The IMF's Other Agenda
The Way Ahead

excerpted from the book

Globalization and Its Discontents

by Joseph E. Stiglitz

WW Norton, 2003, paper


Today ... market fundamentalists dominate the IMF; they believe that markets by and large work well and that governments by and large work badly. We have an obvious problem: a public institution created to address certain failures in the market but currently run by economists who have both a high level of confidence in markets and little confidence in public institutions.

A New Role for a New Exchange Rate Regime?

Some thirty years ago, the world switched to a system of flexible exchange rates. There was a coherent theory behind the switch: exchange rates, like other prices, should be determined by market forces. Attempts by government to intervene in the determination of this price are no more successful than attempts to intervene in the determination of any other price. Yet, as we have seen, the IMF has recently undertaken massive interventions. Billions of dollars were spent trying to sustain the exchange rates of Brazil and Russia at unsustainable levels. The IMF justifies these interventions on the grounds that sometimes markets exhibit excessive pessimism-they "overshoot"-and the calmer hand of the international bureaucrat can then help stabilize markets. It struck me as curious that an institution committed to the doctrine that markets work well, if not perfectly, should decide that this one market-the exchange rate market-requires such massive intervention. The IMF has never put forward a good explanation either for why this expensive intervention is desirable in this particular market-or for why it is undesirable in other markets.

I agree with the IMF that markets may exhibit excessive pessimism. But I also believe that markets may exhibit excessive optimism, and that it is not just in the exchange rate market that these problems occur. There is a wider set of imperfections in markets, and especially capital markets, requiring a wider set of interventions.

For instance, it was excessive exuberance that led to Thailand's real estate and stock market bubble, a bubble reinforced, if not created, by hot speculative money flowing into the country. The exuberance was followed by excessive pessimism when the flow abruptly reversed. In fact, this change in the direction of speculative capital was the root cause of the excessive volatility in exchange rates. If this is a phenomenon comparable to a disease, it makes sense to treat the disease rather than just its manifestation, exchange rate volatility. But IMF free market ideology led the Fund to make it easier for speculative hot money to flow into and out of a country. In treating the symptoms directly, by pouring billions of dollars into the market, the IMF actually made the underlying disease worse. If speculators only made money off each other, it would be an unattractive game-a highly risky activity, which on average made a zero return, as the gains by some were matched by equal losses from others. What makes speculation profitable is the money coming from governments, supported by the IMF. When the IMF and the Brazilian government, for instance, spent some $50 billion maintaining the exchange rate at an overvalued level in late 1998, where did the money go? The money doesn't disappear into thin air. It goes into somebody's pocket-much of it into the pockets of the speculators. Some speculators may win, some may lose, but speculators as a whole make an amount equal to what the government loses. In a sense, it is the IMF that keeps the speculators in business.


... The IMF is pursuing not just the objectives set out in its original mandate, of enhancing global stability and ensuring that there are funds for countries facing a threat of recession to pursue expansionary policies. It is also pursuing the interests of the financial community. This means the IMF has objectives that often conflict

The tension is all the greater because this conflict can't be brought out into the open: if the new role of the IMF were publicly acknowledged, support for that institution might weaken, and those who have succeeded in changing the mandate almost surely knew this. Thus the new mandate had to be clothed in ways that seemed at least superficially consistent with the old. Simplistic free market ideology provided the curtain behind which the real business of the "new" mandate could be transacted. The change in mandate and objectives, while it may have been quiet, was hardly subtle: from serving global economic interests to serving the interests of global finance.

I should be clear: the IMF never officially changed its mandate, nor did it ever formally set out to put the interests of the financial community over the stability of the global economy or the welfare of poor countries. We cannot talk meaningfully about the motivations and intentions of any institution, only of those who constitute and govern it. Even then, we often cannot ascertain true motivations-there may be a gap between what they say are their intentions and their true motivations. As social scientists, we can, however, attempt to describe the behavior of an institution in terms of what it appears to be doing. Looking at the IMF as f it were pursuing the interests of the financial community provides a way of making sense of what might otherwise seem to be contradictory and intellectually incoherent behaviors.

