You probably don't think of the IMF as an enthralling  storyteller. This colorless, insistently-dull, statistics-bound institution headquartered in Washington DC is known for its macro-economic rigor and its issuance of mind-numbing numbers, not its narratives. And yet on January 8, the story that the IMF was telling about the future of the world economy made the front page of the New York Times. It was in fact one of the two top stories, under the headline: “I.M.F. Says Rise in U.S. Debts Is Threat to World's Economy.”

Of course, the authors of the article, Elizabeth Becker and Edmund Andrews, don’t explicitly identify the IMF as a storyteller. But what else was the IMF doing but telling a story? The story was alarming because embedded in the long and detailed report, replete with numbers and ratios and analyses, was the story of a disastrous possible scenario for the world economy. If the IMF had stuck to the numbers and the analyses, no one would have paid any attention: to their report. But because they start telling an interesting, even alarming, story, they end up on the front page of the New York Times.

According to Becker and Andrews, "the report sounded a loud alarm about the shaky fiscal foundation of the United States, questioning the wisdom of the Bush administration's tax cuts and warning that large budget deficits pose 'significant risks" not just for the United States but for the rest of the world.'"

Thus with its rising budget deficit and ballooning trade imbalance, the United States is running up a foreign debt of such record-breaking proportions that it threatens the financial stability of the global economy, according to a report released Wednesday by the International Monetary Fund. 
The report warns that the United States' net financial obligations to the rest of the world could be equal to 40 percent of its total economy within a few years — "an unprecedented level of external debt for a large industrial country," according to the fund, that could play havoc with the value of the dollar and international exchange rates.

The danger, according to the report, is that the United States' voracious appetite for borrowing could push up global interest rates and thus slow global investment and economic growth. "Higher borrowing costs abroad would mean that the adverse effects of U.S. fiscal deficits would spill over into global investment and output," the report said.

"The I.M.F. is right," said C. Fred Bergsten, director of the Institute for International Economics in Washington. "If those twin deficits — of the federal budget and the trade deficit — continue to grow you are increasing the risk of a day of reckoning when things can get pretty nasty." 

Administration officials have made it clear they are not alarmed about the United States' burgeoning external debt or the declining value of the dollar, which has lost more than one-quarter of its value against the euro in the last 18 months and which hit new lows earlier this week.

White House officials dismissed the report as alarmist, saying that President Bush has already vowed to reduce the budget deficit by half over the next five years. The deficit reached $374 billion last year, a record in dollar terms but not as a share of the total economy, and it is expected to exceed $400 billion this year. "Without those tax cuts I do not believe the downturn would have been one of the shortest and shallowest in U.S. history," said John B. Taylor, under secretary of the Treasury for international affairs.

Though the International Monetary Fund has criticized the United States on its budget and trade deficits repeatedly in the last few years, this report was unusually lengthy and pointed. And the I.M.F. went to lengths to publicize the report and seemed intent on getting American attention.

So we have two competing stories:

• We have the IMF story that concerns the significant risk of a global economic meltdown – “disaster is at hand.”

• We have the White House telling a very different story - “everything's ok, trust us.”

Note also that the two competing stories are not merely predictions. The stories themselves change behavior and so change the world. And paradoxically, the impact of the stories is the opposite of their content. Thus if people believe the IMF story, then it is likely that things will, as the White House predicts, turn out ok. However, if people believe the White House story and so no action is taken to rein in the looming budget deficit, it is more likely that the IMF's disaster scenario will materialize. 

Go to the article in the New York Times
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For more examples of Storytelling in The News, go to the Archive