The
August 15,
2002
Norton, 282
pp., $24.95
The most pressing economic problem of our
time is that so many of what we usually call "developing economies" are, in fact, not developing. It is shocking to most
citizens of the industrialized Western democracies to realize that in
What is more troubling still, however, is
to realize that many if not most of the world's poorest countries,
where very low incomes and incompetent governments combine to create such
appalling human tragedy, are making no progress—at least not on the economic
front. Of the fifty countries where per capita incomes were lowest in 1990 (on
average, just $1,450 per annum in today's US dollars, even after we allow for
the huge differences in the cost of living in those countries and in the US),
twenty-three had lower average incomes in 1999 than they did in 1990. And of
the twenty-seven that managed to achieve at least some positive growth, the
average rate of increase was only 2.7 percent per annum. At that rate it will
take them another seventy-nine years to reach the income level now enjoyed by
This sorry situation stands in sharp
contrast to the buoyant optimism, both economic and political, of the early
postwar period. The economic historian Alexander Gerschenkron's
classic essay "Economic Backwardness in Historical Perspective"
suggested that countries that were far behind the technological frontier of
their day enjoyed a great advantage: they could simply imitate what had already
proved successful elsewhere, without having to assume either the costs or the
risks of innovating on their own. The economist and demographer Simon Kuznets, who went on to win a Nobel Prize, observed that
economic inequalities often widen when a country first begins to industrialize,
but argued that they then narrow again as development proceeds. Albert
Hirschman, an economist and social thinker, put forward the hypothesis that,
for a while, at the beginning of a country's economic development, the
tolerance of its citizens for inequality increases, so that the temporary widening
that troubled Kuznets need not be an insuperable
obstacle. Throughout the countries that had been colonies of the great European
empires, the view of the departing powers was that the newly installed
democratic institutions and forms they were leaving behind would follow the
path of the Western democracies. Political alliances, like the myriad regional
pacts established during the Eisenhower-Dulles era (SEATO, CENTO, and all the
others), would help cement these gains in place.
Not surprisingly, the contrast between
that earlier heady optimism and today's grimmer reality has led to a serious
(and increasingly acrimonious) debate over two closely related questions. What,
in retrospect, has caused the failure of so many countries to achieve the
advances confidently predicted for them a generation ago? And what should they,
and those abroad who sympathize with their plight and seek to help, do now?
Perhaps not since
the worldwide depression of the 1930s have so many thinkers attacked a problem
from such different perspectives: Have the non-developing economies (to call
them that) pursued the wrong domestic policies? Or have they been innocent
victims of exploitation by the industrialized world? Is it futile to try to
foster economic development without an appropriate social and political
infrastructure, including what has come to be called the "rule of
law" and perhaps also including political democracy as well? Or do these
favorable institutional creations follow only after a sustained improvement in
material standards of living is already underway? Would more foreign aid help?
Or does direct assistance from abroad only create parallels on a national scale
to the "welfare dependency" sometimes alleged in the
One important concrete expression of the
optimism with which thinking in the industrialized world addressed the
challenge of economic development a generation and more ago, before these
painful questions became prominent, was the creation of new multinational
institutions to further various aspects of the broader development goal. The
United Nations spawned a family of sub-units to this end, most prominently the
UN Development Program and the UN Conference on Trade and Development. The Food
and Agriculture Organization (founded in 1945, but separately from the UN) and
the World Health Organization (1948) had more specific mandates. The
International Bank for Reconstruction and Development (commonly called the
World Bank), established in 1944 mostly to help rebuild war-torn
The International Monetary Fund (the IMF,
or sometimes just the Fund) was a latecomer to the development field.
Established in tandem with the World Bank in 1944, the IMF's
original mission was to preserve stability in international financial markets
by helping countries both to make economic adjustments when they encountered an
imbalance of international payments and to maintain the value of their currency
in what everyone assumed would be a permanent regime of fixed exchange rates.
