“Debtonation” has been used to describe the systemic crisis that goes to the
heart of the financial model and underpins economic globalization. As more and
more banks feel the fiscal pressure, 22 consumers are surviving on credit in the
developing nations. In the UK, in October 2007, it was reported by the BBC that
10% of homeowners, one million people int he UK, are paying their mortgages each
month with credit cards. The so-called “invisible hand” is no longer relied upon in
the financial markets even of the developing world.
JOSEPH STIGLITZ, chief economist at the World Bank from 1997-2000 and
winner of the Nobel Prize for Economics in 2001, asserts that asymmetries exist in
terms of information especially in the market place, between employer and
employee, bank and borrower, etc. That is why increased transparency and
improving information provided to citizens about what global institutions do should
be included in discussions of reform. (STIGLITZ: 2002.)
He expands his argument by stating that the inherent imbalance of power, for
example, between the IMF and its “clients” creates inevitable tension and IMF
behavior exacerbates an already difficult situation. Lack of trust is the premise on
which MEIs like the IMF and World Bank build their relationships with “client”
countries. This undermines the effectiveness of economic reform because for an IMF
program to be effective, client countries must muster the forces required, on the
basis of a broad concensus, to stand behind the implementation of a program. This
kind of consensus can only be achieved through dialogue, open discussion and the
involvement of civil society and its representatives. The IMF and WB have begun to
take notice and have initiated, among other changes, “participatory” poverty
assessments in which client countries contribute to the assessment of the size and
depth of the problems a country faces.
Sometimes it is hard to believe that the IMF is a public institution established
and funded by taxpayers throughout the world since it does not report to those who
finance it or to those whose lives it affects. It reports only to ministries of finance,
banks and governments. This leads to the question: How can citizens find out what
these institutions do and hold them accountable? The underlying problem with the
22
Great Northern in the UK is just one recent example of government bail out. The bailout has
become a public-private partnership, a new hybrid form, something in-between nationalization and
privatization.
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