Peter Levine

(1) Perhaps the Bank and the IMF give good advice--good for a whole borrowing country’s population. Indeed, independent professional economists tend to endorse the main themes of the “Washington consensus.” If they are right, then the anger of the anti-globalism activists is misplaced.

(2) Perhaps these lenders are interested in maximizing the odds that their loans will be repaid. Then their advice is hard-headed and practical, but they ought to be more generous with very poor countries. If they ran out of funds as a result, the donor nations should give them more money.

(3) Perhaps they are well-meaning but misguided. They require reforms that will (as they claim) maximize economic growth in the borrowing countries. However, a government can add a percentage point to GNP through a policy that plunges a significant portion of its population into hunger and homelessness. Growth of GNP is a good thing all else being equal, but it’s often not the right goal to aim for.

(4) Or perhaps they require reforms that will harm recipients but benefit holders of capital, who are concentrated in the wealthy countries of the north. This doesn’t mean that lenders are deliberately and consciously cruel. Rather, they may honestly believe in mainstream academic economics, which could be a fundamentally biased discipline. In that case, wouldn’t borrowing countries prefer not to take their loans at all? Wouldn’t they be better off defaulting? Not necessarily. The overall system imposed by the “Washington consensus” could be bad for all poor countries, yet each country could be better off taking a loan than refusing it.

I don’t know enough to choose among these interpretations. But I’ve reached the point where all I want is empirical evidence that helps me see which of the above theories is true. Most of the rhetoric on both sides (about greedy capitalists or wise economists) is unhelpful.