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Description
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The primary focus of this study is on the effectiveness of the IMF at influencing government policies. However, a prior question that must have occurred to the reader is whether it is normatively desirable for the IMF to exercise influence, and I turn to this question before proceeding with my argument. Critics of unbridled capital markets and the "Washington Consensus" that supports them worry that international institutions and global capital flows may so constrain economic policies during the transition that weak democratic institutions are swept away by popular discontent. Furthermore, they argue, the IMF's neoliberal economic prescriptions of tight monetary and fiscal policies, deregulating the economy, and lowering the barriers to the "creative destruction" wreaked by markets—stabilization, liberalization, and privatization—represent a naïve application of standardized recipes to a much more complex reality. In the felicitous Russian aphorism, it is easy to turn an aquarium into fish soup, but only God can reconstitute the aquarium.
To the contrary, I argue that the basic thrust of the policies urged by the international financial institutions was, in fact, correct. At this point, I want to distinguish carefully between the basic strategy of transition and the specific tactical choices that were made in particular countries. By tactical choices I mean operational decisions on which economic theory does not yet provide straightforward guidance, such as the best ways of targeting exchange rates, the ideal method of privatization, and the optimal sequence of structural reforms. The Fund supported programs in countries that chose a wide range of approaches to these issues, but in some cases IMF staff promoted specific policies that turned out very poorly. We have learned things about economic transitions over the last ten years that would have made it possible to make better choices, had we known them earlier. On the other hand, the key IMF strategy for reform was clear: Accelerate the full spectrum of m arket reforms as much as possible, and lead with rapid macroeconomic stabilization and liberalization. This appeared to be a rather risky strategy from the vantage point of 1990. After a decade of experience, however, it is clear that this was the strategy best suited to promoting economic growth and consolidating democracy in post-Communist countries, because inflation has such disastrous consequences during the transition.
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Notes
| Subject: STANDARD DEPOSIT TERMS 1.0 Type: DATAPASS:TERMS:STANDARD:1.0 Notes: This study was deposited under the of the Data-PASS standard deposit terms. A copy of the usage agreement is included in the file section of this study.; |
