Initially devised to maintain a system of fixed exchange rates, the IMF took on a
new role during the Latin American debt crisis of the 1980s-providing moderate amounts
of credit, facilitating debt renegotiations, and recommending responsible macroeconomic
policies. But the IMF is also applying the lessons of Eastern Europe and the former
Soviet Union, where a fundamental economic restructuring was necessary, to Asia.
So in Korea, for example, the fund called for reform of inefficient conglomerates
and inflexible labor laws. However beneficial in the long run, such changes are not
needed to resolve the current crisis. By stepping in too far and too soon, the IMF
discourages countries from seeking modest help. Even worse, it encourages bankers
to undertake more risky loans, making another crisis more likely.