Moreover, the IMF's behavior should come as no surprise: it approached the problems from the perspectives and ideology of the financial community, and these naturally were closely (though not perfectly) aligned with its interests. As we have noted before, many of its key personnel came from the financial community, and many of its key personnel, having served these interests well, left to well-paying jobs in the financial community. In modern democracies, there are concerns about such revolving doors, where those in government service move quickly from and to private sector jobs in firms that may benefit from government services or contracts, or that are affected by government regulations, for the obvious reason. Citizens worry, will government officials be tempted to treat potential future employers especially well, in the hopes that by doing so their future prospects will be enhanced, even if there is no explicit quid pro quo? Economists-and ordinary citizens-believe that incentives matter. If so, how could they not affect behavior, if ever so subtly, in these situations? Sensitive to these concerns, most democracies have imposed constraints on these revolving doors, even though in doing so, some talented individuals might be discouraged from public service. The IMF is so far removed from democratic accountability that these concerns did not seem to weigh at all; moving from the IMF to a bank that had benefited from an IMF bail-out was par for the course.

But one does not need to look for venality. The IMF (or at least many of its senior officials and staff members) believed that capital market liberalization would lead to faster growth for the developing countries, believed it so strongly that it gave little credence to any evidence that suggested otherwise. The IMF never wanted to harm the poor and believed that the policies it advocated would eventually benefit them; it believed in trickle-down economics and, again, did not want to look too closely at evidence that might suggest otherwise. It believed that the discipline of the capital markets would help poor countries grow, and therefore it believed that keeping in good stead with the capital markets was of first-order importance.

Looking at the IMF policies this way, its emphasis on getting foreign creditors repaid rather than helping domestic businesses remain open becomes more understandable. The IMF may not have become the bill collector of the G-7, but it clearly worked hard (though not always successfully) to make sure that the G-7 lenders got repaid. There was an alternative to its massive interventions ... an alternative that would have been better for the developing nations, and in the longer run, better for global stability. The IMF could have facilitated the workout process; it could have tried to engineer a standstill (the temporary interruption of payments) that would have given the countries-and their firms-time to recoup, to restart their stalled economies. It could have tried to create an accelerated bankruptcy process. But bankruptcy and standstills were not welcome options, for they meant that the creditors would not be repaid. Many of the loans were uncollateralized, so in the event of bankruptcy, little might be recovered.

The IMF worried that a default, by breaking the sanctity of contracts, would undermine capitalism. In this, they were wrong in several respects. Bankruptcy is an unwritten part of every credit contract; the law provides for what will happen if the debtor cannot pay the creditor. Because bankruptcy is an implicit part of the credit contract, bankruptcy does not violate the "sanctity" of the credit contract. But there is another, equally important, unwritten contract, that between citizens and their society and government, what is sometimes called "the social contract." This contract requires the provision of basic social and economic protections, including reasonable opportunities for employment. While misguidingly working to preserve what it saw as the sanctity of the credit contract, the IMF was willing to tear apart the even more important social contract. In the end, it was the IMF policies which undermined the market as well as the long-run stability of the economy and society.

It is understandable then why the IMF and the strategies it foists on countries around the world are greeted with such hostility. The billions of dollars which it provides are used to maintain exchange rates at unsustainable levels for a short period, during which the foreigners and the rich are able to get their money out of the country at more favorable terms (through the open capital markets that the IMF has pushed on the countries). For each ruble, for each rupiah, for each cruzeiro, those in the country get more dollars as long as the exchange rates are sustained. The billions too are often used to pay back foreign creditors, even when the debt was private. What had been private liabilities were in effect in many instances nationalized.

In the Asian financial crisis, this was great for the American and European creditors, who were glad to get back the money they had lent to Thai or Korean banks and businesses or at least more of it than they otherwise would have. But it was not so great for the workers and other taxpayers of Thailand and Korea, whose tax money is used to repay the IMF loans, whether or not they got much benefit from the money. But adding insult to injury, after the billions are spent to maintain the exchange rate at an unsustainable level and to bail out the foreign creditors, after their governments have knuckled under to the pressure of the IMF to cut back on expenditures, so that the countries face a recession in which millions of workers lose their jobs, there seems to be no money around when it comes to finding ` the far more modest sums to pay subsidies for food or fuel for the ~ poor. No wonder that there is such anger against the IMF.

If one sees the IMF as an institution pursuing policies that are in the interests of creditors, other IMF policies also become more understandable.

