The administration's message is getting through to Congress: If the developed countries don't respond swiftly to the Asian financial crisis, the U.S. economy will suffer. With American jobs at stake, Congress is far more inclined today than it was a month ago to pony up the extra $18 billion the International Monetary Fund says it needs to help restore confidence in the Asian economies and stem the flight of short-term capital.
The IMF help may well play a crucial role in stabilizing the Asian economies suffering financial meltdown, but Congress should not yield to demands for extra cash without reservations. The IMF and its way of handling financial crises has come under a great deal of legitimate criticism. Both the solutions the IMF prescribes for all the money it is getting, and the procedures that it follows in divvying it out, should be open to outside scrutiny. Moreover, IMF rescue efforts should aim to bring about structural changes that prevent a recurrence of similar problems.Some transparency is already creeping into the IMF's secretive ways, but it is haphazard, discretionary and subject to prior consent. Those changes and more have to be institutionalized. Studies and reports that are being currently released on an ad hoc basis must be made public as a rule - and within time limits.
One key criticism leveled at the IMF is that it failed to see the Asian crisis coming and took inappropriate measures to address it after it arrived. The IMF says it foresaw the crisis but couldn't convince others it was coming. It also says it was deliberately misled by flawed financial data from the Asian capitals. The IMF bristles at the suggestion it is administering the same, often wrong, medicine to all countries, regardless of the roots of their problems.
But the confidence the IMF often exudes on the outside does not reflect the organization's own internal divisions and masks a record of some notable failures. In the Asian crisis, for example, an internal staff memo expressed serious concern that the $43 billion bailout package for Indonesia has not produced the desired results. Similarly, an internal review critical of IMF's role in Mexico in the runup to the 1995 peso crisis was hushed up and never released to the public. In fact, internal criticism is often kept out of reports and left to disappear within the bowels of the secretive IMF bureaucracy. When things go wrong, however, the IMF always finds someone else - usually the recipient government - to blame. IMF Managing Director Michel Camdessus has turned fault-finding into a fine art.
But not even the IMF's loudest critics are in favor of it being dismantled or even want it to be denied the extra funding. The IMF has developed into a powerful and necessary institution, often replacing government economic policies with its own ''recommendations.'' For that very reason, however, it must be subject to the same standards of good governance that it tries to impose on the target countries.
First, its country reviews, now released only when the subject country agrees to it, must be routinely made public, as should letters of intent it signs with countries seeking IMF assistance. Its archives should also be opened so that past decision-making can be examined.
The rescue plans it proposes must insist on structural changes to prevent the recurrence of similar problems. For example, the plans must lead to the dismantling of crony capitalism in Indonesia and government-sponsored industrial groupings - known as chaebol - in Korea.
The agency should only step into problems that are considered too risky for private capital and should limit its role to that of a lender of last resort. Only then can it avoid the criticism that it encourages irresponsible investment by private investors.