By the early 1970s, however, the fixed
exchange rate system proved untenable, and floating
rates of one kind or another became the norm. Moreover, as the Western European
economies gained strength while, at the same time, more and more developing
countries entered the international trading and financial economy, it was
increasingly the developing countries that ran into balance of payments
problems or difficulties over their currencies and therefore turned to the IMF
for assistance. As a result, over time the IMF became increasingly involved in
the business of economic development. And as development has faltered in many
countries—including many in which the IMF has played a significant part—the IMF's policies and actions have increasingly moved to the
center of an ongoing, intense debate over who or what to blame for the failures
of the past and what to do differently in the future.
Joseph E. Stiglitz, in Globalization
and Its Discontents, offers his views both of what has gone wrong and of
what to do differently. But the main focus of his book is who to blame.
According to Stiglitz, the story of failed development does have a villain, and
the villain is truly detestable: the villain is the IMF.
Joseph Stiglitz is a Nobel Prize–winning
economist, and he deserves to be. Over a long career, he has made incisive and
highly valued contributions to the explanation of an astonishingly broad range
of economic phenomena, including taxes, interest rates, consumer behavior,
corporate finance, and much else. Especially among economists who are still of
active working age, he ranks as a titan of the field. In recent years Stiglitz
has also been an active participant in economic policymaking, first as a member
and then as chairman of the US Council of Economic Advisers (in the
In Globalization and Its Discontents Stiglitz
bases his argument for different economic policies squarely on the themes that
his decades of theoretical work have emphasized: namely, what happens when
people lack the key information that bears on the decisions they have to make,
or when markets for important kinds of transactions are inadequate or don't
exist, or when other institutions that standard economic thinking takes for
granted are absent or flawed.
The implication of each of these absences
or flaws is that free markets, left to their own devices, do not necessarily
deliver the positive outcomes claimed for them by textbook economic reasoning
that assumes that people have full information, can trade in complete and
efficient markets, and can depend on satisfactory legal and other institutions.
As Stiglitz nicely puts the point, "Recent advances in economic
theory"—he is in part referring to his own work—"have shown that
whenever information is imperfect and markets incomplete, which is to say
always, and especially in developing countries, then the invisible hand
works most imperfectly."
As a result, Stiglitz continues,
governments can improve the outcome by well-chosen interventions. (Whether any
given government will actually choose its interventions well is another
matter.) At the level of national economies, when families and firms seek to
buy too little compared to what the economy can produce, governments can fight
recessions and depressions by using expansionary monetary and fiscal policies
to spur the demand for goods and services. At the microeconomic level,
governments can regulate banks and other financial institutions to keep them
sound. They can also use tax policy to steer investment into more productive
industries and trade policies to allow new industries to mature to the point at
which they can survive foreign competition. And governments can use a variety
of devices, ranging from job creation to manpower training to welfare
assistance, to put unemployed labor back to work and, at the same time, cushion
the human hardship deriving from what— importantly, according to the theory of
incomplete information, or markets, or institutions—is no one's fault.
Stiglitz complains that the IMF has done
great damage through the economic policies it has prescribed that countries must
follow in order to qualify for IMF loans, or for loans from banks and other
private-sector lenders that look to the IMF to indicate whether a borrower is
creditworthy. The organization and its officials, he argues, have ignored the
implications of incomplete information, inadequate markets, and unworkable
institutions—all of which are especially characteristic of newly developing
countries. As a result, Stiglitz argues, time and again the IMF has called for
policies that conform to textbook economics but do not make sense for the
countries to which the IMF is recommending them. Stiglitz seeks to show that
the consequences of these misguided policies have been disastrous, not just
according to abstract statistical measures but in real human suffering, in the
countries that have followed them.
