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on 20 February 2011
This is an indictment for the IMF. The crimes are region according to the author. The IMF was the direct result from the experience of the Great Depression in the 1930s when nations reduced deficit and increased interest rate in the face of the Depression. The IMF, under the aegis of Keynes,was supposed to provide liquidity to countries who might experience economic difficulties. After the Reagan era, however, the IMF was hijacked by market fundamentalists who were modern day Hooverites.

The IMF became the nub of problem rather than the solution to the Asian financial crisis. First it, together with the Treasury, demanded capital market liberalisation from South Korea. Korea finally succumbed to the demand even though Korean officials had many worries about unregulated capital market which is dominated by hot money. This had become the seed of Asian Financial Crisis. When the crisis finally came, the IMF prescriptions was a disaster for many people. It almost ordered the Korean government to raise interest rate and reduce budget deficit. The sudden hike of interest rate forced even healthy businesses to go to the wall. For three decades Korea recorded at most less than 5% of unemployment. During the `IMF crisis' the number crossed over double digit. In Asia the Asian Financial crisis has been called the IMF crisis. The Crisis was almost engineered in that without the harsh IMF demand for high interest rate and fiscal austerity the Crisis wound't have caused such economic hardship for many Asian people. Even though the IMF prescription is difficult to understand on intellectual basis, it is plausible if we assume that the IMF was just seeking the interests of US financial industry. However that is not the IMF's mission or its reason for existence.

In the chapter `Who lost Russia' the author reveals how the IMF supported corrupt Russian government. The sudden privatisation with no proper frame work for market brought out oligarchs who were usually friends of the Kremlin and usurped newly privatised companies in asset stripping. The economy lost more than half of its production capacity during the IMF led transition period. The failure of transition from communism to capitalist economy in Russia was not inevitable pain for transition economies. These were caused by policy failures of market fundamentalists who got the majority power at the IMF and the Treasury. The IMF concerned about only exchange rate and inflation while unemployment and social stability were totally disregarded.

International trade organisations like WTO are also the subject of criticism. The huge agricultural subsidies for rich farmers in developed countries maintained while developing countries were forced to open market for manufactured goods. This is why anti-globalisation forces are so strong wherever the international trade meetings take place.

Stiglitz is not just criticising the IMF and the Treasury, he also gives alternatives to existing flawed policies. China's slow but measured approach toward modern capitalism is praised and Malaysia's capital control during the Crisis is also given special attention.

The IMF is obsessed with market fundamentalism and the belief in it is so strong there is no need of evidence to support its theories. This is the main reason that the IMF made systematic policy mistakes during the whole 1990s.

However, it must be recognised that Stiglitz is a fervent supporter for globalisation. East Asia's successful stories from Japan to South Korea to China through foreign trade are raised as an example of successful globalisation.

The author's main claim is that there is a different version of globalisation in which the concerns of developing nations like poverty reduction and inequality should play as much an important role as the interests of developed nations' finance in making decisions on the global issues.
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on 21 August 2002
A very much believable and realistic account of the problems inside the policies created by the richer western world, which serve the priorities of such countries over the more serious problems encountered by the majority of the world - the poor. Hopefully views that will be considered by those in power.
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on 10 June 2004
The book, from the start to the finish, is compelling and also very detailed. The fact that Stiglitz was a part of the International Establishment, and that he encountered the ideologues of the Washington Consensus on a daily basis, makes it very difficult to dismiss his critique as just a dissident view from the idealistic left. His account of the East Asian Crisis is very thorough, and in fact, as a South Korean who lived through those turbulent periods, I find most of his arguments very accurate. Many would argue that his book is essentially pro-globalisation, but his definition of the 'globalised' world is radically different from that of the Washington Consensus. This book puts emphasis on the need for proper regulation on the side-effects of the laissez-faire capitalism, and quite rightly so.
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on 22 July 2010
This excellent and readable book on macro-economic policy and its effects is written (was written in 2002) by the former Chief Economist of the World Bank. It is a good read, an interesting read and a read which makes the general reader engage and think about organizations often taken at their own inflated face-value, notably the IMF.

