In the year of 1998 the same issue happened to the government of Indonesia when the IMF tried to develop a reform program to revive the foreign exchange market, by supporting the government’s budget. In return the government promised to increase the interest rates, cut government expenditure and introduce more financial deregulation (Griffin, 2005).
As discussed above what IMF had gone through so far as the revival program for the poor economies had led to the colonial authority on the governments, meaning to say the promises which have given by the mentioned countries to IMF is the evidence of how IMF got the colonial authority on the countries by gaining benefit by the defined terms given to them.
Have you ever heard the term of “There is no free lunch”?
Why once we owe to the other party we feel he got the authority on us? Is that issue coming from the context of the culture we came from or because of the beliefs which have given by the religion we believe in?
Reference:
- Ricky W. Griffin, Michael W. Pustay , (2005), International Business, 4th edition, Pearson Prentice Hall.
17 comments:
Hey you know.. I heard Malaysia was offered the same deal in 1997 when the financial crisis hit us.
But apparently, the Malaysian Prime Minister at that time did not take up the offer. I thought it was one of the smart moves of his carrier. I think it helped us a great deal by NOT taking the IMF offer.
The major issue to discuss is how we can compare the societies together in order to find out how accurate your plea is. Don’t you think is that because of the norms we have gained by our religion? As we compare the Asian culture with the western culture we can simply find out it has not defined any free lunch through the western dictionaries even for the couples!!!
As this fellow mentioned, the idea of “free lunch” belongs to the thoughts given by the context of the culture we came from. For instance the Asian culture is known as the typical culture which has not practiced this concept yet, as it can bee seen through the events they all gather together and share the food for free!!! The idea of “there is no free lunch” has came from the western countries and with no doubt it has been effected the Asian culture as well. Since the western countries have imposed the strategy of controlling countries as the indirect way of having authority on the colonial subjugations as what “IMF” has done so far we can simply get to the conclusion of: this concept came from the western culture”.
Actually I never heard about the free lunch, but from the concept you have wrote above, what I understand about "There is no free lunch" is there is no free help which is given by another party to us. In your case, it means the IMF will expect something from their help to poor countries.
In my opinion, the IMF's attitude does not come from the culture and religion that we have, but it comes from the original nature of human itself. Because as we know, everytime we help someone, most if the time we help someone, even a little, we expect something from him/her. So, it is difficult to admit that we can help someone without expecting anything. I do not say that everyone like that, there are also person who can have good and pure heart in helping.
So, my conclusion is we can accept the help from IMF when our countries got problems, but we also have to think rationally whether the terms which are given by the IMF can be afforded by our country in near future.
As been mentiond, during the financial crisis, Malaysia was offered the same deal from IMF. The Malaysia Prime Minister did not take the offer but asking help from the other country.
In my point of view, it is a great move from our Prime Minister by not taking the offer.
Hello Brad……! Here my opinion IMF is not a good organization to borrow money from them. Because when I was studying international business I’ve learn that the IMF lending money with some percentage of the interest. That’s means they are not helping the country to which they lend money. Actually IMF is making profit by lending money to the country. For example; Thailand and Indonesia now these countries are suffering because they have to pay the high interest amount of money to the IMF. And when they pay these amount of money every year they won’t be able to develop there country.
The IMF's influence in the global economy steadily increased as it accumulated more members. The number of IMF member countries has more than quadrupled from the 44 states involved in its establishment, reflecting in particular the attainment of political independence by many developing countries and more recently the collapse of the Soviet bloc. The expansion of the IMF's membership, together with the changes in the world economy, have required the IMF to adapt in a variety of ways to continue serving its purposes effectively.
In an apparent move to curb the sudden rise of gold prices, and to shore up the falling value of the US Dollar, the International Monetary Fund's executive board approved a broad financial overhaul plan that could lead to the eventual sale of a little over 400 tons of its substantial gold supplies. IMF Managing Director Dominique Strauss-Kahn welcomed the board's decision April 7, 2008 to propose a new framework for the fund, designed to close a projected $400 million budget deficit over the next few years. The budget proposal includes sharp spending cuts of $100 million until 2011 that will include up to 380 staff dismissals.
http://en.wikipedia.org/wiki/International_Monetary_Fund
Brad, I would say that it is not the culture nor is it the beliefs nor is it about authority. It is a normal human principle to have the feeling of gratitude when someone helped us. However, in this context, it has nothing to do with the way of culture or beliefs. It is an agreement between two parties and both the parties should abide to the contract that has been made. I would say this is fully about law of contract. As how we have studied law, it is two parties stating their terms and condition and abiding to their agreement.
Nobody will help other parties without purpose and it is something with no body will give you free lunch. This is same like what IMF did with every country which asks help from this organization. Yes, IMF tried to help certain country which faced serious economic problem but since the day that country asks help from IMF it is same like it’s never end. Such as like South Korea and Thailand until today they still owe that money to IMF even they borrowed it long time already.
