89
conditions in the country deteriorated even more in the wake
of the Fund holding back on the second tranche of its loan
did the iMF agree to loosen its conditions. However in latvia,
the iMF has continued to demand austerity even in the wake
of plummeting growth and rising unemployment which have
lead to riots and political instability.
recent World Bank loans are similarly
conditioned, in part, on “fiscal discipline.”
insistence on such policies at a time
when the US and most of the rest of
the rich world are following virtually the
opposite economic strategy indicates
the need for fundamental rethinking
of what actually generates growth and
development. There is a growing body of
alternative ideas in this area –including
work by the Nobel laureates Joseph
Stiglitz and paul Krugman – which the
iMF and the World Bank should consider.
More importantly, american control
has meant that throughout their history these institutions
have been used as an adjunct of US foreign policy. Given
the centrality of orthodox stalwarts like larry Summers and
Timothy Geithner in the Obama administration, the prospect
of serious reform appears dim. Summers was a key architect
of neo-liberal policies while at the World Bank and the US
Treasury during the Clinton administration, and Geithner is a
former senior iMF official.
Both men are likely to support the prevailing global
double standard, which allows rich countries to use fiscal
expansion in the face of recession, while forcing poor
countries into greater austerity. But the Obama administration
can still help – for example, by asking the Federal reserve
to expand the currency swap arrangements that it recently
offered to Singapore, South Korea, and Brazil to other
developing countries. That way, the world’s poor could at
least avoid the heavy-handed conditionality imposed by the
iMF and World Bank.
Exclusive Macau Business / Project Syndicate
april 2009
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