Apart from a clearer perspective on why the IMF's policies were bound to fail, Stiglitz uncovers at length the hidden agenda behind the IMF. The continual huge bailout disbursements of the IMF to help countries in economic crisis only benefited the large American banks that made the bad loans, to make a clean profit. The countries that followed the IMF's prescriptions suffered deeply- leading to riots in such places as Indonesia where people saw both their savings and jobs wiped out at the same time. On the contrary, the countries that achieved quicker recovery are precisely those who managed to elude from the worst aspects of the crisis by ignoring or better yet, boldly went against the IMF’s advice. The IMF however, blamed the governments for the economic turmoil and demanded even faster privatization despite all the evidence harnessed to the failure of such measures. Thailand and Malaysia are prime examples of the IMF’s innumerable failures where the policies they enforced to “ensure stability and a recovery from the depression,” resulted in disastrous measures. It was as if truth and reality were meaningless in the face of the IMF's fundamental perception: the market can never be wrong. More darkly, in Stiglitz's view, the IMF systematically acts in the interest of creditors, and of rich elites, in preference to that of workers and commoners. He sees it as no coincidence that the IMF while preaching the virtues of free market, regularly provides money to pay off loans made by banks who are eager to accept the high interest rates, which bear pretentious risks. It is also no accident that food subsidies and other ways of cushioning the hardships suffered by the poor are among the first programs the IMF presses onto countries to cut when they blatantly need to balance their budgets. “Stabilization is on the agenda; job creation is off. Taxation, and its adverse effects, are on the agenda; land reform is off. There is money to bail out banks but not to pay for improved education and health services, let alone to bail out workers who are thrown out of their jobs as a result of the IMF's macroeconomic mismanagement.” (Stiglitz pg. Unknown) Here again, Stiglitz reiterates that the IMF's mistakes are not random but just simply the systematic consequence of its fundamental biases.
Lastly, Stiglitz repeatedly claims that the IMF's policies stem not from economic observation or analysis but from ideology--specifically, an ideological commitment to free markets. Again and again he accuses IMF officials of deliberately ignoring the "facts on the ground" in the countries to which they were offering recommendations. To some extent he complains that they did not understand, or at least didn’t take into account that free markets do not necessarily deliver positive results when information, market structures or institutional infrastructure are incomplete. Stiglitz also highlights the corrupt connection between the IMF, the US Treasury Department and Wall Street. The IMF's policies devastated many economies, as detailed in many of the cases including the Asian Crisis, Russian boom to the debt crisis in Argentina, leaving them vulnerable to greater destruction. Furthermore, due to the sudden loss of jobs as a result of massive privatization, these futile policies also lead to extreme social strife. As Stiglitz himself recognises, when such crises lead to food riots and general social instability as in Indonesia, the economy is bound to suffer even more. These facts and that the IMF consistently worked in conformity with the US Treasury and pushed for weak fiscal measures puts into consideration the very idea that there was a 'conspiracy' to do so. Claiming that the IMF was somehow 'reflecting' other people's ideology and interests is a naive justification that cannot be taken seriously. Stiglitz's indictment of the IMF and its policies is more than just an itemized bill of facts. His argument is that the failings of which he accuses the IMF are not just random mistakes; there is a sense of lucidity to each set of individual policies.
Throughout the book, Globalization and Its Discontents, Joseph E. Stiglitz emphasizes several fundamental arguments against the IMF’s shortcoming of global economic policies. Delivered through the various cases such as the beggaring of Russia and the Asian Crisis, he focuses on the IMF’s lack of reform, its hidden agenda and the so-called ‘one-size fits all’ policy to dispute the IMF’s unfettered policies. As Stiglitz clearly proves throughout the book, the policies that the IMF recommended to helping countries restructure, stabilize and recover from depression had in turn, inflicted devastating long-term economic turmoil. Ultimately, the stories of failed economic and social development was truly induced by the abominable villain: the IMF.
The G7/G8 and Its Impact on Globalization Today
Over the years, globalization has created a shift towards a greater interrelated and interconnectivity of the world economy. It has unprecedently urbanized the world for our greater benefit. As ACS students, who study the dynamics of globalization, it is imperative for all to recognize fundamental organizations like the G7/G8. This organization, among many others, is the spark that ignites the engine of globalization. Without international organizations like the G7/G8 who strive to expand the benefits while ensuring the minimal cost of globalization, our present world state wouldn’t be as integrated or sophisticated as it is presently.
