The Dirty Hippies were right, once again

It's worth repeating: the IMF and World Bank suck, big time. They suck a lot. And good evidence of how much they suck is that when developing countries are given any other alternative to the IMF or World Bank, they usually take it. And they don't just take it, they flee the Bretton Woods system like East Germans trying to get over the wall.

I know you all saw the same front-page story on the Washington Post that I did:

As Global Wealth Spreads, the IMF Recedes

This is one of those seriously good-news stories from the last half-decade or so. Basically, the rise of China and India (and other suddenly-flush states) with the concommitant collapse of Argentina and other IMF projects has created lending competition that the IMF, with its rigid insistence on ideological and fiscal straitjackets, is losing.

(One of the underreported aspects of the clash over the World Bank and IMF in the early part of this decade was the fact that these institutions derived operating funds from their loans, so they had an interest in seeing loans and interest rise as high as possible. With the collapse of the IMF lending system, the IMF has been in a pretty severe budget crisis.)

The usual liberal tic here is to bemoan America's waning influence in the developing world, as China provides aid without America's allegedly high-minded concern for free markets or human rights. But there's no reason -- absolutely none -- that America, or the countries who control the IMF, should be losing out to countries that are still quite poor. The IMF and World Bank collectively are, as Dean Baker has said, the OPEC of money. If China is offering developing countries cheap money, America, the UK, and other rich countries have every ability to offer more money for cheaper, if this is really about geopolitical influence.

But what's clear, at this point, is that the competition isn't really over money. It's about respect for national sovereignty. The IMF and World Bank were able to get away with incredibly abusive treatment of the developing world during the 1980s and 1990s, as the influence of America's competition on the world stage waned and collapsed. The abuse of poor countries included starving Malawians in the name of the free market, among other things. As money from different sources becomes available, a large number of developing countries could be forgiven for telling the Bretton Woods organizations to go pound sand, no matter what money they offer.

This is one of the reasons that John McCain's "League of Democracies" is so unlikely. The young and developing democracies of the world do in fact have wildly different conceptions of what the world should look like, and despite wealthy white countries' pet ideologies like "the responsibility to protect", old Westphalian notions of sovereignty, autonomy, and equality among states have a great deal of currency among the middle and lower class of nations.