On Meeting Joseph Stiglitz
November 3, 2006
Not only does Joseph Stiglitz have wonderful ideas, he is also a great guy.
In addition to winning the 2001 Nobel Prize in Economics, Stiglitz also chaired President Clinton’s Council of Economic Advisers and was the World Bank’s senior vice president and chief economist. So when Matt Rothschild and I went to receive him at the airport here in Madison on November 1 to snag him for The Progressive’s radio show (he was in town to speak at the university), we were expecting someone who would be at least a bit full of himself. But our fears were instantly allayed when the recognizable, bearded person (shorter than I thought)
walked toward us with a twinkle in his eye and a smile on his face.
In the brief ride from the airport to our office, he peppered us with questions about Madison, The Progressive, and the implications of the Military Commissions Act. He also recounted for us with wry humor the experience of attending the 90th birthday party of Bernard Lewis, Dick Cheney’s favorite historian on the Middle East and a leading proponent of the Iraq War.
Stiglitz is a heretic. While at the World Bank, he castigated the policies of its sister institution, the IMF, as being biased against the developing world and, indeed, being controlled by Wall Street. After he was forced to resign by the U.S. Treasury Department as the chief economist and while he was still with the World Bank as a “special advisor,” he wrote an article in The New Republic in April 2000 excoriating the IMF.
The article began: “Next week's meeting of the International Monetary Fund will bring to Washington, D.C., many of the same demonstrators who trashed the World Trade Organization in Seattle last fall. They'll say the IMF is arrogant. They'll say the IMF doesn't really listen to the developing countries it is supposed to help. They'll say the IMF is secretive and insulated from democratic accountability. They'll say the IMF's economic 'remedies' often make things worse—turning slowdowns into recessions and recessions into depressions. And they'll have a point. I was chief economist at the World Bank from 1996 until last November, during the gravest global economic crisis in a half-century. I saw how the IMF, in tandem with the U.S. Treasury Department, responded. And I was appalled.”
Wow! Not surprisingly, the piece generated a lot of controversy. U.S. Treasury Secretary Lawrence Summers reportedly offered World Bank President James Wolfensohn a choice: It’s either Stiglitz’s head or yours. Stiglitz was swiftly ejected.
When asked about this in a Progressive interview shortly after his forced departure, Stiglitz was cryptic.
“I heard the same rumors,” he remarked. “I have no way of knowing. In an article in the Financial Times when I left, somebody observed that these guys are smart enough that they wouldn't leave fingerprints.”
In two books on globalization, the most recent one of which (“Making Globalization Work”) has just appeared, Stiglitz has elaborated on his views about the IMF, sometimes being quite blunt in his language.
The IMF has changed its mandate “from serving global economic interests to serving the interests of global finance,” Stiglitz writes in “Globalization and Its Discontents.” “Capital market liberalization may not have contributed too global economic stability, but it did open up vast new markets for Wall Street.”
He also states that “the IMF and other international economic institutions” . . . “are dominated not just by the wealthiest industrial countries but by commercial and financial interests in those countries, and the policies of the international financial institutions naturally reflect this.”
Stiglitz was the first person from such a vaunted perch to confirm this theory that progressive critics have had about the global financial institutions for years.
In “Making Globalization Work,” Stiglitz sets out to rescue the global economic system and make it perform fairly for developing countries. He has founded the Initiative for Policy Dialogue to assist developing countries in seeking alternatives to the awful policies imposed upon them by the IMF and the World Bank.
Stiglitz’s work is not above criticism. First, he is too soft on his former employer, the World Bank, perhaps due to a misplaced sense of loyalty. Second, on the debate between reforming the global financial institutions and getting rid of them, he comes out squarely for the former, a position that may seem weak to some people. But his critique is invaluable, coming from such a privileged position.
Stiglitz, who now teaches at Columbia, has done some other important research in the recent past, too, albeit in a different direction. He has prepared an estimate of the cost of the Iraq War: an astounding figure of between $1 trillion and $2 trillion.
“Even taking a conservative approach,” Stiglitz and his co-author Linda Bilmes wrote in the January 2006 study, “we can state, with some degree of confidence, that [the costs] exceed a trillion dollars.”
“Americans could, and should have asked, are there ways of spending that money that would have enhanced our long run well being–and perhaps even our security–more,” the authors say, and then go on to give a useful number of ways—from strengthening social security to enhancing foreign aid—in which this could have been done.
Incidentally, Stiglitz told Matt Rothschild that the $1 trillion-$2 trillion figure should be revised now, since the costs have gone up faster than he had predicted. He now says $3 trillion is probably a more accurate price tag.
All the good work that Stiglitz has done and the accolades he has earned don’t seem to have gone to his head, though, as my encounter with him demonstrated. Who says that fame necessarily makes you arrogant?