Session 8
Joseph Stiglitz, Globalization and its Discontents, 2002
Chapters 1 and 2
Chapter 1: The Promise of Global Institutions
I.
International Organizations – powerful institutions today
A. International Bureaucrats – the “faceless symbols of the world economic order” are
under attack
B. Protests of Int’l Org Meetings – continual flashpoints/conflict
1. WTO – Seattle, 1999 protest
2. Annual IMF/World Bank protests
3. Protests not new in developing world, ARE new in developed world
4. Now, with communications advances, even 16-year olds have an opinion on
NAFTA
5. As result, even conservative politicians must pay heed to negative effects of
globalization (Chirac cited as example)
II.
Globalization
A. Brought much good through int’l trade (Nike factory example)
B. Social benefits as well: Greater connection throughout world has allowed things like
the International Campaign to Ban Landmines and anti-globalization movement to
develop
C. Economic integration helped stop Asian Financial Crisis from growing in ‘97
D. Sometimes results mixed: integration/market reforms in Russia so far bad
E. Western-driven with disproportionate share of benefits: Terms of Trade for poorest
declining (7)
F. Other related issues: speculation, property rights infringement, conditionality of aid as
a force that can undermine national sovereignty, environmental probs
III.
The Major Institutions of Globalization – IMF, World Bank, WTO
A. International Monetary Fund (IMF) – goal: to ensure global economic stability
1. Originally designed to provide loans to countries facing economic downturn
to stimulate aggregate demand (Keynesian approach)
2. Now, because of free market ideological influence, countries receive funds
only if countries raise taxes or interest rates, or slash deficits
3. Public institution – only U.S. has effective veto
4. Because developing countries in continual crisis, IMF could regularly impose
conditions on them
B. World Bank – goal: to reduce poverty
1. Under McNamara and Chenery, Bank was very sympathetic to poverty
reduction focus
2. In 1980’s (Reagan era), Clausen and Kreuger moved the Bank in a much
more free market direction (governments were the problem)
3. In 1980’s, Bank lending went beyond just normal projects to include
structural adjustment loans
C. World Trade Organization (WTO) – goal: to govern int’l trade relations
A. Spawned from the General Agreement on Trade and Tariffs in 1995
B. Forum for trade agreement disputes and enforcement body
IV.
The Washington Consensus
A. Name for the consensus between IMF/WB/U.S. Treasury for “right” economic
policies for developing world to pursue
B. These policies not always right for promoting growth
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1. Example: “capital market liberalization has been pushed despite the
fact that there is no evidence showing it spurs economic growth”)
2. Example: U.S. and Japan used protectionism as an important tool for
growth, but IMF/WB/WTO does not promote that
C. IMF/WTO/WB leaders dominated by wealthy country interests
D. Leaders are chosen behind closed doors and often have little experience in
developing world
E. World situation is now one of “global governance without global government”
– these key players dominate
Chapter 2: The Promise of Global Institutions
I.
Distinctions Between the IMF and World Bank
A. World Bank has “substantial fraction” of staff in country; IMF only one
“resident representative” in capital (for more, 24)
B. IMF’s view of a country from a luxury hotel – out-of-touch
II.
The Role of the IMF and its Problems
A. Role in International Assistance: To review macroeconomic situation (growth,
unemployment, and inflation) and make sure country is living within its
means
B. Particularly concerned with inflation, even though may overfocus on this to
the detriment of growth and development (Ethiopia example on page 28-31)
C. Strong financial focus, as in the case of pushing for Ethiopia to open banking
system to foreign competition and liberalize financial markets
D. Insistence on wanting countries to rely on market forces for stabilization and
growth
E. “One-size-fits-all” advice of IMF that richer countries, like the U.S. can ignore
(34, 49); further example, report done with search and replace (47-8)
F. Not interested in hearing the thoughts of ‘client countries’ (40)
G. Photo of IMF Managing Director Camdessus lording over the President of
Indonesia who was forced to sign an agreement (40-1)
H. IMF can not only cut off funds but has power to discourage investments from
private markets (42 – the case of Korea)
I. Focused on intermediate variables, like money supply, setting strict 30-, 60-,
and 90-day targets, rather than just overall growth, unemployment, and
inflation
J. Example of sketchy IMF advice to Korea and others: Build Central Banks that
with mandate to focus on inflation (opposite to U.S., whose Bank focuses on
growth and inflation)
K. Treated Russia and Kenya different because Russia a strategic nuclear
power
L. Executive Directors (country representatives) at IMF often kept in dark about
decisions
M. Escaping public accountability
N. Stiglitz: need for a public institution’s Freedom of Information Act to know
what such institutions are doing
III.
Botswana as an example of an approach alternative to the IMF (36)
A. Botswana used variety of outside advisers, including Ford Foundation, public
institutions, and private foundations
B. When IMF mission came in 1981, found that Botswana was already doing
many of the things it would have recommended – since then, Botswana has
not turned to the IMF for help
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