In 2001 in 'Globalization and It's Discontets' Joseph Stiglitz wrote about unregulated markets and financial institutions running amok in the developing countries with the backing of the IMF. Rather than creating jobs and upping demand in a recession the IMF was intervening to assist financial institutions, often Western financial institutions, make a buck with disastorous results for the people of the developing countries. Another huge point of Stigitz's is that a functioning regulatory environment has to be present for markets to work. This requires that interventions be staggered in time rather than delivered via 'shock therapy'. Stiglitz points to the lack of a regulatory environment as a basic cause of corrupt and mafia-like elements gaining control of the Russian economy upon shock therapy being applied to Russia. Stiglitz's book is about the developing world but the lessons of the book about the dangers of unregulated markets and financial markets gone wild are all too clearly applicable to the US as recent events have shown. The main point is that both government and markets are required. Markets aren't machines that can run alone but require maintenance. One can only hope the lessons Stiglitz delivers here have finally sunk in.

I don't doubt that Stiglitz is right. People with a background like that and have won the Nobel Prize usually know what they are talking about. But man this book is frustrating in the first few chapters. I initially categorized it as anti-western propaganda because it is extremely opposed to western policies. However, it is right. The economics of it are sound, the politics also make sense and the details of this are all laid out. You definitely need some economics knowledge to get through it and it makes a VERY good case against market fundamentalism and excessive deregulation. Unfortunately, the same market fundamentalism that drives the IMF is also what drives Wall Street and the Treasury and it's causing a lot of problems nowadays.

It should have been subtitled: "Or how the IMF screwed everything up, despite Joe's best efforts."

It's a tiring tirade.

"Globalization and Its Discontents" is an impressive critique of the Washington Consensus and international economic institutions. Even more so because the author is not only an eminent economist, but also an insider on the issues that are being discussed. Some of the things it covers are the historical context, the East Asian financial crisis, and Russia's transition from central planning to a market economy. Stiglitz demonstrates how a combination of unwillingness to consult, market fundamentalist ideology and financial interests led to terrible outcomes. Everyone who has taken an introductory macroeconomics course will be surprised to find out that the IMF pushed contractionary policies during downturns. The Russian experience underscores the importance of cautious and contextual policies that create the institutions necessary for a market economy. Besides retrospective insights, Stiglitz provides a list of alternative policies that could yield a much better result in the future.

It may be less revolutionary now than it was in 2002: many mainstream economists such as Dani Rodrik have come out against the Washington Consensus since and the influence of the IMF seems to have decreased prompting economist Dean Baker to say that "No one needs the IMF anymore" ("The IMF: A Sandbox to Play In", April 10, 2007, Truthout). It may also have its share of flaws, most notably a somewhat naive sounding belief that getting closer to the free trade ideal (which includes cutting subsidies to agriculture so that the poor countries could better compete) will help developing countries a great deal. Many developing countries are in fact net importers of food and cutting agricultural subsidies in rich nations might actually increase prices that they pay for food. Nevertheless, "Globalization and Its Discontents" is an accessible and very interesting book that provides lessons about the need for open dialogue and contextual approaches to development. Not to forget that with the impact that this book has had it is also already a piece of history.

Anyone with an interest in global affairs would be aware of the East Asian crises and the Russian attempt at becoming a market economy. These are the two main examples used by Stiglitz to frame his arguments and the policies are well known. They are the same problems the anti-globalization movement protests against outside various international financial meetings so there are no new insights here of any great significance. Some of the less prominent countries like Ethiopia and Malaysia are covered though and these sections are interesting although still using the same themes - co-ercive IMF tactics, capital market liberaliztion or protectionism etc. Stiglitz also contradicts himself at times. In one section he argues for greater transparency and public debate (ie. politicization) of the IMF's policies, then in another criticises the U.S. government for enacting protectionist measures domestically (assuredly for political purposes).
The problem with these 'insider' accounts is that they are by definition subjective. The only examples of the inner workings of these institutions put forward are self-serving anecdotes of when Stiglitz himself opposed, or tried to oppose, IMF policies. There is also very little talk, and even less criticism, of the World Bank which is where he was the chief economist. Would recommend a book by, say, a respected professional journalist who can be a more objective, more dispassionate, and much more coherent.