The author makes a number of points highly relevant to the world and, particularly to a British reader, the UK today. Here we are in 2010, with a government which puffs up its own supposed economic-management credentials, yet here is a book which, by implication, rubbishes them! David Cameron, a former public relations man ---- yes I know he has a PPE from Oxford, but then so did a recent contestant on Who Wants To Be A Millionaire, a girl whose ambition was to (yawn) be prime minister...she went away with £1,000 after displaying woeful ignorance (she did not even know that the raccoon was native to North America!). Danny Alexander is Chief Secretary to the Treasury, but his only two "real" jobs were public relations ones in national parks; George Osborne, Chancellor, whpose only non-Conservative Party job filling in forms about vehicle licence plates for the london council. Nuff said. Amateurs, whose economic knowledge is back-of-a-matchbox sort or taken from think tanks staffed by twenty-something ex-Oxbridge policy nerds who have never exited the egg. This book is by a respected professional.

The author points out how naive and/or misguided it is to assume that when public services are taken away, the private sector fills the gap. Usually not. Indeed, often, the public sector is providing the services precisely because the private sector could not or did not.

The author points out how the insecurity of the poor is increasing...again relevant to modern Britain, with its welfare cuts, short-term contracts, pension cuts etc.

The author points out that the IMF and some Treasuries (he cites the US but it is even more true of the UK) have a blinkered consensus ideological view centred around austerity measures, cutting spending etc and how that view has been built up based on deliberately ignoring evidence (particularly from East Asia) which contradicts that consensus view.

We all know that statistics can be misused but often ignored is the fact that raw data is itself often corrupted or plain wrong. I heard from a very reliable source once (I did meet the person concerned as well, at a later time, but was too diplomatic to ask for his recollection lol!) that a young English exec at the World Bank (this was 30 years ago), who was in his first job (the kind of first job you get if you have been to Cambridge and your father is a heavily-connected life peer...) was sent to do a World Bank report about a small, poor, Muslim country. He spent months collecting statistics and, because of the paucity of office space in the capital, worked out of his hotel suite. One day he returned to find that a flood from the hotel plumbing had destroyed virtually all his papers and there was no back-up. He returned to Washington DC and after a while admitted to his superior what had happened. They cobbled together fake statistics and the country eventually received its loans and its economic forecast...based on educated guesses.

The author examines Russia and the absurd early 1990's plan of (he does not name him) the Harvard economis Sachs, often called "Capitalism in 100 Days". Disaster.

The author, overall, makes the point that a degree of globalization can be good and may be inevitable, but that regulatory regimes based on democratic accountability have to be in place too. A lesson for out would-be "leaders" that "the markets" and the IMF behind them are by no means always right.

I liked the fact that the author did descend from the sunlit uplands and clouds of high economic theory and position to the levels where the masses of people suffer or live as a result of the economic policies pursued by those at the top.

Recommended (especially to the members of the UK "government" "coalition"!)...
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on 28 January 2012
Globalization and its Discontents has now been around for ten years. In 2002 the book was published as the tech bubble burst. It was five years since the Asian financial crisis in 1997. It was the better part of two decades since the Third World debt crisis of the 1980s effectively removed the livelihoods of masses in Latin America and Africa. And it was also ten years since the demise of the Soviet Union and its bloc.

Joseph Stiglitz's book analyses the response of the world's major financial institutions, especially the World Bank and the International Monetary fund, to these crises. National aid programmes and commercial banks also figure in the discussion. His conclusions were clear at the time - and remain so today. The ideologically-driven policy orthodoxy promoted by these bodies has repeatedly proved to be counter-productive.

I lived in Asia at the time of the crisis. I remember arguing with a Malaysian colleague about the need to take the medicine, as the IMF's prescriptions were described. Integrate fully, open your markets, remove controls and accommodate foreign interests: this was the orthodoxy. When Malaysia did the opposite, I scoffed. The Malaysian economy subsequently contracted less than others, its people suffered less pain and recovery came quicker. Thailand in particular swallowed the prescribed pills and continued to suffer.