Most of the
specific policies that Stiglitz criticizes will be familiar to anyone who has
paid even modest attention to the recent economic turmoil in the developing
world (which for this purpose includes the former
Fiscal austerity. The most traditional and perhaps best-known IMF policy
recommendation is for a country to cut government spending or raise taxes, or
both, to balance its budget and eliminate the need for government borrowing.
The usual underlying presumption is that much government spending is wasteful
anyway. Stiglitz charges that the IMF has reverted to Herbert Hoover's
economics in imposing these policies on countries during deep recessions, when
the deficit is mostly the result of an induced decline in revenues; he argues
that cuts in spending or tax hikes only make the downturn worse. He also
emphasizes the social cost of cutting back on various kinds of government
programs—for example, eliminating food subsidies for the poor, which
High interest rates. Many countries come to the IMF because they are having trouble
maintaining the exchange value of their currencies. A standard IMF
recommendation is high interest rates, which make deposits and other assets
denominated in the currency more attractive to hold. Rapidly increasing
prices—sometimes at the hyperinflation level—are also a familiar problem in the
developing world, and tight monetary policy, implemented mostly through high
interest rates, is again the standard corrective. Stiglitz argues that the high
interest rates imposed on many countries by the IMF have worsened their
economic downturns. They are intended to fight inflation that was not a serious
problem to begin with; and they have forced the bankruptcy of countless
otherwise productive companies that could not meet the suddenly increased cost
of servicing their debts.
Trade liberalization. Everyone favors free trade—except many of the people who
make things and sell them. Eliminating tariffs, quotas, subsidies, and other
barriers to free trade usually has little to do directly with what has driven a
country to seek an IMF loan; but the IMF usually recommends (in effect,
requires) eliminating such barriers as a condition for receiving credit. The
argument is the usual one, that in the long run free trade practiced by
everyone benefits everyone: each country will arrive at the mixture of products
that it can sell competitively by using its resources and skills efficiently.
Stiglitz points out that today's industrialized countries did not practice free
trade when they were first developing, and that even today they do so highly
imperfectly. (Witness this year's increase in agricultural subsidies and new
barriers to steel imports in the
Liberalizing Capital
Markets. Many developing countries have weak
banking systems and few opportunities for their citizens to save in other ways.
As one of the conditions for extending a loan, the IMF often requires that the
country's financial markets be open to participation by foreign-owned
institutions. The rationale is that foreign banks are sounder, and that they
and other foreign investment firms will do a better job of mobilizing and
allocating the country's savings. Stiglitz argues that the larger and more
efficient foreign banks drive the local banks out of business; that the foreign
institutions are much less interested in lending to the country's domestically
owned businesses (except to the very largest of them); and that mobilizing
savings is not a problem because many developing countries have the highest
savings rates in the world anyway.
Privatization. Selling off government- owned enterprises—telephone
companies, railroads, steel producers, and many more—has been a major
initiative of the last two decades both in industrialized countries and in some
parts of the developing world. One reason for doing so is the expectation that
private management will do a better job of running these activities. Another is
that many of these public companies should not be running at all, and only the
government's desire to provide welfare disguised as jobs, or worse yet the
opportunity for graft, keeps them going. Especially when countries that come to
the IMF have a budget deficit, a standard recommendation nowadays is to sell
public-sector companies to private investors.
Stiglitz argues that many of these
countries do not yet have financial systems capable of handling such
transactions, or regulatory systems capable of preventing harmful behavior once
the firms are privatized, or systems of corporate governance capable of
monitoring the new managements. Especially in
Fear of default. A top priority of IMF policy, from the
very beginning, has been to maintain wherever possible the fiction that
countries do not default on their debts. As a formal matter, the IMF always
gets repaid. And when banks can't collect what they're owed, they typically
accept a "voluntary" restructuring of the country's debt. The problem
with all this, Stiglitz argues, is that the new credit that the IMF extends, in
order to avoid the appearance of default, often serves only to take off the
hook the banks and other private lenders that have accepted high risk in
exchange for a high return for lending to these countries in the first place.
