Capital Market Liberalization, Globalization, and the IMF
One of the most controversial aspects of globalization is capital-market liberalization- not so much the liberalization of rules and governing foreign direct investment, but those affecting short term capital flows, speculative hot capital that can come into and out of a country. In the 1980's and 1990's, the IMF and the US Treasury tried to push capital-market liberalization around the world, encountering enormous opposition, not only from developing countries, but from economists who were less enamored of the doctrines of free and unfettered markets, of market fundamentalism, that were at that time being preached by the international economic institutions. The economic crises of the late 1990s and the early years of the new millenium, which were partly, or even largely, attributable to capital-market liberalization, reinforced those reservations. This paper takes as its point of departure a recent IMF paper, to provide insights both into how the IMF could have gone so wrong in its advocacy of capital-market liberalization and into why capital-market liberalization has so often led to increased economic instability, not to economic growth.
About the Author
Initiative for Policy Dialogue (IPD)
Joseph E. Stiglitz is President of the Initiative for Policy Dialogue, and Chairman of the Committee on Global Thought at Columbia University. He is University Professor at Columbia, teaching in its Economics Department, its Business School, and its School of International and Public Affairs. He chaired the UN Commission of Experts on Reforms of the International Monetary and Financial System, created in the aftermath of the financial crisis by the President of the General Assembly. He is former Chief Economist and Senior Vice-President of the World Bank and Chairman of President Clinton’s Council of Economic Advisors. He was awarded the Nobel Memorial Prize in Economics in 2001.