The Third Way conception of the state and economic policy draws on the new "institutional economics," which emphasizes the problems of economic coordination in the free market and their resolution through the management activities of "experts" in the state. Theoretically, this approach argues that the state, which has the authority to create money, influence interest rates, encourage technical development and research through educational and regional policy, and so on, can influence economic activity without interfering directly in the market by creating a more predictable economic environment. The doctrine emphasizes complex coordination of just the type of decentralized and vertically disintegrated production processes that characterize the global economy, as well as a new and more sophisticated infrastructural environment, such as communications grids and information highways - "goods" which the more "pure" neo-liberal laissez-faire state is ill-equipped to provide.

Reagan and Thatcher represented the most dogmatic and pure form of neo-liberalism - a wholesale and unfettered opening to the global economy. This dominated political and economic transformations in the initial period of globalization. This was known as the "Washington consensus," was first launched as a globalist strategy at the Cancun Conference in 1982 and implemented around the world with a vengeance in the 1980s and 1990s. But the world recession of the 1990s exposed the fragility of the world monetary system and caused rising alarm and growing fissures in the inner circles of the global ruling class. How to stabilize the system and achieve some regulatory order and stabilize the system has bedeviled transnational elites and led to strategic differences. With mounting social fallout from pure neo-liberalism, especially in the wake of the Asian crash and looming economic disasters elsewhere, unity around the Washington consensus fell apart and the Third Way began to develop as an alternative policy approach for the transnational ruling class.

The breakdown of the Washington consensus reflects a broad and ongoing debate engaged by different think tanks, political leaders and economists as the globalists search for a way out of growing world crisis. Indeed, shortly before the Seattle meeting Clinton told the annual gathering of New Democrats that the party is united on most "Third Way policies" - fiscal conservatism, being "tough" on crime, educational reform, and so on - but there is one big exception: "how we're going to respond to globalization." The battle in Seattle, both on the streets and in the corridors, was mostly in response to the social fall-out and failures of the neo-liberal Washington consensus, and began the struggle to forge a new consensus around the Third Way.

Changes at the IMF and World Bank

This debate has been reflected in the differences and sometimes-heated exchanges between policy leaders at the IMF and World Bank. This struggle came to a head in November and December '99 around two important resignations; Michel Camdessus leaving as Managing Director of the IMF, and Joseph Stiglitz resigning as chief economist at the World Bank. The major protagonists in this drama that unfolded within the apex of these powerful supranational institutions of global capitalism brought together several of the most influential figures in globalist financial policies. It is not possible here to elaborate on all the issues behind the IMF and World Bank shakeups, which go to the heart of an increasingly fractious transnational elite's efforts to reform the world financial system. But a cursory look at the events and policy shifts that eventually solidified in the annual IMF/World Bank meeting in Prague throws some light on the current politics of globalization from above.

Camdessus has led the IMF for 13 years and is a leading exponent of the Washington consensus and has had a huge influence on global economic policies. Stiglitz was chief of Clinton's Council of Economic Advisors before he went to the World Bank, where he became a major spokesman for the Third Way, and one of the most outspoken critics of the IMF. In some ways Stiglitz was a stalking horse for Clinton, who has been cautious and accommodating with the established policies of the Washington Consensus. Clinton's men at the Treasury Department, Robert Ruben and Lawrence Summers worked closely with Camdessus to implement neo-liberal solutions to the Asian and other crises. These included bailouts for international finance, high interest rates to benefit global lenders, rapid privatization of state supported enterprises and cutting social services. The resulting political disruptions and free fall into poverty was viewed as necessary steps to regain the confidence of international financiers.

It was precisely these policies that began the revolt of Third World globalists, as they paid the price of the crisis for their more powerful partners in the developed world. Stiglitz, not surprisingly a leading exponent of the new "institutional economics," was the first inside voice from the inner sanctum of the ruling bloc to criticize the IMF's strategy in Asia and Russia, directly challenging the Washington consensus as a short-sighted and incomplete strategy. In fact, Camdessus' resignation reflected the breakdown of the Washington consensus. Taking place on the heels of Seattle, it upped the ante by raising the possibility of new directions for the Fund and for globalist financial policies. Stiglitz stepped up the tenor of his attacks after Camdessus announced his resignation in November. At that point, Summers stepped into the fray to try to impose order and stake out a middle ground for a new consensus.

