Many of you will be familiar with this critique of The IMF or World Bank, from Chomsky and many other sources. What distinguishes Joseph Stiglitz is that he served as senior vice president and chief economist of the World Bank and is a former member and chairman of the US President's Council of Economic Advisors, and received the Nobel Prize in Economics 2001. So he knows his target from the inside.
The IMF and Its Discontents
bcq The IMF has drawn vocal criticism over the years. In his 2002 book, Globalization and Its Discontents, Nobel Prize–winning economist Joseph Stiglitz denounced the fund as a primary culprit in the failed development policies implemented in some of the world’s poorest countries. He argues that many of the economic reforms the IMF required as conditions for its lending—fiscal austerity, high interest rates, trade liberalization, privatization, and open capital markets—have often been counterproductive for target economies and devastating for local populations.
The fund has also been criticized on the basis of overreach or “mission creep.” William Easterly makes this case in his 2006 account of the failures of Western aid to the undeveloped world, The White Man’s Burden. While he acknowledges some IMF successes in firefighting financial crises in Mexico and East Asian countries in the mid-1990s, he criticizes many of the fund’s interventions in severely impoverished countries, particularly in Africa and Latin America, as overly ambitious and intrusive. In addition, he describes many of the fund’s loan conditions and technical advice as out of touch with ground-level realities.
In recent years, the IMF’s work in more advanced economies has drawn ire as well. Greece has been the most high-profile example, as troika-imposed austerity measures deepened the country’s economic contraction. In July 2015, popular discontent led to a “no” vote in a referendum on whether to accept the IMF’s loan conditions, which included raising taxes, lowering pensions and other spending, and privatizing industries. The government subsequently ignored the results and accepted the loans. However, the Greek case also saw the IMF soften its stance on austerity, at least compared with the European Commission and ECB. In 2016, senior IMF economists argued that more austerity would be counterproductive, and in 2018 the fund raised the alarm about the unsustainability of Greece’s debt burden, putting it at odds with the rest of the troika.
However, others dismiss the suggestion that the IMF’s approach changed. In 2016, the Guardian’s economics editor, Larry Elliott, wrote that “the IMF’s remedy for Greece and Portugal during the Eurozone crisis has been straight out of the structural adjustment playbook: reduce public spending, cut salaries and benefits, insist that state-owned enterprises return to the private sector, reduce minimum wages, and restrict collective bargaining.”