This is an old song. . . .

Back in 1982, at the start of the debt crisis, the International Monetary Fund was up for a quota extension, favored by the Reagan administration, but opposed by right-wing Republicans who accused the IMF of trafficking with communists — meaning Hungary and Yugoslavia. The threat was that the NRCC would attack Democrats who supported the quota extension for being soft on communism. Though skeptical of the IMF, the Dems were prepared to support Reagan’s request but not at the price of being attacked by Reagan’s own minions for doing it.

Chris Matthews (then working for Tip O’Neill) and I got the message across (in my case, to Bart Rowen of the Washington Post): no IMF unless Reagan wrote a personal letter to each Democratic member asking for their support, in the national interest. Reagan did so, and the quota passed. I’ve often thought since that I could have pulled the plug personally on the IMF at that time, and wondered whether the world might not have been better off.

So, here we are again. Emanuel is right: until just recently, the IMF was effectively without a mission. Most countries in the world ceased doing business with it after the fiasco of the Asian crisis — it was out of Latin America altogether, and most of Asia. Now it is coming back to life in Eastern Europe, somewhat reformed, somewhat better led, but still with much the same wholesale approach to conditionality. The East European governments are taking the deals, because, shockingly, they are somewhat less stringent than the alternative on offer from the European Union. A sad situation, but one in which it may be better to have the IMF than not to have it.

That said, the liberal critique of the conditionality exercises is a sensible one, and particularly for E. Europe where there are important strategic considerations. (Though having said that, why the IMF should be bailing out the EU and doing its work for it is an interesting question. One can go back and forth on the merits of this for a long time…)

Overall, and taking everything into account, the IMF probably cannot do the same damage now that it did in the 1980s and 1990s, and, in broad support of the administration, I’d be inclined to keep it going. The way to achieve this would be for the White House to make a sensible concession to the liberal critique. For example, one might insist on the creation of an autonomous commission to review conditionality in particular cases in real time, so as to help ensure against the kind of reckless deflationism that overtook Asia in 1997. One might establish a high-level review group on the functioning and future of international monetary institutions. In short, there must be something that would work toward a better outcome than either the defeat of the IMF bill or a blank check for the same old policies.