Good intentions gone awry. (Book Review).

Globalization and its Discontents

Joseph E. Stiglitz 

W.W. Norton & Company

US$24.95

Economist Joseph E. Stiglitz, winner of a Nobel Prize in 2001 and a professor of economics at Columbia University, uses this book to unleash a severe critique of the three institutions that preside over globalization: the International Monetary Fund (IMF), the World Bank and the World Trade Organization (WTO). His attack is directed primarily at the IMF.

Stiglitz's critics have called him a traitor. However, unlike most opponents to globalization, Stiglitz is neither against this modern-day phenomenon nor its principal pillars--privatization of state-owned companies, free trade and free exchange of capital. On the contrary, the author supports them. What Stiglitz questions in Globalization and its Discontents is the way they have been implemented in poor or developing nations to the beat of the IMF's drum.

Stiglitz begins with the origin of the IMF and World Bank in 1944, during World War II, in the conference of Bretton Woods, New Hampshire. At this meeting of 44 countries, an international monetary system--based on dollar hegemony--was established, and a plan was coordinated to finance the reconstruction of Europe after the war. In fact, the official name of the World Bank is the International Bank for Reconstruction and Development, a title that reflects its original mission.

The author explains that the IMF was created on the premise that markets did not always operate well, that is, they could yield a high rate of unemployment and not necessarily furnish the needed funds for reconstruction or economic development. As a side note, it is worth mentioning that not even Adam Smith trusted the market forces with the same devotion that some believers today uphold the theses of the Scottish economist.

The IMF was created under the belief that in order to achieve economic stability, a collective effort at the global level was necessary. Similarly, the United Nations was founded out of the need for an international collective action to achieve political stability. Throughout the book, Stiglitz underscores how the IMF has detached itself from its original mission.

The IMF is a public institution, financed by contributors from various countries. Notwithstanding, it does not report to these citizens but rather to the finance ministries and central banks, in a complicated balance of power that is fundamentally based in the economic power of countries at the end of World War II. In this manner, the author affirms, the industrialized countries direct the fund, and the United States is the only one with veto power. Stiglitz accuses the IMF of placing the interests of developed countries and their "main shareholder," the United States, above the interests of less developed countries.

He points his artillery at the lack of transparency on the part of the IMF and against its ideological inclination. From a faith in the coordinated action of private companies and the government, the IMF has shifted in two decades to the strict notion that the market is enough to promote development. Stiglitz Draws upon his experience as an economic adviser to U.S. President Bill Clinton and his three years as chief economist for the World Bank to contradict this concept. For the author, the imposed policies now known as neo-liberal are not enough to elevate the quality of life, reduce poverty or decrease inequality in employment, education and progress among the general population. He supports his argument with an analysis of the crisis in Russia and eastern Asia, and the failure of Latin America to reach its development goals.

Especially in nations that have combined the effectiveness of free markets with social policies and the promotion of national industries, Stiglitz concludes globalization and external aid have improved the lives of millions of people. And they could improve the lives of millions more if the IMF, the World Bank and the WTO practiced transparency, allowed room for debate and revised the conditions demanded by developing nations. What he proposes, in essence, is that closed ideology and economic dogmatism yield their place to discussion.

RELATED ARTICLE: Excerpt from: Globalization and its Discontents:

"I should be clear:All of these criticisms of how the IMF operates do not mean the IMF's money and time is always wasted. Sometimes money has gone to governments with good policies in place-but not necessarily because the IMF recommended these policies."