The Revival of the Liberal Creed: The IMF, The World Bank, and Inequality in a Globalized Economy

Half the people and two-thirds of the countries in the world lack full control over their own economic policy decisions. To a great extent, expatriate "experts" managed by industrial country nationals and based in Washington DC regulate their macroeconomics, investment projects, and patterns of social spending. The principles guiding these decisions from afar are known as the Washington Consensus. They are based on the "neoliberal" or "market-friendly" brand of economic policy analysis that has become predominant over the past dozen years. In some cases local policy-makers have been even more enthusiastic about neoliberalism than their colleagues from Washington. Such "globalization" of economic policy, however, has precedents. In fact, the dramatic shifts in economic and social policy of the 1980s go far toward recreating the environment prior to the Great Depression; advocates of "neo"liberalism say little that is unfamiliar from the debates of the 1920s. The world has come full circle - institutionally, ideologically, and politically. Out of the disaster of World War II emerged an international consensus of economic collaboration of governments and the liberty to organize national life at will which was manifested in the establishment of the World Bank and the International Monetary Fund. Paradoxically, for developing countries these same institutions today represent the intellectual backbone and political force behind the dismantling of the truly utopian ideas of the 1940s. By first providing a historical account of the origins and evolution of the World Bank and the IMF, the paper attempts to speak to the present debate on the issues of "globalization", when the capacity to reconcile market and social contradictions is more and more impaired by growing economic and financial imbalances that come with increasing interdependence of liberalized global markets. These issues are then illustrated in the context of concrete country experiences with structural adjustment policies and their distributional outcomes in a globalized economy. The paper concludes by suggesting ways to reform the two agencies.