The major investment firms(also)wanted to exculpate their advisers, who had encouraged their clients to put their money into these countries. Fully backed up by the governments in the United States and the other major industrialized nations, investment advisers from Frankfurt to London to Milan could claim that there was no way they could have been expected to know how bad things really were, given the lack of transparency in East Asian countries. These experts quietly slid over the fact that in a fully open and transparent market, one with perfect information, returns are low. Asia had been an attractive investment-it produced high returns-precisely because it was more risky. The advisers belief that they had better information- and their clients' thirst for high returns-drove funds to the region. The key problems-South Korea's high indebtedness, Thailand's huge trade deficits and real estate boom that inevitably would bust,

Suharto's corruption-were well known, and the risks these posed should have been disclosed to investors.

The international banks too found it convenient to shift blame. They wanted to blame the borrowers and bad lending practices of the Thai and South Korean banks, which, they alleged, were making bad loans with the connivance of the corrupt governments in their countries-and the IMF and the U.S. Treasury again joined them in the attack. From the start, one should have been suspicious of the IMF/Treasury arguments. Despite their attempt to get the major international lenders off the hook, the hard truth is that every loan has both a borrower and a lender. If the loan is inherently bad, the lender is as much at fault as the borrower. Moreover, banks in the Western developed countries were lending to the large Korean firms, knowing full well how leveraged many Korean firms were. The bad loans were a result of bad judgment, not of any pressure from the United States or other Western governments, and were made in spite of the Western banks' allegedly good risk management tools. No wonder, then, that these big banks wanted to shift the scrutiny away from themselves. The IMF had good reason for supporting them, for the Fund itself shared in the culpability. Repeated IMF bailouts elsewhere had contributed to lack of due diligence on the part of the lenders.

There was an even more profound issue at stake. The U.S. Treasury had during the early 1 990s heralded the global triumph of capitalism. Together with the IMF, it had told countries that followed the "right policies"-the Washington Consensus policies-they would be assured of growth. The East Asia crisis cast doubt on this new worldview unless it could be shown that the problem was not with capitalism, but with the Asian countries and their bad policies. The IMF and the U.S. Treasury had to argue that the problem was not with the reforms- implementing liberalization of capital markets, above all, that sacred article of faith-but with the fact that the reforms had not been carried far enough. By focusing on the weaknesses of the crisis countries, they not only shifted blame away from their own failures-both the failures of policy and the failures in lending-but they attempted to use the experience to push their agenda still further.

Globalization today is not working for many of the world's poor. It is not working for much of the environment. It is not working for the stability of the global economy. The transition from communism to a market economy has been so badly managed that, with the exception of China, Vietnam, and a few Eastern European countries, poverty has soared as incomes have plummeted.

To some, there is an easy answer: Abandon globalization. That is neither feasible nor desirable ... globalization has also brought huge benefits-East Asia's success was based on globalization, especially on the opportunities for trade, and increased access to markets and technology. Globalization has brought better health, as well as an active global civil society fighting for more democracy and greater social justice. The problem is not with globalization, but with how it has been managed. Part of the problem lies with the international economic institutions, with the IMF, World Bank, and WTO, which help set the rules of the game. They have done so in ways that, all too often, have served the interests of the more advanced industrialized countries-and particular interests within those countries-rather than those of the developing world.

The Need for International Public Institutions

We cannot go back on globalization; it is here to stay. The issue is how can we make it work. And if it is to work, there have to be global public institutions to help set the rules.

These international institutions should, of course, focus on issues where global collective action is desirable, or even necessary. Over the past three decades there has been an increased understanding of the circumstances under which collective action, at whatever level, is required... collective action is required when markets by themselves do not result in efficient outcomes. When there are externalities-when the actions of individuals have effects on others for which they neither pay nor are compensated-the market will typically result in the overproduction of some goods and the underproduction of others. Markets cannot be relied upon to produce goods that are essentially public in nature, like defense. In some areas, markets fail to exist;4 governments have provided student loans, for instance, because the market, on its own, failed to provide funding for investments in human capital. And for a variety of reasons, markets are often not self-regulating-there are booms and busts-so the government has an important role in promoting economic stability.

Over the past decade, there has been an increased understanding of the appropriate level - local, national, or global - which collective action is desirable. Actions the benefits of which accrue largely locally (such as actions related to local pollution) should be conducted at the local level; while those that benefit the citizens of an entire country should be undertaken at the national level. Globalization has meant that there is increasing recognition of arenas where impacts are global. It is in these arenas where global collective action is required-and systems of global governance are essential. The recognition of these areas has been paralleled by the creation of global institutions to address such concerns. The United Nations can be thought of as focusing upon issues of global political security, while the international financial institutions, and in particular the IMF, are supposed to focus on global economic stability. Both can be thought of as dealing with externalities that can take on global dimensions. Local wars, unless contained and defused, can draw in others, until they become global conflagrations. An economic downturn in one country can lead to slowdowns elsewhere. In 1998 the great concern was that a crisis in emerging markets might lead to a global economic meltdown.

