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Stiglitz on the IMF « Previous | |Next »
May 22, 2006

Joseph Stiglitz has written an article on the credibilty of the IMF as an international financial institution concerned with global economic govenance. The article is entitled the 'IMF's Problem Called America'. In it Stiglitz asks a good question:

The International Monetary Fund’s (IMF’s) recent meeting was lauded as a breakthrough, with officials given a new mandate for "surveillance" of the trade imbalances that contribute significantly to global instability. The new mission is crucially important, both for the health of the global economy and the IMF’s own legitimacy.

Stiglitz asks: 'But is the fund up to the job?' He answers thus:
...the U.S. bears responsibility both for trade imbalances and the policies that might quickly be adopted to address them. The IMF’s response to its new mission of assessing global imbalances will thus test its battered political legitimacy....If the IMF’s analysis of global imbalances is not balanced, if it does not identify the U.S. as the major culprit, and if it does not direct its attention on the U.S.’s need to reduce its fiscal deficits, through higher taxes for America’s richest and lower defence spending, the fund’s relevance in the 21st century will inevitably decline.

I cannot see the IMF identifying the U.S. as the major cause of global imbalances frankly. So it is going to struggle to regain legitimacy as an international institution. And I cannot see the Bush Administration directing their attention to reducing the fiscal deficit. That is not included in the Republican talking points.

Things aren't going that well economically speaking in the US. according to Paul Krugman. In his column in The New York Times he says that ecconomic growth in the US:

...over the past three years was driven mainly by a housing boom and rapid growth in consumer spending. ... As I summarized it awhile back, we became a nation in which people make a living by selling one another houses, and they pay for the houses with money borrowed from China. Now that game seems to be coming to an end. We're going to have to find other ways to make a living--- in particular, we're going to have to start selling goods and services, not just I.O.U.'s, to the rest of the world, and/or replace imports with domestic production. And adjusting to that new way of making a living will take time.

How long has the US got I wonder?

| Posted by Gary Sauer-Thompson at 4:06 PM | | Comments (0)