The G7/G8 is one of the central international institutions of the 1990s and potentially of the twenty-first century. Compared to the IMF, the G7/G8 is a less structured international arrangement as it was not established by formal international agreement, and it has no secretariat. (Hajnal 1) In the new era, the Group of Eight, composed of the world’s major market democracies, including Russia and the European Union, is emerging as the effective source of global governance. At present, many individuals feel their lives are subject to fast-paced, far-reaching forces, flowing in from far-off foreign locations and disrupting their familiar routines. (WWW1) In the past, people had occasionally experienced the mayhem of war, economic depression, disease, famine, and the arrival of new technologies such as railroads, the telephone and television. But in our current day, such changes seem to come continuously in many different forms, through processes that are overwhelming, and few can comprehend or control. Through these processes of globalization, many individuals are taking advantage of the new freedoms and opportunities that they bring. However, many others are weary about the impacts of globalization, overlooked by the benefits, harmed by its downfalls, and eager to have it governed for the benefit of the world. (Hodges, Kirton, Daniel 3, 45-47) The G8 has long shared this concern about globalization. As the G7, it first identified the process of globalization at the 1988 Toronto Summit. At the 1996 Lyon Summit, it took up globalization as its central focus. Since then, the G8 has continuously struggled with this complex issue, seeking to enhance the benefits of globalization, reduce its costs and govern it to suit the needs of the global community. (WWW1)
Indeed, globalization is a new phenomenon. Left alone, it brings substantial benefits but also much expanded costs. In our present time, globalization is generated and guided by the world's major governments. Together, they are collaborating, through the G8, to create the freedom and prosperity that openness brings, but also to control the costs of globalization and make it meet the development, social and environmental needs of all. Several years from now, today's globalization will require new forms of global governance, forms that the G7/G8 is already starting to construct. (Kirton, 3) In order to proliferate its benefits and reduce its costs, The G7/G8 has helped govern today's globalization. Since its creation in 1975 as the G7, the group has sought to extend the benefits, by legitimizing floating exchange rates and by having its leaders promise to forego the pressures toward trade protectionism that all must subject to. In order to give market forces and foreign firms more freedom in the 1980s, the leaders agreed to loosen state control over their national economies. By the mid 1990s, the G7 aimed to link the new generation of information technologies through simple interconnections during the Global Information Society ministerial conference. Replacing the order earlier provided by the 1919-1945 United Nations and 1947 Atlantic family of institutions, and among other states and international institutions, the G7/G8 Summit system has ultimately become one of the most effective centres of global governance. (WWW1)
The summit is no longer just economic; political questions and various global issues have taken on increasing importance for number of years. (Hajnal 2) Since 1996, the G8 has generally focused regularly on the plight of developing countries, Africa in particular. Shockingly, it is the only region largely barred of the benefits of globalization. The 2000 Okinawa Summit focused on development and ways to bridge the health and digital partitions that are critical barriers to reducing Africa’s poverty level. At the 2001 Genoa Summit, this emphasis continued. (WWW1) Here the G8 leaders agreed to the request of the African leaders who attended to act together on the New Plan for Africa's Development (NEPAD). These new directions are accompanied by the institutional innovations that outline how global governance, through the G8, will be exercised in our rapid world of globalization. (Kirton, Daniels and Frevtag 290)
The greatest innovation was introduced the following year at Genoa. The G8 committed money to the Global Health Fund to Fight Malaria, AIDS and Tuberculosis. This fund amassed several billion dollars from G8 governments and humanitarian-like global corporations. The G8 discarded the old model of channelling money from donor governments through international organizations with large bureaucracies and problematic procedures to recipient governments in the developing world. Now, the funds are delivered quickly and directly to those who are in most need. (John J. Kirton)
In relation to the IMF, the G7/G8 monitors their implementation of new codes and standards and calls upon them to develop a formal mechanism for systematic evaluation of the effectiveness of its operations, programs, policies and procedures. As an indication of the seriousness of G7/G8 commitments concerning the IMF, the representatives of the 7 countries in the IMF Executive Board sent a memorandum in 1998 to the IMF Managing Director and to members of the Executive Board, entitled “Work Program on Strengthening the Architecture of the International Monetary System”. The memorandum proposes a number of priority reforms in light of the G7 leaders’ and finance ministers’ statements. (Hodges, Kirton, and Daniels 3, 45-47) These reforms embrace standards and codes of good practice, transparency and accountability, and terms and conditions of IMF loans. (Dallaire 97, 99) Hopefully through the G7/G8’s continuous intervention in the IMF’s agenda, the economic destructions inflicted by the IMF on various countries as portrayed in Globalization and its Discontents, will discontinue.
Bibliography and Citations:
- Kirton, J. John. "International Constraints and Transnational Diffusion: The Dynamics of G8 Effectiveness in Linking Trade, Environment and Social Cohesion." Paper prepared for the 2001 Berlin Conference on the Human Dimensions of Global Environmental Change on "Global Environmental Change and the Nation State," Berlin: (January 31, 2002): 1-15
Note:
- John J. Kirton. "International Constraints and Transnational Diffusion: The Dynamics of G8 Effectiveness in Linking Trade, Environment and Social Cohesion." Paper prepared for the 2001 Berlin Conference on the Human Dimensions of Global Environmental Change on "Global Environmental Change and the Nation State," Berlin: (January 31, 2002): 1-15
Parenthetical Note:
(Kirton 3,4)
-
Kirton, J. John. The New Globalization and Its Challenges. N.d., Online. (21, Feb. 2003)
Note:
John J., Kirton, “The New Globalization and Its Challenges”. n.d., Online. (21, Feb. 2003)
Parenthetical Note:
(WWW1)
- Dallaire, Sebastian. "Continuity and Change in the Global Monetary order." in John Kirton and George von Furstenberg, Ed. Ashgate: Aldershot. 2001. 95-112
Note:
Sebastian, Dallaire. "Continuity and Change in the Global Monetary order," in John Kirton and George von Furstenberg, Ed. Ashgate: Aldershot. 2001. 97,99
Parenthetical Note:
(Dallaire 97, 99)
- Hodges, R. Michael, Kirton, J. John, Daniels, P. Joseph. “The G8’s Role in the New Millennium. “Great Britain: Ashgate Publishing Company, 1999
Note:
Michael R. Hodges, John J. Kirton, Joseph Daniels, P. Great Britain: Ashgate Publishing Company, 1999
Parenthetical Note:
(Hodges, Kirton, and Daniels 3, 45-47)
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Kirton, J. John, Daniels, P. Joseph, and Freytag, Andreas "The G8's Contribution to Twenty-First Century Governance," Guiding Global Order. Ed. Ashgate: Aldershot, 2001. pg. 283-306
Note:
John J. Kirton, Joseph P. Daniels, and Andreas Freytag, "The G8's Contribution to Twenty-First Century Governance," Guiding Global Order. ed. (Ashgate: Aldershot, 2001) pg. 283-306
Parenthetical Note:
(Kirton, Daniels and Frevtag 290)