ABSTRACT
Figure 41.1 Groupthink in the IMF: the Mexican financial crisis of 1994 674 Figure 41.2 The meaning of Good Governance within IBRD, DAC and ADB 677 Figure 41.3 The World Development Report of the IBRD 682 Figure 41.4 Instrumental and identity-oriented social movements 687 Figure 41.5 The ten largest transnational corporations of the late 1990s 691 Figure 41.6 Business principles in the UN Global Compact (1999) 693
New financial crises and crisis prevention
During the huge financial crisis that hit Mexico in 1994 and 1995 the IMF played a poor role as a result of groupthink among those of its personnel involved (see Figure 41.1). They did not see the crisis coming and reacted wrongly, with the result that the Mexican currency lost its value. New financial crises hit East Asia in 1997-98, Russia in 1998 and Turkey and Argentina in 2000 and 2001. Because the IMF’s attempts to control these crises were inadequate, it was forced to rethink and reform its operations in three areas: crisis prevention, crisis management and its role in economic development, including its division of labour with the IBRD. Crisis prevention focused on the creation of international standards and codes of good financial practices and the promotion of sound financial institutions in developing states, with responsibility for increased transparency and accountability. It was argued that the greater openness and the better insight these provided would make it easier to follow developments and signal potential dangers. The
IMF decided to keep its documents on individual states no longer confidential. From then on most documents would be published on the Internet.
