The traditional critique offered by those who oppose the market system and the increased globalisation of trade says that the combination of financial liberalisation, the opening up of economies and IMF macroeconomic development recipes create a dangerous cocktail for small, open and dependent countries. Recently, however, similar sentiments are being heard from the very officials who implement these policies.

On 29 and 30 September the International Monetary Fund (IMF) and the World Bank met with representatives of more than 184 countries to evaluate world economic development and the social problems that affect most countries.

The Washington meeting came as economists reflected on slow growth and rising discontent about the free trade policies promoted by the IMF and the World Bank.

According to James Wolfensohn, World Bank president, the five fundamental IMF tasks for 2003 must be to improve crisis monitoring and prevention, create security mechanisms to help countries weather external shocks, clarify policy about access to IMF resources, improve the system concerned with non-sustainable development and simplify access to additional funds.

For his part, Horst Kohler, president of the IMF executive board, said: 'There was also endorsement of our work to improve debt sustainability analysis, and to help develop better mechanisms for dealing with unsustainable sovereign debts.'

Despite the sterling words, many observers see the two organisations as firestarters rather than firefighters. From this perspective, the financial crises faced in Russia, Asia, Mexico and most recently Argentina are directly related to free trade, privatisation, austerity and market liberalisation policies.

Such views have led institutions such as the Economic Commission for Latin America and the Caribbean (ECLAC) to request a re-evaluation of the structural adjustment policies promoted by the international financial institutions, on the grounds of social inequalities and poor income distribution.

Nobel Prize winner Joseph E Stiglitz, who headed the [former US president Bill] Clinton administration's Council of Economic Advisers and was the World Bank's chief economist, has added to the debate by questioning the impact of trade, financial and structural adjustment policies, from the point of view of their economic failings, as much as for ethical concerns.

From Stiglitz's perspective, these policies worsen rather than resolve economic crises. Stiglitz talks of 'a growing regional disillusionment with the IMF and the reforms ... a feeling of resentment with the hypocrisy of US free trade rhetoric combined with increased trade barriers' and the perception that in those cases where there has been growth, the rewards have disproportionately ended up in the hands of the rich, with the situation worsening for many of the poorest.

'The experiment in so-called reform is failing in Latin America. After a brief spurt in the early 1990s, growth has slowed. Many countries in the region are facing recessions, depressions, crises, a few of an almost unprecedented level... The outcomes have been worse than many of its critics feared: it has not brought growth to much of the region and in some parts of the region, it has brought increased inequality and poverty.'

Stiglitz believes that the reforms failed because their proponents used fundamentally incorrect concepts with regard to the functioning of market economies and the role of governments. 'The fact is that capitalism has always been marked by huge fluctuations, and that, if anything, these fluctuations have become even more marked within the developing world.'

For Stiglitz the problem stems from a premature and excessively rapid liberalisation of the financial sector and of the capital markets, along with a lack of adequate regulatory frameworks. Rather than asking what the correct regulatory framework would be, there was a focus on deregulation, 'with disastrous results'.

'The dimensions of the failure are hard to fathom. The data for the first full decade of reform are now in. Growth has been slightly greater than half of what it was in the 1950s, 1960s and 1970s.' Although the 1990s have been better than the 1980s, 'it was the first half of the decade in which growth occurred. In the second half, especially since 1997, there has been stagnation, recession, and depression.'

Stiglitz starts his analysis with the observation that the costs and risks of instability in international financial markets have been absorbed by debt-laden countries. At the root of the 1980s debt crisis, instead of questioning the role of creditor institutions in provoking the crisis, the institutions dedicated themselves to reforming the economies of the indebted countries.

For Stiglitz the growth seen in the first half of the 1990s has more to do with the resolution of debt problems of the preceding decade than with the reforms.

'The reforms have increased the vulnerability of the Latin American countries to the instability of global economy. Worse still, the reforms have replaced automatic stabilisers with automatic destabilisers. For Latin America as a whole, fiscal policy, rather than being counter-cyclical, has been pro-cyclical.'

The reforms opened the economies to greater fluctuations of capital, which have also been pro-cyclical. Capital flows to a country when everything is going well, and leaves when things are going poorly. 'Monetary policy too has become a source of instability, and due to the priorities of the IMF, will probably make the situation worse in the future.'

During the era of reforms, growth 'worsened inequality and exposed the countries to new sources of volatility ... increased macroeconomic instability is borne disproportionately by the poor'.

'Even in countries that have experienced growth, such as Mexico, a disproportionate part of the benefits have gone to the upper 30%, the upper 10%, with many of the poorest, those in the bottom 30%, worse off,' said Stiglitz.

This is due in part to the consequences of a strategy of trade liberalisation. 'These policies have often undermined the ability of the economy to create new jobs, by, among other things, forcing high interest rates. As a result, trade liberalisation has resulted in workers moving not from low-productivity jobs to high-productivity jobs, but from low-productivity jobs to unemployment.'

Jose Angel Tolentino, an analyst with the Development Foundation of El Salvador, doubts the sincerity of World Bank and IMF claims of a new direction. 'They are just looking for an easy way to avoid the criticism they are receiving all over the world,' said Tolentino. He said that a deeper analysis of neoliberal reforms was required.

Tolentino considers it to be an achievement that social movements have put such themes on the agenda for organisations like the World Bank and the IMF. 'The growing evidence of discontent, each time greater across the globe, has forced these institutions to return to discussions about poverty and social distribution, absent in the policies that they have promoted.'

Tolentino maintains that despite the conclusions of the Washington summit, pressure for change in favour of economic policies with a social agenda will have to come from below. The institutions cannot promote this type of change themselves, 'because that would imply going against their own principles and the interests that they represent'.