Popular discontent with the economic process known as globalization is on the rise not only in developing countries, for which globalization has had adverse consequences, but also in the West, as shown by the large street demonstrations that take place whenever the World Trade Organization (WTO), the World Bank, or the International Monetary Fund (IMF) hold a major meeting. These demonstrations can no longer be shrugged off as the work of a small, discontented minority. In Globalization and Its Discontents, the critics of globalization and the role of Western financial and trade institutions in promoting it receive some heavyweight support from an insider who knows what he is talking about. This book is a sustained and often devastating critique of the role of the IMF in globalization and is only slightly less critical of the economic policies and assumptions of the U.S. government. Stiglitz relentlessly offers example after example of situations in which the IMF’s rigid insistence that its policies were the only correct ones to be pursued, in spite of evidence to the contrary, led to disastrous results across the globe, from East Asia to Latin America and Russia.
Globalization is the process which has led to a closer integration of all the nations of the world by the reduction in costs of transportation and communication and the breaking down of artificial barriers to the movement of goods, services, capital, and people across borders. There is no doubt, as Stiglitz points out, that globalization has brought many benefits. The opening up of international trade has helped many developing countries grow far more quickly than they otherwise would have done. Standards of living have been raised and life expectancy extended. However, in many parts of the world, globalization also has failed to bring the predicted economic improvements. More people live in poverty in 2003 than at the beginning of the 1990’s, even though total world income has increased during the same period. Nor has globalization brought economic stability, as crises in Latin America and Asia have shown.
The IMF was created in 1944 with the task of ensuring global economic stability. Stiglitz believes that it has failed in its mission. Not only have economic crises become more frequent over the last twenty-five years, but in many cases, the policies promoted by the IMF have actually made the situation worse, especially for the poor. Nor has the IMF been successful in the task it adopted in the 1990’s, to supervise the transition to a market economy in former communist countries.
The basic criticism that Stiglitz makes is that the IMF is attached to a rigid ideological agenda that is not always appropriate for the situation. He calls this the “Washington Consensus.” This consensus, which emerged in the Reagan era of the 1980’s, values the free market above everything else. It emphasizes fiscal austerity, privatization, and market liberalization. According to Stiglitz, when the consensus first emerged it made considerable sense, but as the years went by it came to be applied as an end in itself rather than as a means to ensure equitable and sustainable growth in the nations concerned. The Washington Consensus was then pushed too far and too fast. Stiglitz calls this “market fundamentalism.”
Too often, the approach of the IMF to developing countries is that of a “colonial ruler.” Agreements between the IMF and leaders of developing nations are not made between equal partners. The nation in effect hands over its economic sovereignty to the IMF in order to receive IMF-based aid. Stiglitz cites an arrogance at the heart of the IMF culture, the notion (not borne out by the facts) that it always knows best. Little real discussion is permitted, nor are dissenting views. The IMF might claim that it always negotiates the terms of its loans and does not use coercive tactics, but Stiglitz argues that such negotiations are completely one-sided since all the power lies with the IMF. Given the fact that IMF-based economic measures fail as often...
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