This article from NYTimes.com An Ivory Tower Embrace of Views in the Streets June 9, 2002 By ALAN COWELL For several years now, a fractious debate about the role of the big financial institutions in the globalized economy has encircled the world's policy makers, moving from the initial grumblings of the often-unheeded developing world through the street protests of Seattle and elsewhere and on to a much broader agenda. With "Globalization and Its Discontents" (W. W. Norton, $24.95), Joseph E. Stiglitz, a Nobel laureate in economic science in 2001, has taken the discussion a step further. He shows just how much the protesters' misgivings about and outright hostility toward some of those institutions have moved from the fringes into influential, mainstream thinking. Professor Stiglitz, a former top economic adviser in the Clinton administration and chief economist at the World Bank, is now an economics professor at Columbia. He has long been associated, of course, with the economics of growth and development in the third world. With this accessible, provocative and highly readable study, he brings an insider's insights into the crises of the 1990's and beyond, from East Asia to Russia and on to Argentina. His central thesis is simple - that the "market fundamentalism" of the International Monetary Fund, with its insistence that markets themselves will achieve a balance between supply and demand, furthering growth and development, is fundamentally flawed. The I.M.F.'s prescriptions in times of economic crisis, he writes, have caused far more human suffering than they have resolved economic problems. Globalization has been badly managed, he contends, colliding head-on with some of the nostrums of the I.M.F. and what is sometimes called the Washington Consensus. Those include the idea that poverty is eased by the trickle-down effect of prosperity for the elite and that governments should not get in the way of the markets. He goes further, embracing ideas once thought the exclusive preserve of the street protesters: the I.M.F. and the United States Treasury Department, he contends, pursue the interests of the big investment banks rather than the poor most directly affected by their macroeconomic solutions to crises like those in East Asia and Russia. Indeed, those interests seem intertwined in the very personalities who exerted such enormous influence as globalization emerged as the dominant force of the 1990's. After all, he says, did not Robert E. Rubin, the former United States Treasury secretary, hail from Goldman, Sachs and move on to Citigroup after his spell in Washington? Did not Stanley Fischer, the former No. 2 executive at the I.M.F., go directly from that job to a well-paid position at Citigroup? "One could only ask: Was Fischer being richly rewarded for having faithfully executed what he was told to do?" Professor Stiglitz writes. The World Trade Organization, too, Professor Stiglitz asserts, promotes the interests of the developed world. The developing world, he says, still labors under unfair rules that restrict access to richer nations that preach trade liberalization but keep their own markets closed. That is a hypocrisy, he says, that extends to the readiness of the global institutions to bail out their "client" states, differentiating between the strategically significant and the rest. "The I.M.F. is a political institution," he writes, saying the fund was ready to ignore runaway corruption in Russia to rescue Boris N. Yeltsin while suspending aid to Kenya on grounds of corruption. Of course, it would be disingenuous to ignore Professor Stiglitz's own background as chief economist at the World Bank for almost three years, from 1997 to early 2000. In this study, the bank is spared the searing indictment that Professor Stiglitz reserves for the I.M.F. Yet the two are sister organizations, set up together after World War II. And much as he inveighs against what he calls the I.M.F.'s hard-nosed approach to economic crisis, the World Bank itself withholds loans to developing countries that fail to secure the I.M.F.'s imprimatur on their economic performance. To that extent, the World Bank itself creates part of the pressure, particularly on developing countries, to accept those same I.M.F. prescriptions that Professor Stiglitz finds so distasteful. Often enough, however, officials of the two institutions behave more as rivals than as colleagues. Not surprisingly, part of the book's purpose seems to be an attempt to ensure that events during his World Bank tenure do not besmirch his own reputation. In the process, one suspects that some score-settling may well be in play. Significantly, though, Professor Stiglitz dismisses any illusion that the protesters on the streets of Prague, Seattle or Genoa were some kind of lunatic fringe whose arguments will disappear easily. "For decades the cries of the poor in Africa and in developing countries in other parts of the world have been largely unheard in the West," he writes, and it was only the street protesters "who have put the need for reform on the agenda of the developed world." Once the issue is on the agenda, of course, the discussion moves on to reform issues that have absorbed some strategic thinkers since the late 1990's. Part of his message reflects his argument that the global financial institutions have drifted away from the Keynesian principles on which they were founded. The I.M.F.'s "market fundamentalism" - placing much faith in freewheeling markets - has not worked, he contends, as much as the economic policies of nations like Malaysia, where government intervention provided protection from the worst of the East Asia crisis. The countries that have benefited most from globalization, he writes, "have been those that took charge of their own destiny and recognized the role government can play in development rather than relying on the notion of a self-regulating market that would fix its own problems." Equally, though, he says that far greater openness and democratic responsiveness are long overdue, both in the governments of developing countries and in the secretive global institutions where decisions are routinely made in private. Ý S much as anything else, Professor Stiglitz says, all countries should have a clear picture of what development is supposed to achieve. "It is not about bringing in Prada and Benetton, Ralph Lauren or Louis Vuitton for the urban rich, leaving the rural poor in their misery," he says. Development, he says, "is about transforming societies, improving the lives of the poor, enabling everyone to have a chance at success and access to health care and education." Judged from that viewpoint, the record of globalization has been patchy to date. And, Professor Stiglitz says, "if globalization continues to be conducted in the way that it has been in the past, if we continue to fail to learn from our mistakes, globalization will not only not succeed in promoting development but will continue to create poverty and instability." Ý
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