The fund has again failed in its most urgent task - to reform itself
by Joseph Stiglitz
It is six years since the IMF's fateful meeting in Hong Kong, just before the global financial crisis. I was there. What a peculiar meeting it was. To those paying attention, it was clear that a crisis loomed. Capital market liberalisation was the culprit, exposing countries to the vagaries of international capital flows - to both irrational pessimism and optimism, not to mention the manipulation of speculators.
Yet the IMF was still lobbying to change its charter in order to force countries to liberalise capital markets, ignoring the evidence that this did not lead to enhanced growth or investment, but only to more instability. The crises that erupted later that year undermined confidence in the IMF and led to discussions about "reforming the global financial architecture".
Six years later, we can say that those discussions did not lead to much real change. The US Treasury and the IMF knew, or at least hoped, that with the passing of the crisis, global attention would turn elsewhere. On this point they were right.
But change has occurred, though sometimes more in rhetoric than reality. Today the IMF is more aware of the impact its programmes have on poverty - though it still does not produce a "poverty and unemployment impact" statement when it presents a programme. The fund has recognised the importance of participation and ownership. No longer are programmes simply a matter between the IMF, central bank governors and finance ministers. The IMF has recognised that there was excessive conditionality, and that these conditions led to a lack of focus.
The IMF has not, however, fully grasped that the conditions were often dangerously misguided and dealt with political issues beyond its mission. After criticising east Asian countries for a lack of transparency, the IMF acknowledged that it, too, was insufficiently transparent, and made reforms - though sometimes it seems to think a better website is a substitute for transparency. It has still not recognised a basic principle of modern democracy: a citizen's right to know.