systems and institutions. This, many critics believe, actually makes problems worse, rather than improving them, at least in the short-term. In the short-term, countries might do better if the IMF did just shore them up, provide some funding, and let them muddle through the immediate crisis.
This viewpoint is supported by Martin Feldstein (1998) who noted that the IMF had successfully intervened in the past in the Mexican and Latin American crises, but that it was failing now in Asia because it insisted on imposing strict economic policies requiring structural and institutional reform. He indicated that its past focus on adjustments in balance-of-payments and restructuring debt was effective, and was appropriate to the IMF's mission, but the new focus was ineffective and illegitimate.
E.J. Dionne (1998) noted that many of these criticisms are accurate ones. The IMF does intrude on national sovereignty, the U.S. does put tax money at risk, and there is a moral hazard problem when governments and investors are bailed out. Dionne agreed that the IMF does truly interfere with the pure operation of the market. Nonetheless, for Dionne, that risk is necessary. He made the analogy of the IMF being like the fire department. We would not begrudge the fire department putting out our neighbor's fire and using our tax dollars, even if the neighbor had started the fire himself. We would support the fire department because of friendship and because we would not want the fire to spread to our property. Thus, the imperfection of the system becomes acceptable.
Interestingly enough, the same group that often opposes bailouts because of its anti-free-market tinge, often also supports some of the policies that the IMF imposes as the condition of helping a country. These policies are conservative articles of faith, and include such things as currency stability, tax reduction, deregulation, and expanded free trade (Piling on the bailout,...