Mismanaging Integration in a Monetary Straight-Jacket: A Prescription for Social Disintegration, Insecurity and Political Fragmentation

This article focuses primarily on the monetary and exchange rate policies that are routinely promoted by the International Monetary Fund (IMF), an institution that is heavily influenced by U.S. Treasury Department views since the United States has an effective veto power in voting within the IMF. The thesis of this paper is that the range of responsible institutions - the IMF, the World Bank, and the U.S. Treasury, among them - are constrained by orthodox economic models. These institutions are essentially confined by ideological straight-jackets: their adherence to a particular set of policy responses in the face of mounting evidence of failure suggests a fear of open discussion and debate about alternative theories and modes of analysis. Part I of this paper will describe the ideological constraints arising from today's dominant trade theories. In Part II, the author analyzes the particular mix of policies pushed by the IMF and other institutions, and suggests that the policies themselves are undermining economic well-being and social and political stability. Part III offers alternative directions for policy. Part IV suggests that critics within the IMF and World Bank are already struggling to escape the confines of their ideological straight-jackets.