The functions of the IMF have grown greatly with globalization. Its role as a neo-liberal policy enforcer took shape not as part of an ideological principal of governance, but as an organic response to growing world problems. During Camdessus' tenure criticism of the IMF steadily rose from all quarters, indicating a concern to formalize a global supervisory and regulatory structure that could bring some order to world finance. As one commentator pointed out in the Financial Times regarding the resignation: "As an exemplar of bureaucratic entrepreneurship, the IMF is a triumph. Yet what is good for the institution is not necessarily ideal for the world. A change in management is the ideal time to refocus the institution on its core tasks." In response to his critics, Camdessus retorted that "I know that there is, here and there, some nostalgia for a mythical 'good old fund,' limited to a narrow scope of concerns...This would obviously be a recipe for irrelevance in today's world," and lamented that he had failed to reverse "the world's propensity to use [the Fund] as a scapegoat."

But changes have been strongly supported by conservatives or old-guard neo-liberals who see the IMF as an oversized bureaucracy interfering in the natural functioning of the free market, as well by liberal Keynesians largely marginalized under globalization and who decried the extension of neo-liberal social policies through IMF financial arrangements. This alliance came to the forefront of the debate with the Meltzer Report. Issued by a congressional committee known as the International Financial Institution Advisory Commission, it was headed by conservative economist Allen Meltzer and Havard liberal Jeffery Sachs. The report accused the IMF of a record of failure and too much interference in the economic affairs of developing countries. It pushed a stronger role for the private financial sector in lending, and recommended the IMF limit its activities to short-term emergency measures and crisis management. Overall the Meltzer Report called for a sharp cut-back to many IMF functions.

Taking advantage of Camdessus' resignation, Summers gave a major policy speech in mid-December '99 on the IMF at the London School of Business which gives some insight into Third Way thinking regarding global financial regulation. His proposals called for important adjustments to programs based on the Washington consensus, pushing the IMF towards Third Way policies. Changes would include an end to long-term IMF lending, while allowing the private sector greater freedom in arranging terms and solutions for international debt. This would limit IMF loans to short-term crisis management, and focus the Fund's attention on developing a system that obligates governments and banks of "emerging markets" to provide greater access for global bankers and lenders to large bodies of closely guarded economic information. Summers also proposed more attention be given to debt relief, limiting volatile short-term loans, and recognizing the need for greater inclusion of "civil society" and "emerging countries" in IMF decisions making.

But while the IMF should scale back short-term lending and shift this role more fully to private capital, it must assume greater responsibility in global financial oversight and regulation. In this manner the IMF would provide a more secure environment for ongoing accumulation. Its role would be that of an oversight committee which guards the collective rules while individual competition is allowed full range; stepping in only when economic competition gets out of hand causing a financial crisis. Such measures in Summers's view would give states more ability to keep the market running smoothly and help avoid the financial disruptions to the system that the Third Way argues for. Overall, Summers was reformulating a call made with increasing frequency within the globalist bloc for the creation of a transnational "lender of last resort" and suggesting that this role fall to the IMF. The Fund "must be a last, not a first, resort," impose "generally accepted accounting principles" for the global economy and encourage countries to "implement standards and codes of conduct." The cutting edge of the Third Way is that it charts a path between the conventional conservative/liberal split in an attempt to reformulate a majority globalist consensus, which includes ideas from both sides. In what Summers called a "great debate," he argued the true role of the IMF is "to enable creditors to recognize their collective interests despite their individual interest."

