If institutions are the railway, which regulates the pace and direction of the fast and furious train of globalization; Social Capital shall be the driver of the train. How? Let me briefly clarify the importance of having institutions like the IMF and World Bank and other similar economic and political international institutions to regulate our globalized world.
The world, either we are pleased to know that or not, is heading towards complete political and economic globalization. The free capital market and neo-liberalism, either we ideologically believe in them or not, are the dominant rule of today’s world. I am entirely with free capital market. But, with all the positive consequences and economic and political openness brought by such economic-political theories, still there are some minor negative aspects that would primarily affect the developing and poor nations and then threaten the already developed countries.
Stiglitz mentioned clearly that after 9/11 attacks – and I would say even since 1990s – the world realized the importance of enhancing cooperation in reforming and developing emerging and under-developed economies. Hence comes the importance of the role of international institutions like the IMF, World Bank, etc in stabilizing the fast and furious free capital market in our today’s world, especially when trying to transform it to the emerging economies.
Thus, the primary role of those institutions should start before the time of the crisis. IMF is not a rescue squad. It is an international financial organizations meant to help world economy to flourish and regulate the pace and force of global capital market through enhancing cooperation and compatibility among developed and under-developed countries. However, those institutions should not be given absolute power to decide the fate of the world.
The domestic civil society of concerned developed and developing countries and the international community, including powerful states like the US, should compose a network or supervision group to, directly or indirectly, regulate their work, prevent early signs of corruption, and support their basic roles to enhance and stabilize world economies.
Accordingly, I would say that, yes IMF and similar institutions are important and should continue to exist. We, even, need more international political and economic institutions to act as the railway, which regulates the pace and direction of the train of globalization. The role of those institutions is much bigger than a rescue squad that makes up the faults of the inefficient-yet global free market.
Those institutions require an unusual type of supervision by an independent group to ensure its success in its mission in stabilizing world economy and empowering emerging capital markets. This unusual supervision group, which Putnam called the Social Capital, should be constructed as an independent variable (i.e., completely independent) that has no interest in the respective institutions, IMF or any other political or economic institutions. The goal of the Social Capital should be to ensure the quality and transparency of the work of the international institutions. So it must be independent.
Building institutions correctly is another issue. I believe we need more institutions than the very few international institutions working today. Those institutions, I think, should be the dependent variable. In other words they should be built according to the policies of Social Capital and be dependent on it, on the policy level. If institutions are the railway, which regulates the pace and direction of the train of globalization; Social Capital is the driver of the train.