Yesterday the IMF's Independent Evaluation Office (IEO) released its report on the Fund's performance in the run-up to the financial crisis.
According to the executive summary '...the IMF provided few clear warnings about the risks and vulnerabilities associated with the impending crisis before its outbreak.' The report goes on to note:
The IMF's ability to detect important vulnerabilities and risks and alert the membership was undermined by a complex interaction of factors, many of which had been flagged before but had not been fully addressed. The IMF's ability to correctly identify the mounting risks was hindered by a high degree of groupthink, intellectual capture, a general mindset that a major financial crisis in large advanced economies was unlikely, and inadequate analytical approaches. Weak internal governance, lack of incentives to work across units and raise contrarian views, and a review process that did not “connect the dots” or ensure follow-up also played an important role, while political constraints may have also had some impact.
The Fund's Managing Director has broadly endorsed the reports findings. The Fund staff response is here.
It's a useful exercise, and the IEO report makes several sensible suggestions, including the familiar urging to encourage the Fund to better 'speak truth to power'. It's also noticeable that several of the problems identified by the IEO are the kind of structural issues you might expect to bedevil any large organisation (eg. the dreaded 'silo mentality' gets a mention).
One final thought. Despite the pre-crisis shortcomings identified here, the fact is that the crisis has actually been rather good for the Fund. Before the financial earthquake hit, the IMF appeared to be drifting into irrelevance. Now it's back in a prime position in the international financial architecture. Not champions of the world, perhaps, but at least no longer subject to jokes about IMF standing for 'It's Mostly Firing' .
Photo by Flickr user International Monetary Fund.
