The IMF, it appears, has never requested capital controls nor suspended credits even when there was a large or sustained outflow of capital. For most of the Cold War period, its importance as an emergency lender took second place to official grants and credits designed as much for political as for economic advantage.

With the advent of commercial bank lending to Third World countries, and the increasing deregulation and globalisation of financial services, the IMF has abandoned its raison d'etre almost totally.

Instead of a lenderof last resort, it has become the enforcer for international banks and financial institutions and performs a role comparable to the bouncer at a glitzy bar. The big banks invite Third World countries to line up for drinks on credit. But when they drink too much and exceed their credit limit, the IMF takes over as an enforcement agency.

Its tactics are brutal. It refuses to allow supplicant countries to impose capital controls. Instead it demands that they raise interest rates to attract foreign investment. This slows the economy and results in increased bankruptcies and high unemployment.

Governments must also reduce expenditures for health and education. Food subsidies, in most cases, have to be eliminated. Instead of growing food for its own citizens, the government is coerced into growing crops for export to earn the US dollars to repay the IMF.

It was this kind of a Draconian policy which led me to ask, in a book that I published in 1996, if the IMF had not outlived its usefulness. Since then I havecome to the conclusion that it has. It would be a great boon for the world to wind it up and turn its assets over to the World Bank to use partly for debt forgiveness to the world's poorest countries, including a number of African countries, and partly to provide a massive amount of capital for micro-banking, which would offer hope and opportunity to millions of impoverished people worldwide.

As ours is not a world of logic and common sense, however, one has to assume that the ideal is unlikely to happen in the short run and that it is more profitable to deal with more likely scenarios.

The IMF's current policy line turns the original Bretton Woods on its head. Instead of recommending or at least permitting capital controls to mitigate the consequences of massive inflows and outflows of capital, it takes the opposite position. It does this on the pretext that global financial markets reduce the cost of capital and permit a better allocation of resources worldwide.

This neo-classical assumption isrefuted by the actual trends since the 1970s. Removing capital controls has opened the floodgates to an accelerating volume of financial flows. World trade, by contrast, has little more than doubled.

The explosive growth of cross-currency financial flows has been paralleled by increasing volatility of both nominal and real exchange rates and by sharply rising real interest rates. Instead of reducing the cost of capital, it has become more expensive. International bank lending also surged many times faster than economic activity.

Reflecting on the current Asian collapse, Alan Greenspan, chairman of the US Federal Reserve Board, observed that "excessive leverage" and short-term bank lending "may turn out to be the Achilles' heel of an international financial system that is subject to wide variations in financial confidence". Indeed it may. A system under which mega banks print money willy-nilly to lend to almost anyone in the world who will line up for it is inherently unstable. The IMF bailouts onlyexacerbate the situation.

The 1995 Mexican bailout sowed the seeds of the current Asian crisis. The assurance that the IMF will ride to the rescue encourages international bankers and speculators to make still riskier loans. They escape the consequences of their actions, while the costs of their excesses are socialised and picked up by taxpayers at large.

In the face of all the evidence, it is more than astounding that the IMF with the active encouragement of the Clinton administration is now pressing for broad new powers. The IMF is seeking global authority over ability of national governments to control capital inflows and outflows including the power to require member countries to commit to full capital- account liberalisation.

This move should be recognised for what it is. It would mean the end of national sovereignty in economic matters. No country would be a master in its own house. The IMF seeks the power to control the world economy.

Only the holders of financial assets - a tiny fraction ofthe world's population and the ones whose needs have already been met - have anything to gain from perpetuating the global mythology. Even they have reason for concern. A globalised financial system dominated by highly leveraged banks is a recipe for disaster. When that disaster strikes the social consequences are completely unpredictable.

This is the reason I would not give the IMF any additional resources that would encourage it to continue on its present path. The IMF has not earned the trust of the people who pay the bills and should be cut off at the pass before it can do more damage to more people - Third World Network Features.