CREDIT WHERE CREDIT is DUE?
I've been wondering lately if the IMF
isn't due some credit for an overt change in attitude and rhetoric and maybe even in actual policy prescription. And if it is, just how much credit is it due and who else deserves a pat on the back?
The IMF has been churning out a fair bit of stuff lately arguing that they have learned valuable lessons, especially from the Asian crisis, and that they are a more open and flexible organisation. If this is true, it might be worth considering why.
Clearly the Asian crisis was a big wake up call, not just for activists unconvinced by the rhetoric of transcendent neo-liberalism but also for the pillars of the world financial architecture like the IMF. To some extent the IMF admit this, although it is hardly an overwhelming act of contrition when phrased like this
: "While, with the benefit of hindsight, the IMF's policy advice to these countries during the emergency was not flawless, corrections and adjustments to circumstances were made promptly, and the strategies adopted proved successful in restoring financial market confidence and stability, and in achieving a resumption of economic growth, in most cases by late 1998."
They got a little more serious as recently as July this year, when Thomas C. Dawson
Director, External Relations Department International Monetary Fund issued a paper
that outlined seven reforms that he specifically related to lessons learned from the Asian meltdown. In it he concedes:
That crisis tested the International Monetary Fund as never before. The lessons learnt prompted an overhaul of the international financial architecture and many aspects of IMF operations.
This is obviously a much larger admission of "lessons learned" than the previously quoted one. And it must be said that the seven measures he mentions all seem like pretty solid reforms, though it is more difficult to judge the extent to which IMF practices have actually changed. (And stuff like this
doesn't exactly cheer me up.)
But if the Asian crisis was one wake up call for the IMF, it was only part of the story. There is also acknowledgement of "lessons learned" from the crisis in Argentina. Anne Krueger
, the First Deputy Managing Director of the International Monetary Fund National Bureau Of Economic Research told a conference
I would like to focus on some of the lessons that Argentina's recent experience holds for the Fund's efforts at crisis prevention and resolution. Observers of financial crises are fond of recalling Tolstoy's famous remark that "all happy families resemble each other; each unhappy family is unhappy in its own way". Argentina is a case in point. It faithfully applied many of the lessons that we thought we had learned from the previous crises of the mid and late 1990s—but a combination of new mistakes and some old ones brought it to grief all the same. Thus, inevitably, we now have a new set of lessons to learn—and some old ones to remember a little better.
This is good PR if that's all it is. And yep, there's nothing like a solid bit of empirical evidence to pull even the biggest zealot of neo-liberalism (or anything else) up in their tracks. As Paul Krugman
"A decade ago Washington confidently assured Latin American nations that if they opened themselves to foreign goods and capital and privatized their state enterprises they would experience a great surge of economic growth. But it hasn't happened. Argentina is a catastrophe. Both Mexico and Brazil were, a few months ago, regarded as success stories, but in both countries per capita income today is only slightly higher than it was in 1980. And because inequality has increased sharply, most people are probably worse off than they were 20 years ago. Is it any wonder that the public is weary of yet more calls for austerity and market discipline?
"Why hasn't reform worked as promised? That's a difficult and disturbing question. I, too, bought into much though not all of the Washington consensus; but now it's time, as Berkeley's Brad DeLong puts it, to mark my beliefs to market. And my confidence that we've been giving good advice is way down. One has to sympathize with Latin political leaders who want to temper enthusiasm for free markets with more efforts to protect workers and the poor."
Perhaps the strongest admission from the IMF came on July 5 this year when Horst Köhler
, the Managing Director of the International Monetary Fund, addressed the Central Bank Governors' Symposium at the Bank of England Conference Center
. He said:
The Asian crisis sparked a broad, critical debate about the costs and benefits of globalization and the need to reform and strengthen the international financial architecture. We could perhaps have spent our energies defending the IMF against its critics. But in my view it was clearly preferable to consider the problem with an open mind, seeking out different points of view and working hard to identify necessary changes. Nearly five years later, the debate is by no means concluded, but we have used that time productively to set in motion an active process of reform.
You can see a sort of pattern emerging in these mea culpas to the effect of "the Asian crisis taught us valuable lessons" but "we are big enough to learn from our mistakes". It's a great piece of spin in that concedes the obvious (there were
crises despite their policy prescriptions and maybe even because of them); it admits things have to change; and it makes it seem like they figured it out all by themselves.
