To their enemies, the International Monetary Fund and the World Bank are indistinguishable: twin faces of the hydra-headed monster of the '' Washington consensus" dedicated to the defense of global capitalism and oppression of the poor. But anyone who has read about last week's extraordinary diatribe by Kenneth Rogoff, the IMF director of research, against Joseph Stiglitz, the bank's former chief economist and 2001 Nobel prize-winner for economics, can only wonder: consensus? What consensus?
The dispute has lifted the curtain on a relationship that is, in reality, more like that of fractious siblings. The two institutions are too different to get along in harmony; too closely related to getting out of each other's way. The latest flare-up came on World Bank turf a week ago, when Mr. Rogoff spoke to an audience mostly up of bank and fund staff at a lunchtime debate to launch Prof. Stiglitz's new book, Globalization and its Discontents. In defiance of the confidence expressed by Nicholas Stern, Prof. Stiglitz's successor as chief economist at the bank, that the debate would be "about issues, not personalities", Mr. Rogoff launched a vituperative attack on Prof. Stiglitz's character and record in office, particularly during the Asian financial crisis of 1997-98. His attack, now available in full on the IMF's website, sounds intemperate, even excessive. Prof Stiglitz pronounced himself "dumbfounded" by the barrage of criticism, particularly unexpected from such a cerebral and mild-mannered man. But it reflected Mr. Rogoff's sense, shared by many of his colleagues, that the IMF had been provoked beyond endurance. Eventually, something had to snap. Mr. Stiglitz has been one of the IMF's harshest critics for years. He, too, has crossed the line dividing intellectual disagreement from personal contact: he has described the IMF's staff as "third-rate". In his book, he writes that IMF economists make themselves comfortable in five-star hotels in the capitals in developing countries, and likes modern economic management of high-altitude bombing. "From one's luxury hotel, one can callously impose policies about which one would think twice if one knew the people whose lives were destroyed."
Both the fund and the bank are quick to point Prof. Stiglitz in a long way from representing the World Bank's official position. Even while he worked there, his boss James Wolfensohn, the bank's president, observed: "I am always interested to see what Joe is saying on behalf of the bank:" But that is not to say that Prof Stiglitz is a maverick. Other bank officials still hold him in high regard, and he retains a formal link to the institution as a member of a panel of independent advisers to Mr. Stern. He may make his points more strongly than his former colleagues, but there can be no doubt that he is reflecting widely shared and long-standing tensions, which at times have had serious consequences. Development campaigners believe that debt relief for the poorest countries was held up for years by wrangling between the fund and the bank. The roots of their differences go back to the origins of the fund and the bank in the 1940s. Conceived together at Bretton Woods, they were given quite distinct objectives: the bank to support economic development, the fund to maintain the stability of the global economy. These two different objectives have given the two institutions very different cultures: disciplined crisis managers versus reflective idealists.
Charles Wyplosz, of the Centre for Economic Policy Research, 'who has worked as a visiting scholar at the IMF, says the fund is like the Prussian army, the bank like the Mexican army. "IMF staff tend to think of themselves as smart and select, and to look down on World Bank people," he says. "And it is true that the IMF's recruitment is very homogenous: the staff 1 tends to be Economics PhDs from leading universities. The World Bank recruits a much wider range of people." At the Rogoff/ Stiglitz debate, the IMF gang in their dark suits could be easily distinguished from the bank crew in their shirtsleeves and chinos. What turns these cultural differences into flashpoints is when the activities of the fund and bank conflict. It can be infuriating. For example, for a World Bank manager who has spent years trying to help small businesses in a developing country to be told that the IMF has recommended a sharp rise in interest rates or taxes that will force those businesses to close. To make matters worse, since the 1970s, the dividing line between the two institutions' functions has become blurred. The IMF has taken on long-term lending to the poorest countries and had begun making policy recommendations on structural issues, such as social security systems. The World Bank, meanwhile, was heavily involved in the bail-outs for Mexico in 1995 and South Korea in 1997 and 1998.