Stiglitz is forthright about the responsibility of the IMF for the financial problems of East Asia, not only in worsening the crisis once it occurred, but also in helping to bring it about. “…It became clear that the IMF policies not only exacerbated the downturns but were partially responsible for the onset: excessively rapid financial and capital markets liberalization was probably the single most important cause of the crisis.” This is an important statement from a credible economist because the ideological underpinnings of the corporate drive in the United States for increasingly numerous and comprehensive trade and investment agreementsthrough the Free Trade Area of the Americas or through the World Trade Organizationrest on the claim that the mobility of capital brings prosperity. Here, Stiglitz documents how the ‘hot money’ let loose by liberalization destroyed savings, jobs, production, and ultimately economic stability for an entire region, and then moved on to Russia and Latin America. Having deepened and prolonged the crisis in Asia, the IMF also moved on to Russia, where it pushed the same failed policies all over again. In the Russian context, fiscal austerity meant privatization, which, without adequate oversight and regulation, led to the stripping of State-owned assets rather than reform or efficiency. Liberalization of financial and capital markets allowed wholesale capital flight once it became clear that the government of Russia could not pay its debts and might default. An IMF bailout loan only propped up the currency long enough to allow foreign investors to get as much money out of the country as fast as possible before the ruble collapsed, leaving the Russian government, already bankrupt, with even less capital and more debt than before. These formulas Stiglitz describes as mistakes. Globalization and its Discontents is a chronology of appalling policy errors made by the IMF throughout the 1990s, with everlasting repercussions in the lives of millions. It is difficultnot impossible, but still hardnot to notice that these mistakes were consistently made in favor of corporate interests, either when searching out high-profit, low risk markets or in seeking to escape them once they had become low-profit and high risk.The IMF, for example, absolutely never makes the mistake of loaning too much money to improve wages in poor countries where most people are living on less than two dollars a day, and it very rarely deposits too many billions in a fund for public housing in countries where half the population live in crates. Nonetheless, Stiglitz describes “the first round of mistakes” in East Asia as the insistence on contractionary policies to reassure foreign banks. Among its “most grievous mistakes,” was the IMF’s decision to lend $23 billion to support exchange rates and bail out creditors rather than to spend the “far, far smaller sums required to help the poor.” We learn in Globalization how the IMF “failed to understand how finan cial markets work and their impact on the rest of the econo my,” and that “[t]he Fund made the kind of mistakes that we continued on page 17 1/17/03 THE TEXAS OBSERVER 7
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