Many critics argue that Bretton Woods has gone away and the world has no current financial crises. What is the IMF to do? Plus the IMF’s management of crises can be counterproductive and create moral hazard.
The primary question is what kind of recurring but temporarily patched together multilateral crisis management arrangements would replace the IMF. The IMF would seem to be an especially good deal for the United States. Despite being the world’s largest debtor nation, in the absence of an IMF, we would be looked upon as a global lender of last resort.
The presence of an IMF allows us to trade with other nations, and sometimes bully them around. But when their financial claims come we can calmly tell them to go take a place in line; furthermore other countries will help pick up the tab or help make "conditionality" look less imperialistic. Given that the US has a role as global policeman in any case, the IMF shifts the "terms of trade" of that role in our favor. Do note that many IMF critics would prefer to revise this entire arrangement, but simply abolishing the IMF, taken alone, would not bring large gains even under a libertarian view of the world.
A question: given that much of the funds are raised on
private capital markets, how much does the IMF cost (in the crude sense
of the gross subsidy) each year?
By the way, I’ll go out on a limb and predict the next financial crisis will come in an Eastern European nation which wanted to join the Eurozone but couldn’t quite make it. Once this failure is realized capital will flow out rapidly.
On the IMF, here is commentary from The Economist.
Addendum: Here is an IMF piece on Robert Mundell, via Greg Mankiw.