While the IMF and the GATT, created during and after World war II, were part of the explanation for trade expansion and income growth in the 1950s, 60s and 70s, there was a darker side to the post-war international economy.
Problems began to develop with the international financial system, caused, in large part, by the failure of countries experiencing fundamental balance of payments problems to devalue or revalue their currencies.
Also, the US dollars which had been in scarce supply in the 1940s became all too available in the 1960s, to the point at which the world was awash with dollars . The dollar s value vis a vis other currencies was now being challenged.
It was essentially this challenge to the core currency which led to the breakdown of the Bretton Woods fixed exchange rate system in the period 1971 to 1973.
The IMF basically had to reinvent itself with the breakdown of the Bretton Woods, for which it was established. In the 1970s and 80s it was seeking out a new rationale for its existence and , more recently, it s taken on a role more akin to the traditional role that it had, and that is to arrange funds for countries experiencing difficulties with the balance of payments and exchange rate.
But the nature of its activities now has changed quite significantly from what it used to be. It used to be the case that the IMF had to arrange funds to economies that could not sustain exchange rates at the given fixed levels, now its role is to provide funds to countries that have experienced currency crises, and economies experiencing liquidity problems.
It plays the part of a fire rescue team, if you like. There s been a firestorm in the financial markets of an economy and the IMF is akin to the fire brigade, they re coming along and they diagnose the situation and apply remedies.
IMF advice has been all too uniform across countries. In other words, countries vary a great deal. Some of them really should have a Keynesian expansionary type policy, rather than contractionary type policy, while the IMF always places the same kind of requirements on all countries. By the way, I get the feeling that this is changing, in other words that the IMF management is changing its view about macro-policies and we will see greater variety in its recommendations now.