They want, he writes, to be rescued from the consequences of their own reckless
credit policies. Stiglitz also argues that the end result is to saddle a
developing country's taxpayers with the permanent burden of paying interest and
principal on the new debts that pay off yesterday's mistakes.
Stiglitz's
indictment of the IMF and its policies is more than just an itemized bill of
particulars. His theme is that there is a coherence to
this set of individual policies, that the failings of which he accuses the IMF
are not just random mistakes. In his view these policies—what he labels the
"
First, Stiglitz repeatedly claims that
the IMF's policies stem not from economic analysis
and observation but from ideology—specifically, an ideological commitment to
free markets and a concomitant antipathy to government. Again and again he
accuses IMF officials of deliberately ignoring the "facts on the
ground" in the countries to which they were offering recommendations. In
part his complaint is that they did not understand, or at least did not take
into account, his and other economists' theoretical work showing that
unfettered markets do not necessarily deliver positive results when information
or market structures or institutional infrastructure are incomplete.
More specifically, he argues that the IMF
ignores the need for proper "sequencing." Liberalizing a country's
trade makes sense when its industries have matured sufficiently to reach a
competitive level, but not before. Privatizing government-owned firms makes
sense when adequate regulatory systems and corporate governance laws are in
place, but not before. The IMF, he argues, deliberately ignores such factors,
instead adopting a "cookie cutter" approach in which one set of
policies is right for all countries regardless of their individual
circumstances. But importantly, in his eyes, the underlying motivation is
ideological: a belief in the superiority of free markets that he sees as, in
effect, a form of religion, impervious to either counterarguments or
counterevidence.
A further implication of this belief in
the efficacy of free markets, according to Stiglitz, is that the IMF has
abandoned its original Keynesian mission of helping countries to maintain full
employment while they make the adjustments they need in their balances of
payments; instead the IMF recommends policies that result in steeper downturns
and more widespread joblessness. He does not argue, of course, that the IMF
prefers serious recessions or unemployment per se. Rather it simply acts on the
belief—seriously mistaken in his view—that allowing free markets to do their
work will automatically take care of such problems. By extension, he argues,
the IMF also does not act to promote economic growth (which helps to produce
full employment). Again the claim is not that the IMF dislikes growth per se,
but that it believes free markets are all that is needed to make growth happen.
As a further consequence of the misguided
policies that follow from this "curious blend of ideology and bad
economics," Stiglitz argues, the IMF itself is responsible for
worsening—in some cases, for actually creating—the problems it claims to be
fighting. By making countries maintain overvalued exchange rates that everyone
knows will have to fall sooner or later, the IMF gives currency traders a
one-way bet and therefore encourages market speculation. By forcing countries
that are in trouble to slash their imports, the IMF encourages the contagion of
an economic downturn from one country to its neighbors. By making countries
adopt high interest rates that stifle investment and bankrupt companies, the
IMF encourages low confidence on the part of foreign lenders. At the same time,
by repeatedly coming to these lenders' rescue, the IMF encourages lax credit
standards.
Second, and more
darkly, the IMF, in Stiglitz's view, systematically acts in the interest of creditors, and of rich elites more generally, in preference
to that of workers, peasants, and other poor people. He sees it as no accident
that the IMF regularly provides money that goes to pay off loans made by banks
and bondholders who are eager to accept the high interest rates that go along
with assuming risk—while preaching the virtues of free markets as they do
so—although they are equally eager to be rescued by governments and the IMF
when risk turns into reality.
Stiglitz also thinks it is no coincidence
that food subsidies and other ways of cushioning the hardships suffered by the
poor are among the first programs that the IMF tells countries to cut when they
need to balance their budgets. He observes that IMF officials tend to meet only
with finance ministers and central bank governors, as well as with bankers and
investment bankers; they never meet with poor peasants or unemployed workers.
