| Stiglitz: New Ideas (AFP)
New York, Oct. 19: As the chief economist of the World Bank in the late 1990s, Joseph E. Stiglitz got a firsthand look at how policy was made at its sister institution, the International Monetary Fund, and he was dismayed. Decisions, he said, were made on the basis of ideology rather than sound economic reasoning.
The fund was made up of “third-rank students from first-rate universities,” as he once put it. Frank discussion was discouraged, and developing countries were expected to accept fund prescriptions without question. And those prescriptions too often failed, leaving many nations sunk in poverty.
The experience convinced Stiglitz of the need to reassess the ingredients of growth. As he wrote this year in ‘Globalisation and Its Discontents’, “If the developed countries were serious about paying more attention to the voices of the developing countries, they could help fund a think tank — independent from the international economic organisations — that would help them formulate strategies and positions.”
Now Stiglitz himself has set up such an institute. The Initiative for Policy Dialogue is at Columbia University’s School for International and Public Affairs, where Stiglitz is a professor. It is bringing together economists, political scientists and policy analysts from around the world to re-examine the prevailing wisdom about development and to come up with alternative strategies.
“There’s not a Brookings or an American Enterprise Institute for the developing world,” said Stiglitz, co-winner of the 2001 Nobel Memorial Prize in Economic Science.
It’s an ambitious and controversial undertaking. Stiglitz is the IMF’s most visible critic, and the fund has made little secret of its disdain for him. In a biting open letter posted on its web site (www.imf.org), Kenneth Rogoff, the fund’s director of research, calls Stiglitz’s ideas about development “at best highly controversial, at worst snake oil.” His “alternative medicines, involving ever more government intervention, are highly dubious in many real world settings.”
Undeterred, Stiglitz is taking aim at the so-called Washington consensus, a package of free-market, free-trade policies that, critics charge, the IMF and World Bank have imposed on Third World nations. “We disagree with the World Bank-IMF idea that there’s one approach that’s right for all countries,” Stiglitz said. Rather, he said, there is a range of policies that must be selected based on conditions in each country.
Stiglitz’s effort to rewrite the textbook on development is being conducted through 14 task forces that are re-evaluating such critical issues as bankruptcy, poverty, privatisation and trade.