The International Monetary Fund has been, for some years, an institution looking for a new role. Now, the credit crunch has brought it spluttering back to life.
Originally an instrument for bringing wayward first world governments (such as the UK under Labour in 1976) into line by imposing fierce policy reforms in exchange for loans, it used to have a reputation as the slimmest and most effective of the post-Second World War institutions. Over the years, however, it had transmogrified into just another bloated global bureaucracy.
For its critics, it came to exemplify all that was wrong with western economic values. The hardline values it espoused, such as removal of food subsidies, made it an object of hatred among some client countries. It became an object of particular scorn among anti-globalisation protesters, and is now forced to hold its twice-yearly meetings with a ring of steel around its complex.
Initially operating with a small staff of experts out of one building, it now occupies a whole city block in downtown Washington. At its peak it employed 2,600 people. Once it had run out of first world governments to lend to, it turned its attention to the developing world. The IMF became a huge presence in Latin America, often appearing to support dictators and provoking riots as it imposed its draconian model on its customers. It expanded rapidly in the 1990s to cope with Russia and Eastern Europe, and took on a bigger role in Africa and Asia.
It has never been loved, yet has managed to maintain the support of the western democracies, its biggest shareholders. But in recent years it seemed to run out of things to do. Its big customers - Brazil, Argentina, Mexico and, more recently, Russia and South Korea - became thriving economies with large foreign-exchange reserves, and no longer needed the Fund.
Under the lacklustre leadership of the Spanish politician Rodrigo Rato, it drifted, ran short of money and became inward-looking. But the current managing director, Dominique Strauss-Kahn, an urbane former French finance minister, knew what to do. He speeded up modernisation of the Fund's structure so that votes were shifted from the old 1945 powers to a broader range of countries, recognising the rising importance of Asia and Latin America. Costs have been slashed by $100m, leading to the departure of 400 of the 2,600 staff. And the Fund is to secure its finances by selling off 400 metric tonnes of its gold reserves.
What the IMF has always had is a posse of world-class economists and belief in its own wisdom. The problem was that western democracies such as Britain consistently ignored its views. When it told the Blair-Brown government in the early part of this century to start repairing the public finances - a cushion for the rougher years ahead - it was ignored. Similarly, its warnings that Britain's credit explosion could provoke a housing collapse were brushed aside at the Treasury.
Yet every institution has its day, and we could be entering a new age for the Fund. Its well-supported claim that the present financial crisis, based around foolish sub-prime lending, is the worst since the Great Depression made a serious impression.
After all, the Fund, which has its own complex, low-key language for describing economic phenomena, is not given to hyperbole. Its research on the credit crunch discovered that previous estimates of the size of the problem were far too modest: the world's bankers had created a pool of $945bn of toxic debt - about twice the amount expected.
At the recent meetings in Washington, Fund officials such as Strauss-Kahn were on the offensive. It was not the Fund's fault that this build-up of financial speculation had taken place; it had issued warnings where necessary and politicians had chosen to ignore them. The US had refused to let it provide an annual financial assessment, so it had been prevented from raising the alarm.
The credit crisis has made clear the need for better global policing of finance. The IMF is being charged to work on two fronts. First, it has been asked to step up global surveillance, seeking to resolve problems such as the collapsing dollar by persuading groups of affected countries (in this case the US, China and the Gulf states together) to alter their behaviour. This has started to work. For the first time the Chinese are allowing their currency, the renminbi, to rise.
Second, the IMF is being told to monitor global stability (and speak up when it sees bubbles developing) and to force banks, credit agencies and countries to be more transparent. It may also have a critical role to play in providing emergency cash to countries hit by food price rises. The IMF is dead. Long live the IMF.
Alex Brummer is City editor of the Daily Mail