The problem is that for two decades now the I.M.F., the World Bank and the W.T.O. have lined up behind the so-called Washington consensusthe belief that privatization, deregulation and open capital markets are all that is needed to create jobs, make companies more competitive, lower consumer prices, supply foreign capital and technology to poor countries and, by spreading prosperity, establish the conditions in which democracy and respect for human rights flourish.
Critics of this laissez-faire doctrine do not dispute all its claims, but they tell another side of the storyof weak economies (witness Thailand, Indonesia, Russia and Brazil) overwhelmed by easy money and vulnerable to volatile shifts in capital flows, of jobs less secure than the livelihoods abolished by globalization, of sweatshops and child labor, of environmental devastation, of wealth not enlarged but distributed upward to local elites and multinational corporations, and of intensified social and political conflict. In addition the critics point out that the I.M.F., private bankers and brokerages demand accountability in the form of "transparency" and "due diligence" from the governments and banks of developing countries while exempting themselves from the same requirements.
At their best, the protesters in Seattle and Washington are part of a sensible movement to civilize the global economy. At their worst they are playing into the hands of people like Senator Phil Gramm of Texas, chairman of the Senate Banking Committee, who would eviscerate the I.M.F. and the World Bank and in the process derail the effort to relieve poor nations of crushing debt.
The W.T.O., which makes and enforces the rules of international commerce, espouses an exclusive faith in supposedly self-adjusting markets. In practice, the doctrinaire deregulation of international trade often means that the biggest corporations are free to enter markets and extract resources without worrying much about health, safety or environmental constraints. As for the International Monetary Fund, it makes loans to troubled nations to prevent financial panics and in return demands sound management and transparent bookkeeping (all very sensible). But its bailouts also enable big Western banks like Chase and Citigroupand offshore banking centers in places like the Cayman Islands, which specialize in laundering "dirty money" and avoiding national taxesto walk away unscathed from reckless investments.
Meanwhile the I.M.F.’s one-size-fits-all austerity programs undercut local government programs that protect people from the harshness of the market. The recent I.M.F. structural adjustment program in Indonesia, for instance, did not revive the economy but plunged it into depression, sending half its businesses into bankruptcy, provoking massive social and political disorder and making it harder than ever to restore the confidence of customers of Merrill Lynch and Goldman Sachs.
It is time, therefore, for some rebuilding of international financial institutions. The neoliberal dogma that national governments must refrain from asserting themselves in the new global economy is unrealistic and counterproductive. For some time now, Chile has saved itself from economic, social and political havoc by imposing controls on short-term capital flows. We also need better programs to prevent sharp swings in currency values from feeding speculative frenzies. And a new international bankruptcy court should be established to set rules for equitable settlements between creditors and defaulting nations so that the fallen country is not scavenged of its remaining assets while foreign investors walk away scot-free. we also need international environmental and labor regulations to limit unbridled exploitation of developing countries.
Most immediately, generous funding for aid programs, especially for educational and social services, is needed so that the disruptive impact of stabilization programs does not fall disproportionately on workers and the poor, who are not responsible for the bad policies and corruption of their government and business elites.
None of this will make a theme for a Broadway hit, but it is a work whose season has clearly come.