And, by the way, during the debt crisis of the 1980s, a number of Western banks became insolvent and had to be rescued. In that era, however, most measures were put in place behind closed doors so we never got to know the lurid details. We did, however, notice the recession.

Joseph Stiglitz illustrates how the right-wing ideology of perfect, self-regulating markets, liberalisation and privatisation failed to deliver in the past. He repeatedly shows how ensuing liquidity crises were treated with adjustment loans that undermined their own goals. He repeatedly shows how a range of measures calculated to address several angles of the problem simultaneously tended to produce better results. The evidence he presents is compelling.

So why, in 2012, do we again seem to be in the same tightening trap? Wherever lack of regulation or deregulation has been applied, it seems to produce the same results. Couple that with the reality of imperfect markets where no-one feels they will ever have to answer for either greed or risk and, it seems, you finish with a crash and then recession. And those who suffer are rarely those who created the problems. Those who ignore history are condemned to repeat it. And what about those who ignore advice? Why use again a treatment that kills the patient? Here we go again.
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TOP 500 REVIEWERon 14 August 2014
There is no disputing the reputation, abilities or professional achievements that Joseph Stigliz can claim. He writes with authority, derived from both technical competency and personal experience. When Stigliz writes, what he has to say will have a strong core of truth attached even if as this book goes, the reader might disagree with the overall perspective or general thrust of argument. 'Globalization and Its Discontents' is a worthwhile, informative if on occasion somewhat frustrating read on occasion.
Stiglitz makes a strong case for arguing that the IMF and perhaps to a lesser extent, the World Bank are heavily flawed institutions. This is because they are seen as agents of Western or more specifically American financial interests. Markets need to be open for trade and capital has to flow unimpeded around the world as it seeks out profit opportunities. Big business requires access to resources, ability to sell into new markets and the ability to move investment funds and profits as required. This means pliant governments, relaxed labour and environmental, business regulation and capital transfer restrictions. Free markets so the Washington Agenda goes mean that there are significant efficiency gains in how resources are used resulting in more trade, and profits, lower prices, and higher employment for everyone. So the job of the IMF and the World Bank is simple, underwrite the trading and financial interests of Western Capitalism by the use of condition based financial aid and policy prescriptions directed towards market reform. All this sounds convincing.

Stiglitz to his credit does see the merit of the Free Trade argument, in fact he endorses it. What he is rightfully exercised about is the idea that Western governments do not open their own markets to less developed nations. Subsidies, restrictions and tariffs are the stuff designed to make LDC's less competitive in markets where they might have an advantage in, such as agricultural products, shipbuilding and labour intensive production such as textiles. So markets are rigged. Worse still when countries like Argentina, South Korea and perhaps more tragically Russia and Indonesia are encouraged to reform appropriate policies and interventions are not put in place, leading to lasting economic damage that hurts the poor most. The preoccupation with macro policy relating to inflation control and tough restrictions on government spending leads to making a bad situation often much, much worse according to Stigler. He rightfully also suggests that opening markets has to be done in a staged fashion. Successful economic reform has to have a basis in wider society- namely strong financial institutions, transparent and responsible government allied with a sound economic base allowing LDC's to compete when markets open up. Also governments should not be pressurized into fire sales of state assets and insufficient legal and regulatory control particularly in relation to capital movements.

At the end of the book Stiltz offers some useful policy pointers to consider. Namely that reform needs to be 'stepped' in approach, more appropriate to the country concerned and that the West ought to consider reducing its own trade barriers in addition to tighter bank regulation.

So where are the reservations? Firstly, the book is too much in the first person. Stigliz gives the impression that he is like John the Baptist crying out alone in the wilderness. If only his advice where followed etc..etc.. More damagingly the book does not give enough import to the benefits of globalisation. He recognises that globalisation in one form or another (specialised production / extended trading and communication links) has been around for a long time but fails to underline sufficiently for more my taste at least when globalisation has the capacity for great global good. Incomes, output and employment have risen significantly since the end of WW2 and reduction in global poverty has been remarkable even as population has increased. The problem is how have the gains from Globalisation been distributed and what mechanisms have been put in place to assist not just economic growth but also economic development? I would have liked something on the political influence of China (especially in Africa), the 'decoupling' of nations and trade blocs from world markets as well as the growth of remittances as ways of suggesting that there are global trends at play that are neutralising the worst effects of the IMF.

