RAYMOND MIKESELL, a professor of economics at the University of Oregon, died on Thursday September 14th at the age of 93. Mr Mikesell's old age brought with it a noteworthy achievement. He was thought to be the last surviving economist present at the conference in 1944 at Bretton Woods, New Hampshire, which saw the establishment of the post-war economic regime and with it the birth of the International Monetary Fund (IMF) and the World Bank. As the annual autumn meeting of the two institutions gets underway in Singapore, Mr Mikesell's death is a reminder to the ageing figures of international finance that they may also have a natural lifespan.
The organisations ere born into a world torn apart by war. The economists meeting at Bretton Woods also had sharp memories of the international financial crisis of the 1930s, when mercantilist policies and the failure of the international-payments system devastated world trade. They hoped to avert future crises by setting up multilateral institutions to act as a stabilising influence during the post-war reconstruction. The bank's first job was rebuilding Europe; the IMF oversaw the fixed exchange-rate system established at Bretton Woods. Later on the pair sought new roles as the stewards of global economic development and financial stability.
Now the IMF and World Bank have fewer jobs to do. Markets work better, as do other financial institutions. Helped by improved economic theory, the world has grown richer and more stable. As for helping the poorest, a multilateral model of giving poor countries money and advice for running their economies is under fire from both left and right. Conservatives argue that such interventions cause more problems than they solve. The left complains that developing nations get too little money and not enough control over how it is spent. Both sides fear that the institutions' structures are outdated, hinting, increasingly loudly, that retirement is due.
At this week's meetings, the old couple will fiercely insist that they still have work to do. The IMF's latest World Economic Outlook predicts that the global economy remains in good shape, although the risks are "increasingly tilted to the downside." Chief among these are resurgent inflation, supply-side commodity shocks (especially in the oil market) and persistent global imbalances, particularly in America, where the current-account deficit continues to soarfigures released on September 18th showed that the deficit had widened unexpectedly fast in the second quarter to $218 billion.
Those imbalances have pushed Asian exchange rates to the top of the agenda. Europe and America both want Asian countries to stop stockpiling dollars in order to keep their currencies (and exports) cheap, a practice that is fuelling America's unsustainable spending spree. In theory, this sort of currency-related imbalance should be the sort of intervention the IMF is good at.
The power struggle between rich and rising economies is pushing into the area of governance. The IMF has won approval for the first stage of an overhaul of its voting structure that gives a slightly bigger voice to China and other emerging markets. But many poorer countries want substantially more say. Tinkering with the voting rights of various countries will make it no easier to resolve deep-seated disputes. The IMF has promised a more fundamental overhaul by 2008. Nor is it clear what might replace the once widely-supported "Washington consensus", which has guided interventions over the past decade but is falling out of favour.
Nor will reform shield the World Bank. Its leader, Paul Wolfowitz, seems to want to undertake a similar overhaul of his institution. But questions remain over the efficacy of its aid. And worries persist about the weakening market for the banks loans to creditworthy middle-income countries, which help to finance development. Both institutions are in dire need of a cure for creaky old age.
