When they operate outside of the market, workplaces by nature become focused on priorities other than profit. So it is not surprising that to see this headline on the front page of today’s New York Times:
It turns out that notwithstanding its scandalous everyday practices that no one seems to notice — the transfer of conscripted capital to foreign regimes that promise to transfer it back to politically well-connected firms in the West — the I.M.F. is probably not the kind of place at which you’d want your daughter to work. And it didn’t start with Dominique Strauss-Kahn. Even Carmen Reinhart noticed the I.M.F.s “implicit sexual culture” when she worked there from 2001 to 2003: “It’s sort of like ‘Pirates of the Caribbean’” she said. “The rules are more like guidelines. That sets the stage, I think, for more risk-taking.”
It’s hard to think that if a similar culture was uncovered at, say, IBM, the New York Times wouldn’t be clamoring for federal investigations, lawsuits, and arrests of its senior leadership, all while decrying a sick nature inherent in capitalism. That we tend not to see such cultures arising in the private sector reflects the different incentives created when organizations are focused on profit first. In the private sector, a firm’s continued existed is tied to whether it satisfies customers today, and the firms that lose that focus tend to fail. Successful managers in the private sector have strong incentives to root out cultures that can arise and hinder focus from the firm’s primary goals.
Not so at the I.M.F. An internal review conducted there three years ago found that “the absence of public ethics scandals seems to be more a consequence of luck than good planning and action.”
In 2003, an I.M.F. study of itself, coauthored by Harvard economics professor Ken Rogoff, concluded that its policies rarely work. Countries that follow its economic reform plans (in exchange for conscripted capital) often suffer a “collapse in growth rates and significant financial crises,” with open currency markets merely serving to “amplify the effects of various shocks.”
So the I.M.F.’s continued existence is a scandal in itself. Its ostensible justification for existing ended with the collapse of Bretton Woods anyway. It is run by people who earn bloated, tax-free salaries that are much higher than they could ever earn if their salaries were based on their own productivity in the market. It’s like the post office, only sexier. And like the post office, its policies seldom work.