it came to take on a more infamous role as the archangel of international finance. An IMF bailout is a dark punctuation in any nation's history, a humiliation that is never forgotten.
Ireland's experience this week was much like what people saw in Nigeria in 1989 or Britain in 1976: First, the country discovers that international bond markets, frightened by its unstable economy, will no longer lend it money at a price it can afford. So the IMF team from Washington checks into the expensive hotel across from the finance ministry, pores over the books and then delivers a Structural Adjustment Program – drastic reform that turns the country's whole economy into a debt-repayment machine.
Government is gutted. Taxes rise; subsidies and grants vanish; social programs are pared back; state companies are sold; wages are slashed. Ideally, debt drops and investors regain confidence. But the poor and middle classes pay the price for mistakes made by governments and bankers. Cue rioting and electoral defeats.
Some IMF bailouts – economists call it conditional lending – do help to turn countries around. Brazil and Turkey (which this year ended 50 years of IMF stewardship) have built economies with real social benefits, though the process has often been calamitous.
Other times, the IMF is a handy scapegoat. After the Second World War, many former colonies in Asia, Africa and South America developed false economies loaded with regime-owned companies and isolated from the world through trade barriers, all sustained only through debt. In the 1980s, this house of cards fell apart and scores of countries went into economic crisis.
The resulting bailouts marked the beginning of an era of genuine growth for countries such as India. But the conditions were often devastating, preventing growth from being used to support social mobility. In left-wing circles, it's still common to blame the suffering caused by postwar economic authoritarianism on the IMF adjustments that followed. Countries like Venezuela and Zimbabwe have been driven to extremism and isolationism that feeds on anger at the IMF.
The fund itself admits that its actions in Southeast Asia and Latin America in the late 1990s were harsh enough to destroy prospects for growth. In Indonesia, a bailout led to a further crash. The ultimate disaster was Argentina, where the IMF endorsed heavy borrowing, deep government spending and a dangerous fixed-currency system in the 1990s, and then responded to the inevitable collapse with a brutal bailout that led to a paralyzing, full-scale debt default.
The current IMF managing director, French socialist Dominique Strauss-Kahn, took over in 2007 on a pledge to end all that. He has moved to set up a new system where a poverty-alleviation plan is part of the deal, the country is given a bigger stake in its own fate and longer-term concerns are taken into account.
