Scrap the IMF


G20 participants like global stuff, and there are plans afoot to beef up the International Monetary Fund. Actually, we shouldn't be beefing up the IMF any more than we should be beefing up (at considerable expense) the Financial Services Authority. Both should be put in a sack and quietly thrown in a pond.

The IMF is a clapped-out postwar body, set up in a world where trade was a thirtieth of what it is now, and when exchange rates were fixed. Once currencies started floating, in the 1970s, it had no clear role – so carved out another one for itself, doling out advice and cash to poor countries. But today it has few customers: many poor countries have at last embraced the world trading system, and most of the rest don't want the strings that come with IMF funding.

Furthermore, as recent events show, the days when something like the IMF could save the world from a global crisis are over. Even if it had been ten times the size, it could not have halted the enormous forces that were unleashed last year. The IMF's resources were indeed hundreds of billions of dollars. But The bank bailouts in Britain and America alone have amounted to trillions, not billions. Indeed, having an implicit guarantor around in the shape of an IMF is probably as dangerous to the global economy as having the implicit guarantee of a government bailout is to the domestic financial sector – just encouraging people to take more risks because nobody fears the downside any more.

The IMF is a body without a role. It carries too much past baggage to be given a new one. Rather than boost it just because it sounds nicely global, we really should be throwing it into the deep water.