IFI governance


Stiglitz “Appalled” At IMF Policy

14 June 2000

Joseph Stiglitz, former World Bank chief economist, took the opportunity of the extensive media interest in the planned protests against the Bank and IMF at their Spring Meetings to launch an attack on IMF policy advice and practices. He condemned the way the IMF and US Treasury Department responded to the East Asia crisis. In the April issue of the New Republic he said it “was a mistake”, to force the crisis countries in Asia to tighten budget spending and criticised the IMF‘s opaqueness: “with everything going on behind closed doors, it was impossible to know who was the real obstacle to change.” He echoed many NGOs, saying that “in practice, it [the IMF] undermines the democratic process by imposing policies” because “all the power in the negotiations is on one side – the IMF‘s – and the fund rarely allows sufficient time for broad consensus-building or even widespread consultations with either parliaments or civil society. Sometimes the IMF dispenses with the pretense of openness altogether and negotiates secret covenants.”

IMF staff are number crunchers who “frequently lack extensive experience in the country; they are more likely to have firsthand knowledge of its five-star hotels than of the villages that dot its countryside” and are “third-rank students from first-rate universities.” They use mathematical models which are “frequently flawed or out-of-date.” The task of developing a coherent program sensitive to the needs of a country is “impossible” in a few days or weeks.

Reacting to criticism from Stiglitz, and protesters, Stanley Fischer, acting IMF Managing Director, praised IMF staff for their hard work and dedication. Commenting on the protests he said that distinctions should be drawn between “sensible” campaigns such as Jubilee 2000 and disaffected students.

Whilst the IMF restrained itself from publicly reacting to Stiglitz, Professor Rudi Dornbusch, an associate of Stanley Fischer at MIT, took up the challenge, writing that “the notion of IMF malpractice and crack pot medicine argued by Joe Stiglitz is out-and-out frivolous and, of course, mostly self-serving.” “Neither the IMF nor the World Bank needs theorists; they need well-trained country veterinarians.”

Stiglitz article on: www.tnr.com