Joseph Stiglitz and the International Monetary Fund

In studying the processes behind the development of Third World countries, the external pressures to institute immediate reform greatly affect the developmental progress made. We see the International Monetary Fund (IMF) at work around the in efforts to "promote international monetary cooperation and exchange rate stability as well facilitate the balanced growth of international trade and provide resources to help members in balance of payments difficulties or to assist with poverty reduction" (IMF, 2009). As the Third World struggles with development, foreign aid from individual AICs and organizations such as the IMF is crucial to both further progress and the prevention of the all-too-likely scenario of regression as the global financial markets tumble. The IMF necessarily places very strict conditions on the monies loaned, to include major reform of a nation's financial, and occasionally political, structures. While the level of enforcement of these conditions varies, the conditionality itself has often created more problems than it's intended to fix. Creating a favorable balance-of-payment in a nation is attempted by, among other things, opening up the state's economy to foreign competition. The IMF has admitted that this has proven to be exactly the wrong step to take, as feeble local markets can't compete globally and are subsequently swallowed up by foreign competitors (BBCNews, 2003)

"Weathering Global Upheaval", by Yomiuri Shimbun, is an interview with Joseph Stiglitz, the former Senior Vice President and Chief Economist of the World Bank who has, since his time at the World Bank, spoken out against the practices of the World Bank and the IMF (Shimbun, 2009). Stiglitz has only criticism for these institutions and calls on those funding them, their member-states, to demand immediate reform. His 2002 book, Globalization and it's Discontents, accuses the IMF of placing flawed economic demands on developing nations which have demonstrably resulted in further economic ruin for many of those nations which have sought aid at the doorstep of the IMF (Eichengreen, 2002). Examples include Argentina, Brazil, Indonesia, Russia, and sub-Saharan Africa, where the implementation of conditional IMF economic policy in exchange for much-needed financial aid resulted in total collapses of these nations financial institutions. His book further compares the successes of Asian nations, specifically South Korea, Malaysia, and China, which resisted IMF funding and are now powerful emerging markets.

Speaking to the current global financial crises, Stiglitz maintains the responsibility lies almost totally with the United States' poor fiscal management (Shimbun, 2009). In light of the global recession, more nations are looking to institutions such as the IMF for aid, and the ideas pushed by the IMF and the United States favoring increased deregulation are exactly the wrong steps to be taken. The lack of transparency within the IMF is another main concern, as is the inherent complexity brought about by the increasingly beurocratic culture of special interests and favoritism towards the Global North. The problems of self-regulation are apparent, both in the case of the financial sector of the United States and that of the IMF. Neither promotes accountability, and the prevalence of conflicts-of-interest ensures reform will not come from within and must be imposed from an outside authority. In the U.S.'s case, government is needed to reign in the greed and corruption of corporate excess; unfortunately, those who would fix these problems are equally complicit and stand to advance personal interests by maintaining the status quo. Likewise, the IMF's need for reform will only come when those nations who control the budget, specifically the US and the EU, demand reform or pull funding. It's important to keep in mind, however, that the current system of IMF conditionality favors the AICs and will inevitably maintain the imbalance of power in such global institutions.

"Weathering Global Upheaval", rather than basic reporting, is an interview which captures the opinions of one man, Joseph Stiglitz. While his education and background give him a very solid basis for objectivity, critics of his maintain a personal agenda has influenced his writings on the IMF (Ray, 2004). Also, it seems Stiglitz has little to say about the World Bank other than passing remarks, which may be attributed to the fact that he worked there instead of the IMF. Seeing as both of these institutions play a significant role in furthering the "Washington Agenda", fairness would dictate a certain measure of complaint against the institution he led as well. As far as bias in condemning the IMF, Stiglitz backs up everything he says with specific data, which is neither selectively used nor manipulated to fit his theories. This is more of a call to reform rather than a simple critique, which necessarily requires prejudice to present a strong case towards that end.

Stiglitz seems to call all three theories of modernization into account here, claiming the "Washington Agenda", or modernization theory, has led to the preponderance of oft-times unhealthy economic policies of the IMF. While the idea of unregulated market forces creating vast trickle-down wealth is arguable, the current reality of an increasing divide between the Global North and South demands a new approach to solving this development problem. Developmentalism itself holds the Global North responsible for the current inequalities, which Stiglitz equally acknowledges. The redistribution of wealth must be done through governmental interaction, as the forces of the free market intrinsically will favor the AICs. In the case of the dependency theory, while their certainly is a reality of peripheral states working towards the ends set forth by the central states, the system must operate this way as a simple matter of where the wealth resides. I can't imagine those nations in power, such as the US, simply sacrificing their standards of living to bolster that of a poor nation. Again, the theories of globalization hold that a rising global tide raises all ships, and while we can not argue globalization and the free market system has lifted more people out of poverty than any other force in history, the reforms which are feasible which would ultimately result in greater equality need to be implemented to effect a much faster course of development.

Works Cited

BBCNews, "IMF Admits Policy Failures." news.bbc.co.uk. 19 Mar 2003. BBCNews. 23 Jan 2009 http://news.bbc.co.uk/2/hi/business/2863153.stm.

Eichengreen, Barry. "The Globalization Wars: An Economist Reports From the Front Lines." foreignaffairs.org. August 2002. Council on Foreign Relations. 23 Jan 2009 http://www.foreignaffairs.org/20020701fareviewessay8528/barry-eichengreen/the-globalization-wars-an-economist-reports-from-the-front-lines.html.

IMF, "Overview." imf.org. 2009. The International Monetary Fund. 23 Jan 2009 http://www.imf.org/external/about/overview.htm.

Ray, Alok. "What causes Stiglitz's discontents ." thehindubusinessline.com. 05 Mar 2004. The Hindu Business Line. 23 Jan 2009 http://www.thehindubusinessline.com/2004/03/05/stories/2004030500030800.htm.

Yomiuri, Shimbun. "Weathering Global Upheaval." yumiuri.co.jp. 18 Jan 2009. Daily Yomiuri Online: Associated Press. 23 Jan 2009 http://www.yomiuri.co.jp/dy/business/20090118dy01.htm.