My main criticism of the book though is twofold- governments in less (and more) developed nations get themselves into trouble through poor management, populist expansionary fiscal and monetary policy as well as the more obviously rent seeking activities and mafia style governance. All the time that governments can borrow today and let someone else pay the bill tomorrow, they will. They will especially do this if Western banks give out cheap loans in goods times, knowing that those same loans will be more or less underwritten by the IMF in bad times. So to some extent lenders and borrowers knowingly and culpably bring disaster upon themselves. Therefore, Stigliz whilst rightfully bashing the IMF should also have spared a little of his ire for the poor governance that many LDC's exhibit and skewed and short-termist policy objectives of many Western governments. Secondly and finally I think he could have considered that often times the IMF is called in as a sort of emergency fire service. It is somehow expected to rescue the beleaguered government or region when information is lacking, time is tight and a myriad of conflicting stakeholder interests need to be considered.

So a good book, highly readable and accessible to a wide readership but detailed enough for a student of the subject to benefit from reading. Recommended despite some of my less favourable comments.
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on 18 August 2011
For the excoriation of a powerful if undistinguished institution, Stiglitz' book cannot be bettered. He demonstrates systematically exactly how and why the policies of the IMF have failed just about everyone, often including the financial markets they are supposed to be stabilising (and as Stiglitz would say, this really means protecting and insuring them against loss). By this account, the IMF is a mess. Caught in an ideological trap from which they have no desire to escape, they have been blundering around the globe, intimidating national governments, ignoring local economic conditions and insisting on free flow of capital funding as a prerequisite for support. This ignores any of the implications: the ideology is a substitute for thinking more seriously about how crises might be resolved as this could cause them to doubt the efficacy of their performance. That such policies have produced riots and starvation in the countries who have adopted them, like Indonesia, or more latterly Greece, seems to leave them untroubled. As Stiglitz points out, this is because of the IMF's deep-seated belief that excoration is the best route to cure fiscal and monetary irresponsibility. This implies that any difficulties with a national economy are ascribable purely to the failure of national governments and their peoples to follow a free capital market prescription of the kind the IMF invariably formulate as the solution to the problem. What Stiglitz euphemistically calls 'pain' in the economic sense seems more like punishment, dealt out by the IMF to countries who stray from the duty to make American financiers richer, regardless of the consequences for national taxpayers or local businesses.

To that end, it is a frightening and frustrating book: the story that emerges is one of doctrinaire command of vulnerable governments, whose economies are virtually destroyed by the advice they are given in order to reduce the exposure of lenders in the developed world at the expense of ordinary people. As he points out, it is the toil and taxes of local citizens that will go to paying for loans from the IMF whose benefits they rarely experience. He does this through a series of case studies, taking the Asian and South American crises, and spending much time on the transition of the economy in Russia, surely the most egregiously bungled privatization in history. It is a compelling case for reform, but given this was written before the global financial crisis we are currently experiencing had begun (though he adumbrates it in some sections, noting the logical ends of a market characterised by the self-interest of financial institutions), it is quite apparent that nothing has changed and nothing has been learned from the experience of the previous fifteen years.