He also notes that many IMF officials come to the Fund from jobs in the private
financial sector, while others, after working at the IMF, go on to take jobs at
banks or other financial firms.
Here again Stiglitz's point is that the IMF's mistakes are not random but the systematic
consequence of its fundamental biases. His argument is as much about the
policies the IMF doesn't recommend as the ones it does:
Stabilization is on the agenda; job creation is off. Taxation, and its adverse effects, are on the agenda; land reform is off. There is money to bail out banks but not to pay for improved education and health services, let alone to bail out workers who are thrown out of their jobs as a result of the IMF's macroeconomic mismanagement.
One specific example, land reform,
sharply illustrates what he has in mind. As Stiglitz points out, in many
developing countries a small group of families own much of the cultivated land.
Agriculture is organized according to sharecropping, with tenant farmers
keeping perhaps half, or less, of what they produce. Stiglitz argues,
The sharecropping system weakens incentives—where they share equally with the landowners, the effects are the same as a 50 percent tax on poor farmers. The IMF rails against high tax rates that are imposed against the rich, pointing out how they destroy incentives, but nary a word is spoken about these hidden taxes.... Land reform represents a fundamental change in the structure of society, one that those in the elite that populates the finance ministries, those with whom the international finance institutions interact, do not necessarily like.
Stiglitz considers, and rejects, the view
that these and other choices are the result of a conspiracy between the IMF and
powerful interests in the richer countries—a view that is increasingly popular
among the anti-globalization protesters who now appear at the IMF's (and the World Bank's) meetings. Stiglitz's view is
that in recent decades the IMF "was not participating in a conspiracy, but
it was reflecting the interests and ideology of the Western financial
community."
Finally, Stiglitz sees the IMF's systematic biases as a reflection of a deeper moral
failing:
The lack of concern about the poor was not just a matter of views of markets and government, views that said that markets would take care of everything and government would only make matters worse; it was also a matter of values.... While misguidedly working to preserve what it saw as the sanctity of the credit contract, the IMF was willing to tear apart the even more important social contract.
Throughout the book, the sense of moral
outrage is evident.
Do Stiglitz's criticisms hold up?
To begin, it is easy enough to accuse
Stiglitz of selective memory. From reading Globalization and Its Discontents,
one would never know that the IMF had ever done anything useful. Or that
Stiglitz, and his colleagues first at the Council of Economic Advisers and then
at the World Bank, had ever gotten anything wrong. Or that those against whom
he often argued in the US government—especially at the Treasury, which he
continually portrays as complicit in the IMF's
misdeeds, but at the Federal Reserve System too—had ever gotten a question
right. (In the book's sole mention of Alan Greenspan, Stiglitz accuses him of
being excessively concerned with inflation to the exclusion of a vigorous
expansion that could have otherwise taken place in the
One can also disagree with Stiglitz over
the consequences of what the IMF plainly did, even including those policies it
pursued that most people now agree proved counterproductive. By 2002 the Asian
financial crisis of 1997–1998 is receding into the past. While some of the
affected countries (most obviously
A more fundamental problem, as Stiglitz
readily acknowledges, is that we cannot reliably know whether the consequences
of the IMF's policies were worse than whatever the
alternative would have been. Many longtime observers of the developing world
will notice that Stiglitz rarely mentions economic policy mistakes that poor
countries make on their own initiative. Nor does he pay much attention to the
large-scale corruption that is endemic in many developing economies—except in
the case of corruption in
It is surprising too, in light of his
emphasis on the absence of adequate regulation and supervision of financial
institutions in the developing world, that Stiglitz
does not make more of the mistakes made by private-sector businesses. For
example, what made
Defenders of the IMF cannot claim that
all went well after countries implemented the Fund's recommendations. But they
would presumably argue that events would have turned out even worse on some
alternative course. They would also presumably argue that of course they knew
that information was imperfect, and markets incomplete, and institutions
absent, in the countries that came to the IMF for assistance. The issue, to be
argued on a case-by-case basis, is just what different set of actions might
therefore have proved more beneficial.
