Globalization and its Discontents
Just finished
Globalizaton and its Discontents, by Joseph Stiglitz.
Stiglitz really doesn't like the IMF. He claims that the IMF (and its overseers at the Treasury Dept.) have a 'one size fits all' policy for every single 'client' country, that they refused to listen to people on the ground, and they even refused to listen to other economic voices within the administration - for example, Stiglitz's Councile of Economic Advisors or even the World Bank (Stiglitz was chairman of the Council of Economic Advisors under Clinton and then chief economist at the World Bank until 2000).
He feels that the IMF is, in fact, intensely secretive and therefore undemocratic. Ultimately, this wouldn't be as much of a problem if their policies were succesful, but he also feels that their policy recommendations have gone horribly wrong to the point where they directly contradict Keynes's beliefs (the basis for the founding of the IMF) as well as modern economic consensus, and have resulted in far lower standards of living for many residents of the developing world.
Stiglitz's arguments against the IMF are so convincing and damning that it convinced me that the IMF should be disbanded. But then I read a
rebuttal by Kenneth Rogoff, the new director of the IMF, and I found that I agreed with him much more than Stiglitz. There _is_ much more governmental failure than market failure in developing economies, especially out here in Asia, and the problem with Stiglitz's approach, which involves lots and lots of government intervention, is that it's a very slippery slope that politicians just can't resist.
For example, I came across an article a few months back (sorry can't find the link) about foreign investment in education in India - foreign firms are coming in and building universities. The response from the elite: University education should be an 'infant industry' until the domestic universities are strong enough to compete. Closer to home, the Philippines'
protection and encouragement of the domestic rice industry, ostensibly to gain 'self-sufficiency', is a huge tax on the poor and removes the incentive for farmers to switch to more valuable, export-oriented crops such as fruits and vegetables.
Plus, beyond the issues raised by Rogoff, I did some research to try to prove or disprove Stiglitz's claims that non-IMF countries (such as Poland and Malaysia) have done better than the IMF ones (such as the Czech Republic and Thailand), and the information that I found didn't really prove much one way or the other - Thailand has very strong growth at this point, as does the Czech Republic, and Indonesia, for example, would be going strong and back at '97 levels today, if it weren't for the Bali bombing (clearly no fault of the IMF's). So it's difficult to independently substantiate Stiglitz's claims on this fundamental issue.
In the end, Stiglitz does at least bring a different perspective to a number of the IMF's actions in the 1990's. However, I have to agree with the
Economist - this is not about globalization. It is about the IMF and its response to the crises of the nineties, with an emphasis of what Stiglitz would have done differently. It is not about the benefits from the freer flows of trade and information, and from the necessary transition of much of the world from an agricultural to an industrial and eventually service economy. While Stiglitz likely believes that all of these things are ultimately beneficial, he really only expounds on the negatives of the IMF 'rushing' things. So if you want to learn more about globalization, read
Against the Dead Hand. But if you are interested in the arcane economic and political details of how the IMF functions and how it impacts the world, read Globalization and its Discontents. But read
Rogoff's rebuttal first.
Posted by Stephen Bronstein at March 5, 2003 01:15 PM