Previously Camdessus and Summers have worked closely to implement neo-liberal solutions in Asia, Russia and Brazil. In fact, Summers was Clinton's point man in getting Congress to come up with $18 billion to help the IMF take control of the Asian crisis. But as speculation circulated about Camdessus resignation, Summers began to distance his own position from that of Camdessus and called for a "new framework for providing international assistance.one that moves beyond a closed, IMF-centered process that has too often focused on narrow macroeconomic objectives at the expense of human development." In London, Summers expanded his changing tactics to suggest that the World Bank, not the IMF, take the lead in global debt relief programs for the world's poorest countries.

Summers' rejection of the policies he helped develop and implement indicates the depth of the globalist debate. The economic, social and political upheavals of the past three years have the transnational elites searching for new answers, answers that Third Way advocates hope to provide. With Summers' and others' proposals for reorganizing the IMF, key organic intellectuals of the globalist bloc have acknowledged that transnational functionaries need to acquire greater autonomy from transnational capitalists and act more independently of the latters' short-term interests. The neo-liberal state has shown itself incapable of such autonomy; it is not clear if a "Third Way" state would be up to the task.

Back to Stiglitz. With the debate swinging to his side why would Stiglitz choose to resign? One of his most repeated criticisms of the Fund was that its policies led to a deepening human crisis of poverty. Now poverty reduction programs are more firmly in the hands of the World Bank. Just as Summers had distanced himself from Camdessus, World Bank president James Wolfensohn, who had credited Stiglitz for helping to move the institution beyond the Washington consensus, now distanced himself from Stiglitz, expressing discomfort with the full range of the latter's criticisms. These include restricting short-term flows of capital, the IMF's Russian policy, moving more slowly on market liberalization, giving poor countries an inside seat on financial negotiations, and advocating a stronger role for the state. "In short, he cast himself as a scourge of the Washington establishment," noted The Economist "By the end, his boss, the hitherto supportive James Wolfensohn, had turned less warm."

Many of Stiglitz' ideas seem firmly planted in Third Way policy. But for Stiglitz the World Bank has not moved far nor fast enough in changing their basic approach. As Stiglitz stated; "It has become obvious to me that it would be difficult to continue to speak out as forcefully and publicly as I have on a variety of issues and still remain as chief economist. Rather than muzzle myself, or be muzzled, I decided to leave. It became very clear to me that working from the inside was not leading to the responses at the speed at which responses were needed." Recently Stiglitz launched further broadsides against the Washington consensus at the American Economics Association, where he won a standing ovation. Sharply criticizing policies that Camdessus, Summers and Ruben had enforced, he stated; "I believe there is some chance that some of the disastrous economic decisions would not have occurred had workers had a voice in the decision making. Capital market liberalization has not only not brought people the prosperity they were promised, but it has also brought these crises, with wages falling 20 or 30 percent, and unemployment going up by a factor of two, three, four, or ten." Such open criticism of the crisis goes beyond the comfort level for most Third Way advocates, including Summers, who pressured the World Bank for Stiglitz' resignation.

The battle over policy continued with the World's Bank's flagship report on global poverty. The World Development Report reviewed the accomplishments and failures of globalization in the 1990s. Its lead author, Ravi Kanbur, is a highly respected economist brought into the bank by Stiglitz. Discussion for the report was opened up in an unprecedented way using an electronic conference that attracted 1,523 people from over 80 countries. Under Kanbur's guidance the report sharply questioned market liberalization as the best method of development, and criticized economic growth that failed to redistribute wealth. In addition the report called for an expanded governmental role in providing a social safety net as well as empowering the poor through land redistribution. This was too much for Summers who maintains faith in liberalization and growth as the main tenants of the Third Way. Some attention to the elimination of poverty is acceptable, but Kanbur's frontal assault went too far. Summers demanded a rewrite of the report and Kanbur resigned in protest.

