In July 1944, delegates from forty-four nations gathered in Bretton Woods, New Hampshire, to design a postwar international monetary system that would promote world trade, investment, and economic growth. The framers created the International Monetary Fund (IMF or fund) to supervise the new "Bretton Woods monetary regime" that sought to keep national currencies convertible at stable exchange rates and to provide temporary, low-cost financing of balance-of-payments deficits resulting from misaligned exchange rates.
In reality, the framers of the Bretton Woods regime created an international price-fixing arrangement enforced by the IMF. After joining the fund, each member country declared a value for its currency relative to the U.S. dollar. The U.S. Treasury, in turn, tied the dollar to gold by agreeing to buy and sell gold to other governments at $35 an ounce; the inflation of the 1960s, however, made the U.S. commitment to sell gold at that price unsustainable. To preserve U.S. gold reserves, President Richard Nixon closed the gold window in August 1971, effectively uncoupling the dollar from gold and ending the fund's original mission of supervising a system of pegged exchange rates. Looking for a new mission, the IMF quickly evolved into a financial medic for developing countries. Beginning in the early 1970s, the IMF skillfully used a series of global economic crises to increase its capital base and financing activities.
Has the expansion of IMF financing activities alleviated the balance-of-payments problems of member countries and encouraged prudent, progrowth economic policies? The evidence, much of it supplied by the IMF, demonstrates that the fund does more harm than good. Historical studies as well as recent initiatives in Mexico, East Asia, and Russia reveal that IMF financing programs, which rarely prescribe appropriate economic policies or sufficient institutional reforms, are at best ineffective and at worst incentives for imprudent investment and public policy decisions that reduce economic growth, encourage long-term IMF dependency, and create global financial chaos.
It is time to scrap the IMF and strengthen market-based alternatives that would promote an orderly and efficient international monetary system. Key reforms include floating exchange rates, internationally accepted accounting and disclosure practices, unfettered private financial markets, and fundamental legal, political, and constitutional rules that would allow free markets to emerge and countries to achieve self-sustaining economic growth and development.
If there is one really serious intellectual and cultural problem with capitalism, it stems from the lack of a sustained and widely known, let alone accepted, moral defense of the institution of private property rights.
Few doubt, in today’s world, that a society with a legal infrastructure that lacks this institution is in serious economic trouble. The failure to respect and legally protect the institution of private property—and its corollaries, such as freedom of contract and of setting the terms by the parties to the trade—has produced economic weakness across the globe. But many also believe that this institution is not founded on anything more solid than the arbitrary will of the government to grant privileges of ownership (for the latest statement of this position, see Liam Murphy and Thomas Nagel, The Myth of Ownership [Oxford University Press, 2002]).
Without a moral, prelegal defense, the institution of private property, which is the source of a great many benefits to us all, will forever remain vulnerable to the critics, starting with Karl Marx, who said that “the right of man to property is the right to enjoy his possessions and dispose of the same arbitrarily, without regard for other men, independently from society, the right of selfishness.” This essay argues that, contrary to widespread academic sentiments and impressions, the institution of private property rights fully accords with a sensible conception of human morality, indeed, rests on a solid moral foundation.
China has come to Africa. Can U.S. policy makers find ways to mesh, not clash, with Beijing’s interests? By Christopher C. Starling.
Why ideas really do matter. By Hoover fellow David R. Henderson.
The advantage of moderation
Anomalies of a Byzantine tax code
Two, three, many capitalisms
Liberalism’s urban legacy