But these are not the only arenas in which global collective action is essential. There are global environmental issues, especially those that concern the oceans and atmosphere. Global warming caused by the industrial countries' use of fossil fuels, leading to concentrations of greenhouse gasses (CO2), affects those living in preindustrial economies, whether in a South Sea island or in the heart of Africa. The hole in the ozone layer caused by the use of chlorofluorocarbons (CFCs) similarly affects everyone not just those who made use of these chemicals. As the importance of these international environmental issues has grown, international conventions have been signed. Some have worked remarkably well, such as the one directed at the ozone problem (the Montreal Protocol of 1987); while others, such as those that address global warming, have yet to make a significant dent in the problem.

There are also global health issues like the spread of highly contagious diseases such as AIDS, which respect no boundaries. The World Health Organization has succeeded in eradicating a few diseases, notably river blindness and smallpox, but in many areas of global public health the challenges ahead are enormous. Knowledge itself is an important global public good: the fruits of research can be of benefit to anyone, anywhere, at essentially no additional cost.

International humanitarian assistance is a form of collective action that springs from a shared compassion for others. As efficient as markets may be, they do not ensure that individuals have enough food, clothes to wear, or shelter. The World Bank's main mission is to eradicate poverty, not so much by providing humanitarian assistance at the time of crisis as by enabling countries to grow, to stand on their own.

Although specialized institutions in most of these areas have evolved in response to specific needs, the problems they face are often interrelated. Poverty can lead to environmental degradation, and environmental degradation can contribute to poverty. People in poor countries like Nepal with little in the way of heat and energy resources are reduced to deforestation, stripping the land of trees and brush to obtain fuel for heating and cooking, which leads to soil erosion, and thus to further impoverishment.

Globalization, by increasing the interdependence among the people of the world, has enhanced the need for global collective action and the importance of global public goods.

Globalization, as it has been advocated, often seems to replace the old dictatorships of national elites with new dictatorships of international ·i finance. Countries are effectively told that if they don't follow certain conditions, the capital markets or the IMF will refuse to lend them money. They are basically forced to give up part of their sovereignty, to let capricious capital markets, including the speculators whose only concerns are short-term rather than the long-term growth of the country and the improvement of living standards, "discipline" them, telling them what they should and should not do.

But countries do have choices, and among those choices is the extent to which they wish to subject themselves to international capital markets. Those, such as in East Asia, that have avoided the strictures of the IMF have grown faster, with greater equality and poverty reduction, than those who have obeyed its commandments. Because alternative policies affect different groups differently, it is the role of the political process-not international bureaucrats-to sort out the choices. Even if growth were adversely affected, it is a cost many developing countries may be willing to pay to achieve a more democratic and equitable society, just as many societies today are saying it is worth sacrificing some growth for a better environment. So long as globalization is presented in the way that it has been, it represents a disenfranchisement. No wonder then that it will be resisted, especially by those who are being disenfranchised.

Today, globalization is being challenged around the world. There is discontent with globalization, and rightfully so. Globalization can be a force for good: the globalization of ideas about democracy and of civil society have changed the way people think, while global political movements have led to debt relief and the treaty on land mines. Globalization has helped hundreds of millions of people attain higher standards of living, beyond what they, or most economists, thought imaginable but a short while ago. The globalization of the economy has benefited countries that took advantage of it by seeking new markets for their exports and by welcoming foreign investment. Even so, the countries that have benefited the most have been those that took charge of their own destiny and recognized the role government can play in development rather than relying on the notion of a self-regulated market that would fix its own problems.

But for millions of people globalization has not worked. Many have actually been made worse off, as they have seen their jobs destroyed and their lives become more insecure. They have felt increasingly powerless against forces beyond their control. They have seen their democracies undermined, their cultures eroded.

If globalization continues to be conducted in the way that it has been in the past, if we continue to fail to learn from our mistakes, globalization will not only not succeed in promoting development but will continue to create poverty and instability. Without reform, the backlash that has already started will mount and discontent with globalization will grow.

This will be a tragedy for all of us, and especially for the billions who might otherwise have benefited. While those in the developing world stand to lose the most economically, there will be broader political ramifications that will affect the developed world too.

