Globalization and Its Discontents

Globalization and Its Discontents (2002) is American economist John E. Stiglitz’s second major work, published shortly after he became a Nobel laureate. It explores and critiques the International Monetary Fund’s (IMF) policies between the 1970s and the early 2000s. Since Stiglitz was a senior vice president of the World Bank between 1993 and 1997, he uses insider knowledge to explain certain structural and functional aspects of the IMF that remain opaque to the public. His central argument is that the Washington Consensus formed between the IMF, the US Treasury, and the World Bank has been detrimental to global economic stability. This is especially true of the IMF, the ideological fervor of which often blinds it from pursuing sensible economic policies. Stiglitz, an expert of the Keynesian school, argues against the IMF’s dogged pursuit of market fundamentalism, which not only has destabilized the domestic economies in developing countries but sometimes also stunted growth.

Globalization and Its Discontents garnered attention from the general public and intellectuals alike for its easy-to-understand prose and frank observations. Although widely acclaimed, it has also received significant criticism, largely from neoliberal economics and IMF analysts who disagree with his critique of the institution, his proposed reforms, and his dismissal of market fundamentalism. It remains a key text in many college-level macroeconomic courses.

This guide refers to the 1994 W. W. Norton & Company edition.

Summary

Stiglitz’s book contains a Preface and nine chapters, each critiquing a specific aspect of market fundamentalism or IMF policy. Some chapters are further subdivided into small thematic sections, but this guide only makes note of them if they are relevant to the overarching argument of the chapter.

Stiglitz explains his reasons for writing this book and expresses his discontent with the state of global regulatory institutions like the IMF. Chapter 1 defines globalization and provides a brief historical overview of its advantages and disadvantages. It points out that, while globalization is in theory a force for good and has helped countless developing countries grow, it has also been the root cause of economic failures. Stiglitz explains that there is a discrepancy between theory and practice and that poor regulation on the part of the IMF has made globalization a destructive rather than constructive force.

Chapter 2 contrasts the actions of the World Bank with those of the IMF to highlight the shortcomings of the latter. It principally argues that the Fund focuses too much on imposing a specific economic theory on the countries it seeks to help, to the point of disregarding or ignoring domestic indicators that might skew its projected model. Chapter 3 explores how dogged pursuit of privatization, liberalization, and stabilization as ends in themselves have caused IMF policies to fail in countries that need structural support.

Chapters 4, 5, 6, and 7 are all case studies that serve to illustrate the points defended in Chapter 3. They cover, respectively, the IMF’s poor management of the Asian financial crisis of 1997 (Chapter 4), the IMF’s failure to promote growth in post-Soviet Russia (Chapters 5 and 6), and the successful cases of China and Poland, who did not rely on the IMF (Chapter 7).

The final two chapters are dedicated to sketching out a path toward reform. Chapter 8 discusses the strengths of Keynesian economics over free-market ideology, while Chapter 9 explores concrete, practical changes that could enable the IMF to live up to its original mandate as a regulatory institution for globalization. Stiglitz ultimately argues that, should the IMF become more transparent and practical, it can still become a reliable institution that protects global economic stability.