A less kind interpretation is, you fucked up big time; you had no choice but to change; and you wouldn't have changed anyway if there weren't people--from activists to insiders--forcing your hand. A generous person might be willing to accept that reality lies somewhere between the spin version and the harsh version. Wherever you want to place the emphasis, it is as well to consider the influences on the IMF's apparent change of heart.
The other factors that have contributed are the pressure from grass roots activists; the pressure from intelligent NGOs who have taken on the IMF (and others) on their own terms; and the breakaway insiders like Jospeh Stiglitz who have brought a level of credibility to the criticisms that wasn't available to anyone else.
And at this point we might mark a particular problem with the sincerity of the IMF reform: they seem to be in complete denial that they are responding to any outside influence and are especially keen not to give Stiglitz any credit. This unwillingness to admit they are responding to such pressure--to insist that this would have all happened anyway--actually doesn't bode well for their long-term credibility and indicates that they will need to be reminded of their commitments and goaded into further reforms.
should be in no doubt - the reform is not purely internally driven and those who marched at different venues around the world, who protested outside meetings and inside buildings and who were vilified in the media, on the blogs, and who were framed by the police
and rough-housed by the troops should be given their due. Anybody who thinks these activists haven't had a marked effect are simply in denial.
The NGOs have no doubt been at the IMF for a long time on various matters, but it seems to me that Oxfam's report
on the failures of free trade advocates to live up to their own theories has been enormously influential. Although the report came in for a lot of criticism (for example here
) it has been widely quoted and provided a steady, credible set of criteria against which to judge the "Washington consensus" rhetoric (and I should add, it doesn't simply target the IMF).
All of these things have worked in a kind of chaotic harmony to bring some pressure to bear, but I think things might not have progressed as far as they have without the Stiglitz factor
. Without the World Bank chief economist and Nobel Laureate turning states evidence, I doubt if quite the same pressures would have been felt inside the ivory tower of 19th Street, Washington DC. Once Stiglitz crossed over it became incumbent upon a vulnerable institution to cover its arse (or ass, if you prefer) and show that they were fixing things anyway and they didn't need some turncoat telling them what to do. And this has been their strategy ever since, combined with a rising tide of condemnation aimed at Stiglitz himself. In short, the attacks on Stiglitz show just how vulnerable they felt and made them determined to discount him as an influence on their reform.
And it is worth remembering: they are
going after Stiglitz.
For instance, Dawson writes at the end of his piece on the seven reforms instigated post-Asian crisis:
Interestingly enough, these seven areas where reform has been under way for many years are exactly the ones in which former World Bank chief economist Joseph Stiglitz, in his new book, says reform is needed. Once he's through with his book tour, Stiglitz may want to catch up with news of the reforms actually taking place.
Ouch! Take that Joey.
And this is just part of the ongoing campaign, some of which I've already covered here
. More recent forays includes this letter
the IMF tried to get published in the Times
of London, this attack
from Flemming Larsen, Director, IMF Office in Europe, and this speech
, again by Dawson. Throughout, the ploy is to run the line that "we were gonna do it anyway", with for example, Dawson's speech ending this way:
On this particular issue, the relevant portions of Stiglitz's book read like passages from speeches by the IMF's Managing Director. Let me end on that note of harmony.
In short, I'm in no position to judge whether the much-trumpeted reforms are all window dressing or actually point to substantive change. Maybe messieurs Quiggin
might like to pick up on this question (or anyone else who has something to contribute). But it seems to me that despite their disclaimers, the IMF is definitely responding to the pressure provided by grassroots activists who have made it impossible for them to shirk entirely their democratic responsibilities, NGOs like Oxfam who are mounting serious challenges to them on a practical and theoretical level, and to the likes of Joseph Stiglitz and other "insiders" who decided to break ranks and put their own reputations on the line.
The lessons for lefties is that change can happen, but pressure needs to be applied at all levels, to be relentless, and to be well-informed. It would be foolish to suggest that the neo-liberal dominance has come undone and that a progressive agenda is only days away. However, the hubris of those who suggest things like "we are all capitalists now"
also needs to be seen for the furphy
that it is. As if capitalism is one thing and as if we could all be it.
What seems more likely is that we are all no longer under the spell of hardcore neo-liberalism and if anything--and if we are to believe at all the press releases, papers,letters and speeches of the IMF--it is probably more accurate to say "we are all Keynesians again". But let's not get carried away.