Today, the system of capitalism is at a crossroads just as it was during the Great Depression. In the 1930s, capitalism was saved by Keynes, who thought of policies to create jobs and rescue those suffering from the collapse of the global economy. Now, millions of people around the world are waiting to see whether globalization can be reformed so that its benefits can be more widely shared.

It is clear that there must be a multipronged strategy of reform. One should be concerned with reform of the international economic arrangements. But such reforms will be a long time coming. Thus, the second prong should be directed at encouraging reforms that each country can take upon itself. The developed countries have a special responsibility, for instance, to eliminate their trade barriers, to practice what they preach. But while the developed countries' responsibility may be great, their incentives are weak: after all, offshore banking centers and hedge funds serve interests in the developed countries, and the developed countries can withstand well the instability that a failure to reform might bring to the developing world. Indeed, the United States arguably benefited in several ways from the East Asia crisis.

Hence, the developing countries must assume responsibility for their well-being themselves. They can manage their budgets so that they live within their means, meager though that might be, and eliminate the protectionist barriers which, while they may generate large profits for a few, force consumers to pay higher prices. They can put in place strong regulations to protect themselves from speculators from the outside or corporate misbehavior from the inside. Most important, developing countries need effective governments, with strong and independent judiciaries, democratic accountability, openness and transparency and freedom from the corruption that has stifled the effectiveness of the public sector and the growth of the private.

What they should ask of the international community is only this: the acceptance of their need, and right, to make their own choices, in ways which reflect their own political judgments about who, for instance, should bear what risks. They should be encouraged to adopt bankruptcy laws and regulatory structures adapted to their own situation, not to accept templates designed by and for the more developed countries.

What is needed are policies for sustainable, equitable, and democratic growth. This is the reason for development. Development is not about helping a few people get rich or creating a handful of pointless protected industries that only benefit the country's elite; it is not about bringing in Prada and Benetton, Ralph Lauren or Louis Vuitton, for the urban rich and leaving the rural poor in their misery. Being able to buy Gucci handbags in Moscow department stores did not mean that country had become a market economy. Development is about transforming societies, improving the lives of the poor, enabling everyone to have a chance at success and access to health care and education.

This sort of development won't happen if only a few people dictate the policies a country must follow. Making sure that democratic decisions are made means ensuring that a broad range of economists, officials, and experts from developing countries are actively involved in the debate. It also means that there must be broad participation that goes well beyond the experts and politicians. Developing countries must take charge of their own futures. But we in the West cannot escape our responsibilities.

It's not easy to change how things are done. Bureaucracies, like people, fall into bad habits, and adapting to change can be painful. But the international institutions must undertake the perhaps painful changes that will enable them to play the role they should be playing to make globalization work, and work not just for the well off and the industrial countries, but for the poor and the developing nations.

The developed world needs to do its part to reform the international institutions that govern globalization. We set up these institutions and we need to work to fix them. If we are to address the legitimate concerns of those who have expressed a discontent with globalization, if we are to make globalization work for the billions of people for whom it has not, if we are to make globalization with a human face succeed, then our voices must be raised. We cannot, we should not, stand idly by.

In the months since the book was completed, the problems it identifies have mounted. The United States has raised its farm subsidies to new heights. Farm subsidies used to be criticized as a waste of money, a violation of free market principles, bad for the environment, and mainly going to rich corporate farmers rather than the poor small farmers that they were supposed to help. But to these complaints an even more cogent one has been added: by increasing the supply of the subsidized goods, the gains of rich corporate farms in America come largely at the expense of the poorest of the poor internationally. For example, subsidies to 25,000 American cotton farmers exceed the value of what they produce and so depress cotton prices that it is estimated that the millions of cotton farmers in Africa alone lose more than $350 million each year. For several of Africa's poorest countries, losses from this one crop exceed America's foreign aid budget for each of these countries.

Or take America's steel tariffs, allegedly imposed as safeguards against the onslaught of imported steel. America's steel industry has had problems for years, and I encountered them when I was at the Council of Economic Advisers. The old steel behemoths had trouble restructuring. After the East Asia crisis decreased consumption and lowered wages and exchange rates, it was easy for East Asia's highly efficient firms to undercut America's firms. By the same token, even if foreign firms are not technically more efficient, with sufficiently large wage cuts and low enough exchange rates, they can out-compete. Such was the case, for instance, in Moldova, one of the former republics of the Soviet Union, a country I recently visited, which has seen its income plummet 70 percent since it began its transition to a market economy (a particularly dramatic example of the failures described in chapter 6), and which today must spend 70 percent of its budget on debt repayments.

