Professional Documents
Culture Documents
BY JOSEPH STIGLITZ
Chapter 1
THE PROMISE OF GLOBAL INSTITUTES
Chapter 2
BROKEN PROMISES
IMF
Goal: to maintain global stability
Methodology: positivist; one-size-fits all attitude and market must know best
In 1997, Stiglitz started his job as a chief economist and senior vice president of the World Bank. The above picture depicted his perceptions on the 2 international institutions that are fundamentally different in beliefs and approaches . In his opinion, IMF establish major obstacles f0r developing countries to diminish poverty problems.
Chapter 3
FREEDOM TO CHOOSE?
Privatisation: Governments, often times, spend too much time and efforts doing things that should NOT be doing, such as running airlines and running railways systems, rather than providing spending necessary supports and fundamental policies to monitor and control those industries. However, privatisation could miserably fail when:
Privatization is implemented too fast and too far without policies or regulations to provide essential services which eventually causes market failure
Corruption; without the appropriate legal structure and market institutions, the new owners might have an incentive to strip assets rather than use them as a basis for expanding industry.
Hypocrisy of developed countries and inequalities between the developed and developing countries.
Trade liberalisation + high interest rate = job destruction and unemployment creation Financial market liberalisation without regulatory structure = economic instability Privatisation without competition policies and oversight to ensure that the monopoly are not abused = HIGHER price for consumers Fiscal austerity is pursued blindly = higher unemployment rate and shredding of social contract.
In Short: Freedom to choose is when countries can consider the alternatives which strategy, priorities should they adopt through democratic political processes with their own pacing and sequencing. International intuitions should only play a role of information provider so that those countries can make a judgment on their own knowing the consequences.
Chapter 4
THE EAST ASIA CRISIS: How IMF Policies Brought the World to the Verge of a Global Meltdown
After the crisis happened, IMF still failed to provide the remedy because:
Austere fiscal policy made the recession far worse then it needed to be The failure to recognise the important interactions among the policies pursued in different countries IMF forced banks in Asia to increase the interest rate up to 25% which resulted in contraction of the economy in the region during the crisis e.g. Korea and Indonesia. IMF policies did not accommodate the restructuring of both financial sectors and corporates e.g. forced to close down banks and tighten loans
Chapter 5
WHO LOST RUSSIA?
Market revolution ignored knowledge in history, economics or society that happened prior to the reform. The move from one price systems to market price system An appropriate speed of the reform shock therapy and gradualist
Not just an economic reform but the whole social structure reform Russia can put a high level of education into good use for the New Economy A replacement of decentralised systems to centralised systems Military budget was reduced to supposedly improve quality of lives of the people in Russia
Stiglitz identifies area where IMF failed to provide legitimate advices to help the transition in Russia: Inflation- policies that result in a contraction. Privatisation- too fast and too far The social context- IMF policies failed to appreciate the social context of the transition economies (they focus too much on inflation and macroeconomics) Speed of the reform: shock therapy treatment versus gradualist The Bolshevik approach to market reform
Chapter 6
Unfair Fair Trade Laws and Other Mischief
Chapter 7
Better Roads to the Market
The failure of reform strategies in Russia have become increasingly evident. Meanwhile China and Poland employed alternative strategies. China and Poland pursued a gradualist policy of privatization, trying to build up the basic institutions of a market economy such as banks and legal systems.
Moreover, Poland gave importance of democracy for reforms, keep unemployment low, and adjust pensions for inflation.
Chapter 8
The IMFs Other Agenda
Todays IMF loose intellectual coherency by setting intervening in the market. IMF forged policies which weaken and allow problems to play out.
Thailands real estate and stock market bubble. IMF poured billion of dollars into the market, speculators gain profit coming from government, supported by the IMF.
The crisis of trade deficit can affect the long term investment if a country has borrowed short term.
IMF emphasis on getting creditors repaid rather than helping domestic business.
Chapter 9
The Way Ahead