Interestingly,
there is also disagreement today over just how prevalent dire poverty is in the
developing world —and, what is more important, whether poverty is increasing or
decreasing. Stiglitz echoes the standard view that the number of people around
the world living on less than $1 per day, or $2 per day, has been increasing in
recent years. By contrast, his own colleague in the Columbia Economics
Department, Xavier Sala-i-Martin, has recently
published a study arguing just the opposite.[3] Sala-i-Martin's point is that for purposes of assessing
whether someone is economically well off or miserable, what matters is not how
many US dollars the person's income could buy in the foreign exchange market
but what standard of living that income can support in the place where he or
she lives. Because the currency values established in foreign exchange markets
(and also the values that governments set officially for currencies for which
there is no market) often do not accurately reflect purchasing power, the
difference between the two measures of income is sometimes large.
In
Even if we allow for these differences in
the cost of living, the number of people in the world who live on the equivalent
of $1 per day, or $2 per day, is still depressingly large: according to Sala-i-Martin's estimate, nearly 300 million, and not quite
1 billion, respectively. But this is far below the 1.2 billion and 2.8 billion
figures that have become familiar in public discussion and are used by
Stiglitz. More important, Stiglitz follows the more familiar view in saying
that these totals are increasing, but Sala-i-Martin
estimates that they are declining despite the rapid growth in world population.
As a result, he finds, the proportion of people living on what amounts to $1
per day has fallen from 20 percent of the world's population a quarter-century
ago to just 5 percent today, while the $2-per-day poverty rate has fallen from
44 percent to 19 percent.
Much empirical research will have to be
done and much analytical debate will have to take place before anyone can
confidently decide which of these contrasting measurements is the more
accurate. But it is worth pointing out that the major source of the decline in
poverty over the last quarter-century, according to Sala-i-Martin's
calculation, is the dramatic reduction in poverty in China, the world's most
populous country—and Stiglitz, too, praises China's performance as one of the
developing world's great recent economic success stories. (In keeping with his
central theme, he argues that
Stiglitz's attack
on the IMF raises not just factual (and counterfactual) questions but
substantive issues as well, particularly his argument that the IMF acts on
behalf of banks and bondholders, and rich countries more generally,
and therefore against the interests of the poor. To what extent is the IMF
supposed to act as lending institutions ordinarily act? Stiglitz complains at
length, and with many specific cases to cite, that the IMF violates countries'
economic sovereignty when it requires them to carry out its policy
recommendations as a condition for its granting credit. But don't responsible
lenders normally impose such conditions on borrowers? Stiglitz never
acknowledges that today the IMF faces serious criticism from many economists
and politicians in the West on the ground that it makes loans with too few
conditions, so that the borrowing countries often simply end up wasting the
money.[5]
Or should the IMF think of itself not as
a lending institution, acting as responsible lenders normally do, but instead
as an institution charged solely with promoting the welfare of the borrowing
countries, with waste of some credits to be expected? Some parts of Stiglitz's
complaint are not so much about the IMF per se as about the absence of some
form of international authority capable of imposing on citizens who are already
relatively well off the burden of assisting their less fortunate fellow human
beings elsewhere.
To be sure, the world's rich countries
could simply agree among themselves to devote a much greater share of their own
incomes to foreign aid (a frequently suggested standard is 1 percent of GDP),
either out of a sense of moral obligation or in recognition that raising the
incomes of poor countries would create benefits spilling over to the
industrialized world as well. But in fact there is no such agreement. The
foreign aid that most rich countries give is shrinking compared to their GDP,
and the efficacy of such aid is increasingly being challenged anyway.
