Only a narrow city street in Washington separates the International Monetary Fund from the World Bank. Demonstrators often lump the two buildings together as targets for anti-globalisation protests. But anyone who gets inside finds a world of difference.

The IMF is secretive and impenetrable, and subject to the policy shifts of the US Treasury, its biggest shareholder. The World Bank is more like a university debating society where the ferocity of internal criticism of the IMF's bail-out policies among some staffers can sometimes match that of the street protests.

The festering antagonism between individual policy-makers in the two institutions is exacerbated by their overlapping roles. The IMF responds to country crises with loans that often carry strict conditions such as cutbacks in public spending, which conflict with World Bank programmes to reduce poverty.

Two years ago Joseph Stiglitz, an open critic of the IMF, resigned as the World Bank's chief economist, allegedly after pressure from the US Treasury on World Bank president James Wolfensohn. The Nobel Prize-winning economist has now published a book, Globalisation and Its Discontents, which takes issue with the IMF role in Asia, Russia and Brazil in the 1990s, and accuses the Fund of compounding misery in the developing world by imposing policy prescriptions that are the opposite of those applauded in the Western market economies, such as lower taxes, lower interest rates and increased consumer confidence.

When the World Bank asked Stiglitz to launch the bestseller in its bookshop on June 28th, it also invited the IMF to send a representative in the interests of dialogue. When Kenneth Rogoff, the IMF's chief economist, turned up, some 400 staff members anticipated a lively, off-the-record exchange. Instead they got what the author described later as an ambush. Rogoff excoriated Stiglitz in a scathing prepared statement, which the IMF has since posted on its website, www.imf.org.

After years of having its performance attacked by all sides, the empire had evidently decided to strike back. And it was personal. Rogoff started by telling an anecdote designed to portray Stiglitz as, above all, arrogant. In the late 1980s the two economists were discussing Paul Volker, former US Federal Reserve chairman, he said. Stiglitz had asked him, "Tell me, is he really smart... is he smart like us?"

Rogoff then dismissed Stiglitz's policy ideas as "at best highly controversial, at worst snake oil". The Stiglitzian prescription for a distressed government was to issue more debt and print more money, but "we at the IMF - no, make that we on the planet Earth - have considerable experience suggesting otherwise". Did the former World Bank economist not realise printing money raised inflation and stifled growth?

Rogoff concluded by accusing Stiglitz of slandering former IMF number two Stanley Fischer, now with Citibank, by "implying that Citibank may have dangled a job offer in front of him, in return for co-operation in debt renegotiations". Of all the false inferences and innuendos in the book, he said, "this is the most outrageous". (Stiglitz wrote, "Was Fischer being richly rewarded for having faithfully executed what he was told by the US government to do?")

Rogoff concluded: "Joe, you are a towering genius. Like your fellow Nobel Prize winner, John Nash, you have a 'beautiful mind'. As a policy-maker, however, you were just a bit less impressive." When a member of the audience accused Rogoff of an inappropriate personal attack, World Bank officials applauded.

This week Stiglitz is continuing to preach his anti-IMF message in the pages of newspapers in the UK, where he is currently promoting his book. The IMF made two disastrous mistakes in the 1990s, he told the Guardian: the first was making IMF loans conditional on fragile economies opening up their financial sectors, which allowed destructive speculative capital flows; the second was to demand public spending cut-backs and high interest rates, intensifying the recession and the pain.

He accused the IMF of making the same mistake with Argentina today. In the London Times Stiglitz said that instead of getting to debate the issues at the Washington event, he had been subjected to character assassination in Rogoff's surprise attack.

Rogoff, also a distinguished economist, did have substantial things to say about IMF policy in his assault on Stiglitz's reputation. The IMF has moved some distance in reforming its policy prescriptions under the weight of worldwide protest against a global financial system that is massively unfair. But personal abuse is always remembered. The serious bits get overlooked.

One of Stiglitz's chief criticisms of the IMF when he resigned was that when he tried to debate issues with the people across the street, he was always rebuffed. Apparently that hasn't changed much.