Case Study Of The Failure And Failure Of IMF In Argentina

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Argentina is a well known case study of the failure or negative outcome of some IMF's standard policies. In fact, Argentina carefully applied policies dictated by IMF, but, until it stuck up with those policies, it couldn't step out from its crisis, and it ran into even deeper economic and social problems. This failure of the IMF has often been cited as the demonstration of unsuitability of the standard IMF approach (the usual so-called Washington Consensus) for solving economic crisis in developing countries (Serra & Stiglitz, 2008, p. 44). Also, this failure led to hostile feelings versus IMF among the population of Argentina (Kanenguiser, 2000) and fueled generalised suspects over IMF decision-making process being politicized and serving…show more content…
According to this approach, in order to get IMF loans, any assisted country should go through reforms focused on the three major pillars of fiscal austerity, privatization and liberalization (Stiglitz, 2002, p. 53). During all the 90s, Argentina's economic policies were under the strict control of a supporting program established by IMF (IEO of IMF, 2003), so during the deep crisis happened between 1998 and 2002, IMF was already in charge with its approach. Throughout all this period, Argentina strictly applied the IMF formula and realized a number of structural reforms, "reducing budget and balance of payment deficits, raising interest rates, reducing inflation, privatizing state assets, and reducing trade barriers and regulation on capital flows in and out of the country" (Paddock, 2002, p. 158). This program did not produce the results expected by IMF. Instead, it produced recession and a strong dependence of Argentina's government on IMF loans to support its growing debt (Paddock, 2002). Primary economic and social indicators clearly show the sufferings of Argentina during that period: between 1998 and 2002, GDP passed from 292 billion dollars to 97 billion dollars (The World Bank, 2017), while unemployment grew from to 12.8% to 19.6% (The World Bank, 2017). Argentina stepped out of the crisis only after defaulting and devaluating, i.e. after…show more content…
This failure was harshly criticized by some economists as a failure of the "one size fits all" Washington Consensus approach (Stiglitz, 2008). Also, IMF itself admitted some responsibility and mistakes in worsening Argentina crisis (Conway, 2004). Anyway, while IMF never considered the Washington Consensus approach as the root of the problems in Argentina, and explained its faults as being a matter of growth forecast errors (Blanchard & Leigh, 2013), most of the widely agreed criticisms to IMF targeted exactly the Washington Consensus approach and the mindset behind it: "Government as the problem, and markets as the solution" (Stiglitz, 2008, n.d.). In practice, IMF is sometimes perceived as an institution much more involved in liberalization and privatization than in solving economic crisis, and this perception fuels hostile feelings among the population of assisted countries suffering for structural reforms. So, though it is still not proven that the Washington Consensus policies are definitely wrong, it is clear enough that IMF should revise its approach and mindset and should take more care of the social outcome of the economic policies it requests, if it wants to stop being blamed for social riots. A simple way to achieve this goal could be the sharing of risks and responsibilities for erroneous policies that IMF dictates. The righteousness of policies could be judged in respect to the spread between real growth
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