Even within countries with firmly
established democratic governments, there is always debate about how generous
such assistance should be and what form it should take. But a large part of
what troubles Stiglitz and many others who share his views of inequality among countries
is that there is not only no such agreement but also no effective
mechanism—what he calls "systems of global governance"—for even
choosing a policy in this important area and then making it stick. The earnest
desire in some quarters for a more formal approach to international
burden-sharing, together with the equally sincere resistance to the idea among
others, is nothing new. But it is worth recognizing explicitly that it is
central to the question of inequality.
Moreover, the matter at issue is deeper
than simply whether there should or should not be functioning institutions
empowered to act, in effect, as a world government. What obligations the
citizens of one country owe to citizens of another is a question that goes to
the heart of what is involved in being a nation-state and in acting as a
responsible human being. Is it morally legitimate for US citizens to pay taxes
to provide fellow Americans with a minimum standard of health care under
Medicaid, or a minimum standard of nutrition through food stamps, that is far
above what the average Angolan receives—and not at the same time be willing to
pay the costs of bringing Angola, and the rest of the world's low-income
countries, up to that standard? Most Americans will readily answer yes. But as
philosophers like John Rawls and Thomas Pogge have
argued, wholly apart from the practical benefits that we might gain from
alleviating human misery abroad, justifying in moral terms why we owe more to
strangers who are close at hand than we owe to strangers who are far away turns
out to be complicated and, in the end, extremely difficult.
Many of the more
practical economic elements of Stiglitz's argument are also issues of long
standing. He makes a strong case for policies that favor gradualism over
"shock therapy"; that put the emphasis not on what developing
countries have in common but on how each is different; that place the concerns
of the poor above those of creditors; that give maintaining full employment a
higher priority than reducing inflation (at least when inflation is less than
20 percent a year); and that fight poverty and promote economic growth
directly, rather than merely establish conditions under which economies will be
likely to grow, and poverty to decline, on their own. There is serious debate
over each element in this program. Stiglitz provides a powerful logical case,
together with much by way of both broad-based evidence and firsthand specifics,
to support his side on each of these issues. But his objective is not to give a
balanced assessment of the debate.
Stiglitz has presented, as effectively as
it is possible to imagine anyone making it, his side of the argument, including
the substantive case for the kind of economic development policies he favors as
well as his more specific indictment of what the IMF has done and why. His book
stands as a challenge. It is now important that someone else—if possible,
someone who thinks and writes as clearly as Stiglitz does, and who understands
the underlying economic theory as well as he does, and who has a firsthand
command of the facts of recent experience comparable to his—take up this
challenge by writing the best possible book laying out the other sides of the
argument. What is needed is not just an attempt to answer Stiglitz's specific
criticisms of the IMF but a book setting out the substantive case both for the
specific policies and also for the general policy approach that the IMF has
advocated.
Who might write such a book? The most
obvious candidate is the former MIT economist Stanley Fischer, who throughout
the years that Stiglitz's analysis covers was the IMF's
first deputy managing director—that is, the Fund's second-highest ranking
official, but for most observers, the person who, far more than anyone else,
actually set the direction of the organization's policies. Another is my
Harvard colleague (now president of the university) Lawrence Summers, who
served as the
[1] Data from the 1999/2000 World
Development Report, Table 2.
[2] These are my calculations based on data
in the 2001 World Development Indicators; 1999 is the latest year for which
full data are available. Some countries that are presumably poor enough to be
in the "lowest-income fifty"—for example,
[3] "The Disturbing 'Rise' of Global
Income Inequality," National Bureau of Economic Research Working Paper No.
w8904, April 2002.
[4] Data from the 2002 World Development
Report, Table 1.
[5] Surprisingly, Stiglitz is not consistent
in his own treatment of the question of what conditions are appropriate for
loans. He repeatedly castigates the IMF for imposing its officials' views over
those of government officials in debtor countries. But he boasts about how the
World Bank, where he worked, forced