## Stiglitz, the IMF and Globalization -- Speech by Thomas C. Dawson, Director, External Relations Department, IMF

_IMF News, June 13, 2002_

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## Bibliographic details
- Authors: Thomas C. Dawson Director
- Published: June 13, 2002

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### Context and purpose
- Delivered to the MIT Club of Washington.
- Date: June 13, 2002.
- Speaker: Thomas C. Dawson, Director, External Relations Department, International Monetary Fund.
- Primary aim: respond to Joseph Stiglitz's criticisms of the IMF and discuss areas of agreement on globalization.

### IMF mandate and evolution
- IMF described as a multilateral agency with two main jobs:
  - to help preserve global economic and financial stability; and
  - to assist in the global war on poverty.
- Historical shift in policy posture:
  - Shift toward greater confidence in markets attributed to geopolitical and economic developments in the 1980s and 1990s (collapse of the Soviet Union, fall of the Berlin Wall, and market-oriented reforms in the United States and the United Kingdom).
  - Stiglitz’s academic work highlighted market failures; IMF practice moved toward more use of markets based on historical evidence.

### Main critique addressed: "market fundamentalism"
- Dawson rejects Stiglitz’s overarching charge that the IMF is driven by "market fundamentalism," arguing:
  - IMF staff recognize market imperfections and the need for policy responses.
  - Shift toward markets was a response to evidence and historical developments, not ideological blindness.
- External perspectives cited:
  - Index comparison in Stiglitz’s book: "64 references to globalization" versus "340" references to the IMF (presented as an indicator of book focus).
  - Criticism from the right (Brink Lindsey) calls the "market fundamentalism" accusation "misleading to the point of absurdity."

### Personal and institutional criticisms
- Allegations about staff motives and competence:
  - Stiglitz accuses staff of treating the unemployed "as just a statistic" and staying in "five-star hotels"; Dawson counters that IMF staff are drawn from "nearly a 150 countries" and care about developing countries' suffering.
  - Stiglitz’s remark that IMF staff are "third-rank students from first-rate universities" is rebutted by citation of Rudi Dornbusch’s defense of IMF/World Bank staff quality.
  - Specific personnel allegation challenged: Stiglitz’s implication regarding Stanley Fischer and Citigroup is called "repugnant" and inconsistent with Fischer's record.

### Acknowledged IMF mistakes and areas of valid criticism
- Accepted critiques:
  - Excessive zeal in encouraging capital account liberalization in the mid-1990s is acknowledged as a valid criticism in part.
  - IMF conceded errors in initial response to the Asian financial crisis and that it had not kept up with rapid developments in international capital markets.
- Changes in IMF practice in response:
  - IMF is "more vocal in pointing out the risks of rapid capital account liberalization" and gives cautionary notes greater prominence.
  - Example cited: "three weeks ago ... we advised Sri Lanka against opening up its capital account until its financial sector was further strengthened."
- Fiscal policy during crises:
  - Thailand in July 1997: still growing with "a huge and growing current account deficit (more than 8 percent of GDP)"; IMF initially recommended a roughly-unchanged fiscal position but soon supported large budget deficits and increased social spending as crisis scaled up.
- Monetary policy debate remains unresolved:
  - Stiglitz advocates easing monetary policy at crisis onset; IMF and others (Larry Summers, Rudi Dornbusch, Michael Mussa) emphasize conflict between restoring external confidence and providing liquidity—no professional consensus exists.

### Crisis resolution and sovereign debt restructuring
- Observed weakness: existing mechanisms to resolve crises "do not work smoothly."
- Proposal referenced: Anne Krueger’s suggestion for a statutory mechanism to secure more orderly and timely restructuring of unsustainable sovereign debts.
  - Mechanism concept: empower a super-majority of creditors to take key decisions in restructuring negotiations with the debtor.
  - Stiglitz is described as "quite supportive of the general idea."

### Poverty alleviation and participatory approaches
- IMF and World Bank have launched a more "participatory" approach to poverty measurement and strategy design, engaging governments and civil society early.
- Stiglitz’s view: participatory assessments "are a step in the right direction" but warns that a persistent gap between rhetoric and reality will cause disillusionment.

### Globalization: benefits, distribution, and policy implications
- Agreement with Stiglitz on benefits of globalization:
  - "Opening up to international trade has helped many countries grow far more quickly"; globalization has improved life expectancy and standards of living; access to knowledge has expanded.
  - Quoted Stiglitz view: working in factories can be preferable to subsistence agriculture; globalization reduced isolation in the developing world.
- Distributional concerns:
  - Benefits are "spread very unevenly."
  - Specific regional observations: unfulfilled expectations in Africa; Latin America’s growth not yet secure; India "only just emerging from decades of economic slumber."
  - Larry Summers cited: in the developing world "far more people are poor because of too little globalization rather than too much."
  - Stiglitz’s counterpoint: critique of "one-size-fits all" approaches and excessive zeal/haste in market reforms; advocates allowing countries to experiment with alternatives.
- Concrete policy recommendation emphasized:
  - Developed countries should lower trade barriers against products in which developing countries have a comparative advantage; Dawson notes Stiglitz’s call here aligns with IMF Managing Director speeches.

### Tone and concluding assessment
- Dawson frames the debate as having both substantive disagreements and substantial areas of agreement.
- He identifies two books in Stiglitz’s work:
  - A list of allegations against the IMF containing some valid criticisms amid half-truths and falsehoods.
  - A mainstream analysis of globalization where IMF and Stiglitz share common ground.
- Final note: speech ends on an expression of harmony regarding globalization policy directions.

*Source: Stiglitz, the IMF and Globalization — Speech by Thomas C. Dawson, June 13, 2002.*

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## References

- [Thailand and the IMF](http://www.imf.org/external/country/THA/index.htm)
- [Argentina and the IMF](http://www.imf.org/external/country/ARG/index.htm)
- [United States and the IMF](http://www.imf.org/external/country/USA/index.htm)
- [Speeches](https://www.imf.org/en/news/searchnews)
- [PRESS CENTER](http://presscenter.imf.org/)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2015/09/28/04/53/sp061302_