There are a few difficulties with the book: it is not about globalization per se, except in the final chapter which makes some gestures towards the potential of globalism before making some stiff recommendations for the IMF (that have clearly been ignored). It is about the Americanization of the global financial system, with their 'beggar thy neighbour' business attitudes, and a self-justifying moral case for insisting on open markets for their own purposes whilst hypocritically closing their own. It also shows the limits of economics, and the economists' dependence on heavy weapons in economic intervention, whatever their perspective on potential solutions. This is a dangerous game, but in this round of Stiglitz v the IMF, there is only one winner. Stiglitz has the moral force and the weight of evidence on his side, but the financial markets continue to demand (and receive) the right to free capital flows that leave governments powerless in the destruction of the lives of their citizens. If there was ever a case or a time for national governments to ignore the IMF and pursue expansionary policies, it is now, but not too many will have the guts to do it.
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TOP 1000 REVIEWERon 22 February 2006
As Joseph Stiglitz explains in this remarkably candid analysis, globalization (the removal of barriers of free trade and the closer integration of national economics) has, in theory, the potential to enrich everyone in the world. But, the way it has been managed, including the international trade agreements and the policies imposed on developing countries, was not less than disastrous.
The main culprits for the disaster were international economic institutions: the IMF, the World Bank and the WTO.
Joseph Stiglitz attacks in this book relentlessly the IMF, accusing it even of cooking the books (data and economic forecasts) in order to make its programs seem to work!
It failed in its original mission of promoting global economic stability and served instead the interest of global finance.
The author calls it completely incompetent (!) and its policies ‘a blend of ideology and bad economics’. With its ‘colonial mentality and social insensitivity’ it forced its catastrophic fundamentalist ‘free market dogma’ on its client states. It stressed fiscal austerity, excessively rapid privatization and market liberalization, even before social safety nets were in place as well as adequate competition and a regulatory framework. Its policies were probably the single most important cause of recessions in many countries!
Politically speaking, the IMF is not democratic. Its actions affect the lives of billions throughout the developing world, but those voices are not heard. On the contrary, bankers who insist on getting repaid are very well represented through the finance ministers and central bank governors.
Joseph Stiglitz calls for a change in IMF governance via a change in voting rights.
In the short run, he asks complete transparency and, for every intervention, a report on the expected poverty and unemployment impact of its programs in order to force it to be more responsive to the poor, to the environment, to broader political and social and concerns.
Stiglitz stresses rightly that development is about transforming societies, improving the lives of the poor and enabling everyone to have a chance at success and access to health care and education.
But for the World Bank, commercial and financial interests supersede concern for the environment, democracy, human rights and social justice: billions of dollars were available to bail out banks, but not the paltry sums needed to provide food subsidies for those thrown out of work!
Western hypocrisy is totally blatant in the different WTO rounds. Western countries pushed poor countries to eliminate trade barriers, but kept their own barriers, preventing developing countries from exporting their agricultural products. More, they ensured that they garner a disproportionate share of the benefits of trade liberalization with the ultimate result that some of the poorest countries in the world were actually made worse off (!), e.g., the agreements on intellectual property rights had as a consequence that drugs were not available any more in poor countries at affordable prices: thousands were effectively condemned to death.
For Stiglitz, systems of global governance are essential and he proposes that the existing institutions return to their initial responsibilities: the UN for global political security, the IMF for global economic stability and the World Bank for ‘human’ economic development.
This is a book of a superb free mind and a must read for all those interested in world politics.
I also recommend in the same vein, the book of Robert Heilbroner ‘Behind the veil of economics’ and the works of Robert Kuttner. For a voice from the South, see Walden Bello’s incisive ‘Dilemmas of Domination’.
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Prior to reading this book, my reading of Joseph Stiglitz was confined to a few "op-ed" pieces. He seemed to make a lot of sense, and so along with Paul Krugman, I felt they were excellent sources of information for explaining the world through an economist's prism. Stiglitz is a "Washington insider," who worked in the Clinton administration, and went on to head up the World Bank in 1997. The book ends in 2003, so the real economic meltdown of a generation (or three) is not covered. Still, I found his coverage and insights into events that now seem like ancient history, that is, the transition of Russia from communism to (mafia) capitalism, and the East Asian financial crisis of the late `90's to be fascinating.

