The recent protests in Washington, D.C., against the International Monetary Fund (IMF) and the World Bank demonstrate that the opposition to the prevailing economic order that sprang into public view during December's WTO protests in Seattle has not disappeared. Instead, it has grown stronger, picking two new targets that before would never have imagined themselves the objects of public vilification. Although the calls by some protestors to disband the IMF and World Bank are unjustified, the real question is whether the institutions can reform themselves so as to give greater consideration to the interests of the global poor--and whether the developed world can display the political will to do the same.

The IMF and World Bank are not, as some have charged, merely two heads of a single conspiratorial hydra; the former is charged with preventing global financial crises, while the latter's mission is to eradicate poverty worldwide. There are, of course, legitimate grievances with the restructuring plans frequently imposed by the IMF, and the World Bank has funded a number of expensive development projects of questionable environmental or social value. Furthermore, the debt resulting from loans by both institutions only adds to the crushing debt burden on developing nations. In general, however, it is hard to disagree with the statement of Michael Moore, director general of the World Trade Organization (another organization none too popular among the demonstrators), that "blaming the World Bank for poverty is a bit like blaming the Red Cross for starting World Wars I and II."

The IMF has come under increasing fire since it played a visible role in the Asian financial crisis. In order to receive loans to repay foreign creditors, the affected nations were forced to implement various austerity programs, decreasing government spending and opening some sectors of the economy to foreign competition. One of the first casualties of these programs were corrupt and insolvent banking systems, from which the politically connected had been able to receive economically unjustified loans; the cleansing of the banking system has been given partial credit for the recent resurgence of growth in countries like South Korea. Additional casualties of such restrictions, however, were the social spending that fell under the budget ax and the societal cohesion disrupted by economic restructuring and turmoil.

In the aftermath of the interventions in Asia, some have even begun to question the usefulness of IMF interventions in general. On the one hand, were the IMF not to intervene in financial crises, foreign creditors who lose their money might be unable to pay their debts to lenders elsewhere--a cycle of defaulting loans would allow financial crises to spread uncontrollably, bringing down banks in Boston as well as Bangkok. On the other hand, however, there is a danger that the possibility of bailouts could create a moral hazard and encourage speculators to float high-risk loans, secure in their knowledge that the IMF will be there should the loans fail.

Stung by criticism, the IMF has already pledged some reforms, including greater transparency, greater efforts toward debt relief, and a heightened focus on preventing financial crises before they start. Whether these changes were the result of anti-globalization protests or other pressures is uncertain; however, the political forces behind the demonstrators in Washington are very clearly playing a game of chicken with the global economy. Should the continuing efforts of the protestors result in an IMF and World Bank more sensitive to the needs of the developing world, the protests will have accomplished an important goal; the austerity measures in the Asian financial crisis caused severe social dislocation, and the costs of such dislocation must be considered by IMF policymakers along with the costs of defaulting loans.

However, should an election-worried Congress take the calls to "de-fund the fund" and "break the bank" more literally, the result would be more instability and economic pain for developing countries, not less. Countries do not take IMF loans with all the attached strings if they feel they would be better off without them, and the poor would be the first to suffer from a sustained global downturn. Furthermore, the World Bank funds a number of projects--community lending, health and nutritional improvements, and education for poor children--that achieve a great deal of good in the developing world.

One way to ensure that the institutions are more responsive to the concerns of the poor would be to give developing nations an increased policymaking role within them. However, major contributors such as the U.S. are likely to continue to insist that representation within the organizations be largely proportional to the size of a nation's financial commitment. If the developed world is not going to give others an equal voice at the table, it at least ought to heed the IMF and World Bank when they offer anti-poverty proposals that would be simple to implement. We have already noted the Clinton administration's shameful refusal (largely under pressure from domestic labor unions) to open markets to the exports of poor countries at the request of the World Bank. The IMF and World Bank have now created a joint committee to implement two initiatives for poverty reduction and debt relief, and the U.S. and other developed nations should give these programs their full support.