On the surface it appeared to be business as usual at the routine spring meetings of the International Monetary Fund (IMF) and the World Bank held in April in Washington D.C. Ministerial statements, rudderless discussions and lacklustre communiques brought to a close another set of expensive conclaves that provide the Bretton Woods institutions, especially the IMF, the mandate to continue doing more of the same.
 
This year, however, there was evidence of disquiet beneath the surface calm. The source of that disquiet was not the 10,000-odd demonstrators who congregated in Washington calling for the liquidation of the institutions whose global ravage they felt was enough. These demonstrators, in any case, were kept in control by what seemed to be an anti-guerilla operation inspired by the Seattle experience. The disquiet stemmed from the perception, expressed by mainstream critics in and around the spring meetings, that despite its imperial rhetoric and public display of power in the economically weaker locations of the world, the IMF had lost its moorings and was decaying at the core.
 
The sense of that decay, though perceived by many people for quite some time now, turned more pervasive in the wake of the utter failure of the IMF and its policies, initially in Russia and more recently in South-East Asia. That failure was two-fold. First, when confronted by crisis, the IMF responded with its time-worn package, delivered at all destinations irrespective of nature and circumstances. It demanded a greater role for markets and a smaller role for the state, in return for finance to tide over a crisis which markets had created in the first place.
 
In Russia this policy served all the principal financiers of the IMF well. It helped terminate and bury a system that had for long provided an alternative, however imperfect, to developed capitalism. Not surprisingly, the response to the economic chaos that followed the imposition of markets was a willingness to throw good money after bad free-market policies, till such time as the till was virtually empty. After that, the IMF has had more of the same policies but little money to offer. Stanley Fischer, the IMF's acting managing director, epitomises in terms of style and viewpoint what the U.S. administration thinks an organisation man at the IMF should be. Speaking in Moscow early in April he declared that after ten years of experience in over 25 transition economies, the evidence is clear that the basic economic reform and growth strategy recommended by mainstream economists works.
 
He brushed aside the evidence of economic devastation in Russia by saying that despite the many disappointments and setbacks in Russian economic reform, what has so far been achieved in Russia should not be underestimated. This ideologically blinkered perspective has proved un acceptable even to mainstream economists like Jeffrey Sachs, who had made it their mission to ensure the erstwhile Soviet Union's successful transition to capitalism, and are hard put to explain their collective failure.
 
In East Asia, which had been a dynamic pole of the world economy and an important participant in world trade, the story proved different. Initially an IMF package of more open trade and financial markets on the one hand, and a sharp curtailment of government expenditure on the other, threatened to transform slow growth and an economic recession into a depression. Faced with that prospect, the IMF turned tail and accepted rising deficits as a means to ensure the recovery, which foreign capital inflows were expected to, but did not, deliver. This was in the realm of practice. In theory, the IMF continued to attribute the crisis to the conse quences of cronyism and non-transparency in the financial markets, ignoring the role that the financial liberalisation had played in creating the conditions that led up to the crisis.
 
Here again, one of the IMF's most vociferous critics turned out to be an economist from the Bretton Woods stable. Joseph Stiglitz, till recently the chief economist at the World Bank, has for long believed that one area where markets are prone to fail is in the realm of finance. The East Asian experience, according to him, illustrates not just this home truth but much more. In particular it establishes the complete bankruptcy of the policy package that the IMF (and we must mention the Bank, too), has and continues to push through in crisis-afflicted developing economies.
 
Doing the rounds prior to the spring meetings was an article that Stiglitz had penned for the occasion in The New Republic. Stiglitz, while soft on his own erstwhile employer, articulated a viewpoint which would make even a liberal see red. The IMF, he states based on his experience during the crisis, worked in tandem with the U.S. Treasury Department. The latter had earlier sown the seeds of crisis by pressuring these countries to liberalise their financial markets, which resulted in hot money flows that triggered a speculative boom in the real estate markets. When that boom went bust, capital withdrew and currencies collapsed. However, though the source of the problem was private and not public profligacy, the IMF imposed fiscal austerity as the solution, worsening the crisis.