Stiglitz does not like the IMF (The International Monetary Fund). And he provides convincing reasons. He depicts an organization guided by the blind ideology of the sanctity of the "markets." You know, everything will just be "peachy" if we let unfettered markets "do their thing,"... well, until everything blows up, and then it is time to run to the government for a bailout, as we saw in 2008. Like "parachute" journalists who race from one troubled global "hotspot" to another, the IMF provides "parachute" economists who stay in the best 5-star hotel in the capital for three weeks, and then believe they "know" the country, and proscribed the same old tired medicine. The author gives some meaty examples, like when Sweden donated some money to Ethiopia to build schools, but the IMF twisted their arm to place the money in "reserves" to enhance their balance sheet. Tellingly, Stiglitz does compare how IMF policies enacted from those hotels are similar to modern warfare, where killing is so much easier when the vehicle is a bomb dropped from 30,000 ft.

Hypocrisy by the IMF? Naturellement. Free trade is just "peachy" if it means a poor country lowers its trade barriers to Western imports; but lowering the West's agricultural barriers is out of the question. The IMF would demand that countries like Russia prop up their currency through massive loans from the IMF (free market?), and when the government devalued, after the "Big Boys" got their money out at very favorable rates, then the poor are saddled with the obligation to pay off the loan. And in terms of Russian history, surely a worst disaster than communism itself was the IMF sponsored "privatization plans" that left a few of Yeltsin's cronies multi-billionaires, and everyone else poorer than they were under communism. It is enough to give capitalism a bad name (and it has in such countries)! Another key point that the author makes concerns Adam Smith, who started the wonderful "invisible hand" of the marketplace business, but also clearly identified market failures. And Keynes, whose ideas helped set up the IMF would be aghast at the rigidity in the thinking of today.

Numerous times he is straightforward in his critique, such as:

"The billions of dollars in Cayman Islands and other such centers are not there because those islands provide better banking services that Wall Street, London or Frankfurt; they are there because the secrecy allows them to engage in tax evasion, money laundering, and other nefarious activities. Only after September 11 was it recognized that among those other nefarious activities was financing of terrorism."

Or,

"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."

But at other times I felt he "pulled his punches," as an "insider" might. For example, he mentions how Larry Summers and Paul O'Neill were involved in giving disastrous advice (speaking of those "free markets" again, he tells the tale of how O'Neill was involved in setting up an aluminum cartel!) But others are missing, for example Jeffrey Sachs' role in the Russian privatization schemes, and even the "patron saint" himself, Milton Friedman, who sent his "Chicago boys" to take over so much, like the IMF. In that regard, I think Naomi Klein, in her excellent book, The Shock Doctrine: The Rise of Disaster Capitalism does a much better job. Billionaire Russians require a little "outrage", and Stiglitz simply does not do "outrage" like Klein can.

Another part of my frustration with the book was the failure of seemingly all economic books: there is the use of statistics, like, Moldavia's GDP shrank by two-thirds over 10 years, without addressing where the statistic comes from, and how reliable it is. Occasional the issue is address, when it comes to the IMF, with a bald-faced admission that some numbers are just flat made up. And the discussions about "growth" are equally troubling, when no effort is made to address the quality of the growth.

In terms of editing, it could be a lot tighter. Numerous redundancies, numerous inane reminders that farmers need to buy seeds, and tautologies like the following: "A real and effective banking system requires strong banking regulation."

Overall though, an important account from an insider, with many hard examples on how things can go awry when mindless fundamentalists are in charge. 4-stars.
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on 31 December 2003
After doing a degree in Economics, you come across the name Stiglitz many times (most notably through imperfect information), so when I saw this book I knew it was an economist who could apply theory to real world issues. After being awarded his Nobel Prize for Economic Science, and working as the Chief Economist at the World Bank and Economic Advisor for the U.S. Government, Stiglitz is writing this from a very unbiased position, which is the reason this makes this book fascintaing. Not only do you learn of the numerous errors made by the IMF, but you start to learn about how the financial and capital markets work. This book tries to push globalisation in the right direction, which is needed at the moment by top academics.
This book is very addictive and is very hard to put down, because he applies economic theory to the IMF's decisions, which are often incorrect. This book is more of a review of the global system not an attack, but it shows people how much power the IMF has, and how little power governemnts have in the developing world.
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