From the start the most obvious problem in leadership is that Japan has been in an economic slump since 1992 and a more serious recession following the notorious consumption tax increase in May 1997. They can hardly lead Asia into a new era of growth when they can't get out of their 'nineties slump. The second most obvious problem with leadership is that the IMF started running out of resources and the corruption of a loan to Russia has brought further discredit to the IMF on top of the criticism that the Mexican bailout helped cause the Asian crisis.
But problems of leadership are intellectual as well. Near the same time that Malaysia imposed capital controls in August 98, Paul Krugman ventured the heresy that perhaps capital controls might not be such an outrageous idea after all. Krugman's MIT colleague, Rudiger Dornbusch predicted that capital controls would soon become "the fashion." As attention centered on the speculative attack on Brazil's currency following the Russian August default, the Finance Minister, Pedro Malan, had to repeatedly assure foreign investors and the IMF that capital controls were not being considered.
Prior to Krugman's defection from orthodoxy, Joe Stiglitz had also begun to question the IMF model for emerging economy economics on the grounds that the economies that had fared the worse were often the economies that had most closely adhered to IMF advice. As chief economist at the World Bank, he initiated studies to explore the relation between adherence to IMF prescriptions and economic breakdown.
In addition to the liberal defection from IMF orthodoxy led by Stiglitz and Krugman, the radical left or Populist perspective on the IMF has been one of condemnation which began in the 1980s. On top of this criticism, IMF orthodoxy has also been attacked from the right. The most prominent person in this attack was George Schultz, former Secretary of Treasury and State and former Dean of the Chicago Business School. The attack from the right has been, from the start, based on the moral hazard problem. This intellectual attack turned into dwindling IMF resources when the US Congress, starting in early 1998, withheld the $18bil of funds for the IMF requested by the Clinton Administration.
Managing Director of the Fund, Michael Camdessus, announced
his resignation after public criticisms of the IMF's loan to
Russia. Over a billion dollars of IMF money was allegedly laundered
through three banks before ending up in an offshore account. Scott Holton
has a detailed account. A weakened IMF may not be able to
lead the world through another crisis.