Having fought off Third Way critics from the left and right the annual meeting of the IMF and World Bank in Prague offered the opportunity to consolidate a new consensus. Leading up to the conference the IMF's new managing director, Horst Khler, had been making speeches strongly backing the approach of Summers. In a speech to the Board of Governors in Prague Khler clearly articulated a Third Way policy orientation for the IMF. The central role of the IMF will be to develop a "comprehensive approach to fostering a sound and integrated international financial system." This entails guaranteeing data transparency, surveillance of domestic economic policies, and promoting international codes and standards. This will provide a stable structure for the private sector while allowing competition to rule the markets, which is a key orientation for Third Way advocates. In addition Khler has established a Capital Market Consultative Group to create an ongoing dialogue between the IMF and global bankers and financiers, a key demand from the private sector. Refusing to back off from its involvement in the affairs of developing countries the IMF will maintain its Poverty Reduction and Growth Facility which oversees macroeconomic stability in the Third World and demands an export economy to integrate poor nations into global markets. As part of the Third Way focus there will be efforts to increase human capital through health and education spending and debt relief.

Wither the Politics of Globalization From Below?

Having Camdessus, Stiglitz and Kanbur out of the way, and the Meltzer Report behind him, Summers has been able to cobble together a policy combination with the help of Khler and World Bank president James Wolfensohn. After a three-way struggle, the Third Way has emerged out of the Asian crisis to push forward a new consensus within the IMF and World Bank, and more broadly, within the transnational capitalist class. But is not clear how the globalist ruling bloc will sustain its fragile economic and political hegemony. There is no reason to believe it will be able to manage the contradictions of global capitalism, particularly those of overaccumulation and worldwide social polarization. However, as global protest makes clear, the principal source of tension in the coming period will be over the threat from below. The fissures in the globalist-ruling bloc have percolated up from outside the bloc. What took place in the streets in Seattle, Washington and Prague, the politics of globalization from below, forms the real basis on which to understand the politics of globalization from above.

The growing movement is unequivocally an anti-capitalist movement. The importance of this development should not be understated. But breaking the "TINA" (There is not Alternative) syndrome requires an alternative vision for global society. The left and progressives, who may well be competing for influence against a Third Way political configuration for this vision, must move from anti-capitalism, however important that stance may be, to relaunching a democratic, sustainable socialist project for the 21st century.

NOTES

The theoretical issues discussed here are elaborated on at some length in Wiliam I. Robinson and Jerry Harris, "Towards a Global Ruling Class? Globalization and the Transnational Capitalist Class," Science and Society, Vol 64, No. 1, Spring 2000, 11-54.

A theory of national and transnational fractions of dominant groups in the context of globalization has been developed by William I. Robinson in a number of works, among them, Promoting Polyarchy: Globalization, U.S. Intervention, and Hegemony (Cambridge: Cambridge University Press, 1996); "Globalization: nine theses on our epoch," Race and Class, Vol 36, No. 2 1996, 13-31; "Global Capitalism and the Transnationalization of the State," paper presented at the Transatlantic Conference on Historical Materialism and Globalization, University of Warwick, april 15-17, 1999, to be published in Mark Rupert and Hazel Smith (eds.), The Point is to Change the World: Socialism Through Globalization? (London: Routledge). See also Robinson and Harris, Ibid. And Jerry Harris, "US: The Politics of Globalization", Race and Class, Vol 41, No. 3, 2000, 59-72.

On this and other data, see Robinson and Harris, Op. Cit.

"The Politics of Trade," The Economist, October 23, 1999, pp. 28.

Milton Wolf, "A New Mandate for the IMF," Financial Times, December 15, 1999.
Cited in John Burgess, "US Will Urge IMF to Scale Back Role," Washington Post, December 12, E01.

"Le Monde sans Michel," The Economist, November 13, 199, pp. 77. 8

"Right Kind of IMF For a Stable Global Financial System," December 14, 1999. The text of the speech was released by the Office of Public Affairs of the Treasury Department.

As cited in Walden Bello, "Rethinking Asia," Far Eastern Economic Review, December 9, 1999.

"The Bumpy Ride of Joe Stiglitz," The Economist, December 18, 1999.

Louis Uchitelle, "World bank Economist Felt He Had to Silence His Criticism or Quit," New York Times, December 2, 1999, pp.C1. 12. Joseph Stiglitz, Reuthers, January 8, 2000, Datelined Boston, "Workers Rights Key to Development - World Bank."