The United States responded to these competitive threats by imposing tariffs on foreign steel. In the case of Moldova, the tariff was over 350 percent! If every time these struggling economies find a little niche in which they can make some headway, prohibitive tariffs are slapped on them, what are they to think of the rules of the market game? It should be clear: these firms were not engaged in unfair trade practices. It was simply that American firms were, for instance, far less efficient than the East Asian firms and failed to take the measures required to make them competitive. America freely lectures the developing countries on how they have to "face the pain," but it is loath to do so itself. No wonder charges of hypocrisy have grown. If the United States, the richest country in the world, with high employment, an unemployment insurance system, and a broader safety net, says it must resort to protective measures to safeguard its workers, how much more compelling are the arguments for such measures in developing countries, with high unemployment and no safety nets.

This book emphasizes the many dimensions of globalization- globalization of ideas, of knowledge, of civil society. Globalization has meant that what is said in one place becomes known quickly around

the world, and policies in one country can have enormous implications for another. If there is dissonance between the speeches of U.S. government officials when they try to persuade the developing countries to sign up for a new round of trade negotiations, and what those same officials say to Congress as they try to persuade that body too to give them more power, then that becomes known. Which statement are the developing nations to believe?

The good news is that today there is increasing recognition of the problems of globalization, not just in the developing countries, which have long confronted them, but also in the developed countries. Today many even within the financial community recognize that something is wrong with the system; many have themselves been hurt by the huge volatility. These financiers have in many cases responded positively to the ideas in the book; some, like George Soros, have put forward reform proposals of their own, and the G-7 has been lucky to have several finance ministers who have a genuine commitment to redressing the imbalances.

The problems in America's banking and corporate systems-the Enron, Arthur Andersen, Merrill Lynch, and other scandals-have, of course, brought home the dangers of unfettered and unregulated markets. At the time I wrote the book, capitalism, American style, seemed triumphant. Countries were told by America's treasury secretaries to imitate our system of corporate governance and accounting. Now those nations are not so sure that this was exactly the model to follow. America's response to the scandals, a recognition of the need for improved regulation, was right, but it stands in marked contrast to the mantra of I deregulation that the U.S. Treasury and the IMF preach abroad.

One of my main criticisms of the IMF is that, in certain central ways, though it is a public institution, it does not conform to what we have come to expect of public institutions. In Western democracies, for instance, there is a basic right to know, reflected, for example, in America's Freedom of Information Act. There is no such basic right at the international economic institutions. In America and in most other western democracies, there is a concern about "revolving doors"-individuals moving too quickly from public institutions to well-paid private ones closely connected with their public service. There is a concern not only because the revolving door might give rise to conflicts of interest but also because the mere appearance of the possibility of such conflicts can undermine confidence in public institutions. A general might give a contract out to a contractor, in the hopes-or even worse, with the understanding - that when the general reaches the mandatory retirement age, the contractor will reward him by hiring him. If those who run the Department of Energy come from and return to the oil companies, there is the worry that they set energy policy not in the interests of the country but in the interests of the oil companies with which they have long

term connections. That is why there are strong restrictions on such revolving doors even though governments are aware that there is a large cost - some good individuals who might otherwise enter government are deterred from doing so. And even when there are no formal restrictions, there is widespread sensitivity to these concerns. At the IMF, however, the movement between that institution and the private financial institutions, whose interests they are often criticized as serving, is not uncommon. Again, while the movement was natural-the Fund wants to draw upon those with expertise in finance, and the financial community wants to draw upon those with the global experience that time at the Fund provides-it is also problematic, especially because that institution is widely seen, especially in developing countries, as not only reflecting the perspectives of the financial community but also acting in their interests ...

The events of the past year have brought home more forcefully I than ever that we are interdependent globalization is a fact of life. With interdependence comes a need for collective action, for people around the world to work together to solve the problems that we face, whether they be global risks to health, the environment, or economic or political stability. But democratic globalization means that these decisions must be made with the full participation of all the peoples of the world. Our system of global governance without global government can only work if there is an acceptance of a multilateralism. Unfortunately, the past year has seen an increase in unilateralism by the government of the world's richest and most wonderful country. If globalization is to work, this too must change.

Globalization and Its Discontents

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