Rumors of the International Monetary Fund’s demise appear to have been greatly exaggerated. While the IMF has spent most of the last three years looking for clients and “relevance,” the end of the U.S. housing bubble and the resulting global credit crunch seem to have given the institution a new lease on life.
When the Mexican dictator Porfirio Díaz said the great tragedy of Mexico was that it was so far from God and so close to the United States, the comment summed up the long and tortured relationship between the Colossus of the North and Latin America.
Following several weeks of widespread global financial turmoil, leaders of several of the world’s most powerful countries are planning a summit and a series of meetings to address this burgeoning crisis. The November 15 summit and an accompanying series of smaller meetings will weigh the potential for reforms of the international financial system. Some are calling these meetings “Bretton Woods II,” in reference to the New Hampshire conference held in 1944 that created today’s main global financial institutions, the World Bank and the International Monetary Fund.
Given the magnitude and scope of the current economic crisis, the world will no doubt experience a significant economic downturn — of what degree and duration, no one can say — profoundly affecting all aspects of U.S. and international society. Of the many areas that will be impacted by the downturn, the environment stands out in particular. It’s closely tied to the tempo of resource consumption, and significant efforts to ameliorate environmental decline will prove very expensive and out of reach for already-stretched budgets. The question thus arises: Will the crisis be good or bad for the environment, especially with respect to global warming?
While the economic contraction is apparently slowing in the advanced industrial countries and may reach bottom in the not-too-distant future, it’s only beginning to gain momentum in the developing world, which was spared the earliest effects of the global meltdown. Because the crisis was largely precipitated by a collapse of the housing market in the United States and the resulting disintegration of financial products derived from the “securitization” of questionable mortgages, most developing nations were unaffected by the early stages of the meltdown, for the simple reason that they possessed few such assets.