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International Herald Tribune
World Bank Dissenter Sticks to His Guns. On Eve of Davos
Forum, Departing Official Chides Russia and IMF. By Alan Friedman,
International Herald Tribune, Paris, Thursday, January 27, 2000
ROME - The outgoing chief economist of the World Bank has not relented from his criticism of the international financial community, which he accuses of excluding poor countries from the decision-making process.
The economist, Joseph Stiglitz, also restated his disapproval of Russia's privatization program, saying the system encourages ''asset stripping'' that has seen ''billions and billions of dollars'' taken out of the country.
Mr. Stiglitz, who announced his resignation unexpectedly late last year after a string of public statements at odds with both the International Monetary Fund and the economic policies of the Clinton administration, spoke by telephone to the International Herald Tribune as he was preparing to attend the annual meetings of the World Economic Forum in Davos, Switzerland.
The Davos gathering, scheduled to begin Thursday, is to be his last public appearance as a World Bank official before leaving his post Feb. 1.
The world's poor countries, Mr. Stiglitz said, are being denied a seat at the table where key international economic decisions are made even if those decisions hurt them.
As for Russia, Mr. Stiglitz said that privatization had gone ahead without a sufficient legal framework. As a result, he said, ''rather than providing incentives for wealth creation, there have been incentives for asset stripping.''
''Providing free capital mobility,'' he said, ''has been an open invitation for people to take out billions, in fact billions and billions, of dollars out of the country.''
Asked why he was leaving the World Bank, Mr. Stiglitz, 56, said that he believed he could make ''a more effective contribution'' from a position outside the bank. In an interview with The New York Times late last year, Mr. Stiglitz said that he wished to speak out publicly on a variety of issues and felt he could not do so from inside the bank. ''Rather than muzzle myself, or be muzzled, I decided to leave,'' Mr. Stiglitz said at the time.
In the interview with the International Herald Tribune, Mr. Stiglitz cited in particular his concern about whether the interests of poor countries had been ''adequately represented in a lot of the international fora.''
Commenting on the way the IMF and other institutions handled the Asian financial crisis of 1997-1998, Mr. Stiglitz said that ''decisions were made in the last crisis that really adversely affected working people, small businesses.''
He said that many people were thrown out of jobs ''even though it was international financial markets that were at the root of the problem.''
''It was small businesses that faced interest rates that put them into bankruptcy, in some countries more than 50 percent of the firms being put into bankruptcy,'' Mr. Stiglitz said. ''Yet these people whose interests were vitally at stake did not have a seat at the table when those important decisions were made.''
Mr. Stiglitz said that one of the challenges for the international financial community was ''to establish a framework in which economic policies are made which affect everybody,'' and to make sure that all those affected ''can have a voice in those policies.''
The willingness of Mr. Stiglitz to criticize financial markets, and to even suggest that limited government intervention could be positive, puts him at odds with the Washington policy consensus led by the IMF and the Treasury.
Despite his decision to leave the World Bank, Mr. Stiglitz maintains cordial relations with James Wolfensohn, the World Bank president. Mr. Wolfensohn is widely regarded as a champion of the poor, but he has couched his views in more diplomatic terms than those used by his outspoken chief economist.
Mr. Stiglitz said that he would spend a few months at the Brookings Institution, a Washington research group favored by former Democratic officials, before returning in the autumn to Stanford University. He took leave from Stanford seven years ago to serve as chairman of President Bill Clinton's Council of Economic Advisers, a post he held for four years before moving to the World Bank in 1997.
Explaining his concerns about Russia, Mr. Stiglitz said the West assumed that a rules-based legal and financial infrastructure would emerge ''spontaneously'' and ''that all we needed to do was privatize.''
But he said that ''privatization by itself has not been a guarantee for success.'' Rather than becoming wealthier, he said, Russia has become poorer.
Mr. Stiglitz is clearly unrepentant for his outspokenness, even though some of his comments about Russia were criticized by Mr. Wolfensohn last year as being ''not wholly correct.''