Globalization and Its Discontents

Stiglitz’s criticism of the IMF mainly centers around the topic of market fundamentalism. This economic concept is founded on the belief that free markets are self-regulating and do not require government intervention to operate optimally. However, market fundamentalism has time and again been proven to be imperfect in practice. Several factors—such as a lack of information or adequate institutions—can cause a market to fail without adequate governmental intervention. These factors are either not accounted for or presumed to be perfect in the free-market economic model. For example, at the microeconomic level, information is often presumed to be perfect, so consumers always make rational purchase decisions. This is clearly not the case in practice.

Stiglitz’s discontent stems not from the theory itself—economic predictions and models are never perfect, as they cannot account for everything—but from the IMF’s pursuit of it as an end in and of itself. In other words, the IMF’s defense of market fundamentalism is ideological rather than logical, causing the institution to repeatedly ignore signs of its failure and find ways to justify its actions. For example, in Chapter 5, Stiglitz highlights that Russia’s transition from a centrally planned economy to a market economy was far too abrupt to be successful.