Well,one of the functions of IMF is to lend in monetary term to countries that having payments difficulties.Moreover,they also support the policies aimed at correcting the underlying problems especially at poverty reduction.
http://www.imf.org/external/work.htm
Actually,I never heard the term of "There is no free lunch" but however the feeling of getting authority on the person or organizations who borrowed money from is naturally human feeling.This got not to do with the culture,beliefs and religion.Even when we borrowed someone $20,we will feel that the other party will have more authority on us!!Therefore,the government have to think twice before make any decision of asking help from IMF!!like what Malaysia previous President did!
Brad, great article!!! I would be agree with Ayesha, IMF indeed is the organization which aims to reduce the rise in poverty, also IMF plays important role in reducing poverty’s sensitivity to the economy’s aggregate growth rate. (http://imf-ieo.org/pub/pdf/121305.pdf)
IMF has helped many countries and one of the classic examples of it would be South Korea. Nevertheless, I accept the fact that countries like Indonesia did not benefit the IMF adjustments, however, people like Sri SHOULD NOT simply SAY that "I.M.F IS NOT A GOD ORGANIZATION" Therefore Brad, TELL OFF Sri Khan to think more logically and make some research before posting a comment...
Coming back to the main point!! After some research I have made, I found out that the term "there is no free lunch" or "there ain't no such thing as a free lunch" means the opportunity cost. "To get one thing that we like, we usually have to give up another thing that we like. Making decisions requires trading off one goal against another.
(http://www.geoffmetcalf.com/lunch_20010625.html)
And as Ayesha mentioned, when someone borrows a money, the owed person would feel he or she got certain authority on him or herself regardless, who you are and where you came from!! This is a HUMAN BEING THING nothing to do with the culture or religion and if you would consider it as a religion, i do not think that any religion would allow the followers to simply borrow or lend money to one another!!!
And if someone borrows money and would not feel authority towards him or herself in a certain sense, he or she is (sorry to say) a fool, brainless and ill mannered person!!
HI nice topic to dicuss. Now financial crisis coming again and over the whole world.as you say there is no free lunch in the world ,i agree with you,becasue depend one of country the power the most important is the economics.IMF give the offer for the country and the need the profit from the country.
There is no such thing and ever will be as free lunch , everything in life people do things will always have a string attached , like for example the IMF case The International Monetary Fund (IMF) had a vital role in helping to stabilize the region’s economies at the time of encountering to the financial crisis. In August 1997 the IMF came to the rescue of the Thai economy while the Thailand’s currency had been devaluated and the government was forced to accept the emergency IMF funding. In return the government had to agree to a series of terms and conditions defined by IMF by tightening fiscal and monetary policy (Griffin, 2005).
Ee lyn, i was very happy when i read your comments; its always good to see someone who reasons logically! As much as the IMF has had many failled programms, its naive to say its a bad organization. You ask the question, why no free lunch? Ask yourself again, what would happen if there's free lunch? Well, countries would manage their funds as they like, because they know the IMF would be there to help them.In the financial world, you don't just give out money, and the IMF is no exception.
Yo bardia, just to add. Maybe you know this, but you have to realize there are more than 150 countries in the world, with different cultures, beliefs, mindset,procedures and processes. Everything people do everywhere in the world are not governed by culture and religion, though they may somehow influence.
Bardia, for answering to your question I would agree with what Murphy had mentioned earlier that if you own money to someone, it is very certain that you feel your debtors has some authority on you, Well it is very true that it is human nature, it has no relationship with culture or religion.
And talking about the term “There Is No Free Launch” means in economic theory and also the lay opinion that whatever goods and services are provided, they must be paid for by someone - i.e. you don't get something for nothing.
Now relating it with to IMF, the role of IMF is to provide financial assistance to countries that experience serious financial and economic difficulties using funds deposited with the IMF from the institution's 185 member countries. Member states with balance of payments problems, which often arise from these difficulties, may request loans to help fill gaps between what countries earn and/or are able to borrow from other official lenders and what countries must spend to operate, including covering the cost of importing basic goods and services. In return, countries are usually required to launch certain reforms, which have often been dubbed the "Washington Consensus". These reforms are generally required because countries with fixed exchange rate policies can engage in fiscal, monetary, and political practices which may lead to the crisis itself. For example, nations with severe budget deficits, rampant inflation, strict price controls, or significantly over-valued or under-valued currencies run the risk of facing balance of payment crises. Thus, the structural adjustment programs are at least ostensibly intended to ensure that the IMF is actually helping to prevent financial crises rather than merely funding financial recklessness.
Well it is true that IMF charges high interest rate, and also it’s is been criticized financial aid is bound with conditional ties. But we should not forget the above term that you cannot something for nothing.
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