Global Discontent with the IMF

Joseph Stiglitz, Globalization and Its Discontents (W.W. Norton, 2002)

It's not hard nowadays to find people criticizing the International Monetary Fund (IMF) and other instruments of global capitalism. But Globalization and Its Discontents is a book notable mostly because its author, Joseph Stiglitz, was chief economist for the World Bank.

Stiglitz's critique shows just how radically stupid the policies of the World Bank and the IMF are. If a neoliberal like Stiglitz can reveal the obvious economic and moral errors of these global organizations, imagine what a real criticism would look like.

This is no chanting protestor from the Black Bloc; Stiglitz is one of the most respected economists in the world, and a former member of the Council of Economic Advisers. But as Stiglitz notes, "while I was at the World Bank, I saw firsthand the devastating effect that globalization can have on developing countries, and especially the poor within these countries."

Stiglitz is not a convert to the anti-globalization cause. He writes, "I believe that globalization-the removal of barriers to free trade and the closer integration of national economies-can be a force for good and that it has the potential to enrich everyone in the world, particularly the poor."

While Stiglitz is critical of his former institution, the World Bank, he reserves much of his condemnation for the IMF, which he blames for the global financial crisis in 1997-98. According to Stiglitz, IMF policies "based on the outworn presumption that markets, by themselves, lead to efficient outcomes, failed to allow for desirable government interventions in the market."

In 1999, the backlash against these policies began at the World Trade Organization meeting in Seattle, when Stiglitz reports the "shock" of having thousands of protestors at these staid meetings of the economic elite. Stiglitz observes, "Since then, the movement has grown stronger and the fury has spread."

Stiglitz does defend the benefits of World Bank policies: providing jobs to guerrillas in the Philippines who agreed to lay down their weapons; irrigation projects to aid farmers; AIDS projects to help stem the tide of the disease. But Stiglitz observes that many IMF policies benefited banks in the West, not the people. By bailing out these banks who made bad loans and forcing countries to prop up their currency until Western banks could escape with their money, the IMF has encouraged currency speculation and deregulatory policies. Typically, the IMF refuses to loan money to a country until it agrees to shock therapy, drastically cutting its welfare spending to appease these high priests of the free market ideology.

In the end, Stiglitz is a centrist who urges "globalization with a more human face." But unless the IMF, World Bank, and Western governments listen to his ideas, the more radical demands of protestors to abolish these institutions and provide genuine aid to the world will be the only option left.