Pavel,

A commentary on IMF policy with respect to Russia and other countries.
Stiglitz is a very bright person and I agree completely with
his points. Privately, he is even more outspoken.

Vince


---------------------- Forwarded by Vince J Kaminski/HOU/ECT on 12/17/99 
03:08 PM ---------------------------


VKaminski@aol.com on 12/12/99 11:41:09 AM
To: Vince J Kaminski/HOU/ECT@ECT
cc:  
Subject: (no subject)



 W ASHINGTON -- Joseph E. Stiglitz said Wednesday that he would
     resign as the World Bank's chief economist after using the position
     for nearly three years to raise pointed questions about the
     effectiveness of conventional approaches to helping poor countries.

     Stiglitz, who joined the World Bank in February 1997 after serving
     as chairman of President Clinton's Council of Economic Advisers,
     said he would leave the bank at the end of the year and would soon
     return to his academic post at Stanford University.

     His departure will remove from Washington perhaps the most
     outspoken voice in the debate over how rich countries can best aid
     economic development in poor and crisis-afflicted nations. Over the
     last two years in particular, Stiglitz had antagonized officials at
     the International Monetary Fund and within the Clinton
     administration by criticizing their response to the financial
     crisis in Asia and their strategy for encouraging the development
     of democratic capitalism in Eastern Europe and the former Soviet
     Union.

     Stiglitz said the decision to leave had been his. Treasury
     Secretary Lawrence Summers praised Stiglitz as a "major creative
     and intellectual force," and administration officials said the
     United States had not sought Stiglitz's removal. Caroline Anstey, a
     spokeswoman for the World Bank, said Stiglitz had "absolutely not"
     been forced out, and the bank's president, James D. Wolfensohn,
     praised Stiglitz for having helped to move the institution "away
     from the so-called Washington consensus."

     But Wolfensohn has suggested in the past that Stiglitz was too
     quick to second-guess the international aid agencies and the big
     industrial nations that control them. "I think that his recent
     things about Russia, in my judgment, are not wholly correct,"
     Wolfensohn said during the bank's annual meeting this autumn. "I
     think to stand back later and say, 'If you'd done it my way
     everything would have been different,' is a little generous to
     yourself."

     Stiglitz made no secret Wednesday of feeling constrained in his
     ability to speak out as freely as he wished. He said he was looking
     forward to the unfettered freedom of expression afforded by his
     return to the academic world.

     "Whenever you're in an organization there are some pressures,"
     Stiglitz said in an interview. "I felt that it was important for my
     intellectual integrity to be able to express myself as forcefully
     as I thought was appropriate."

     A liberal with a strong belief that governments and institutions
     have a significant role to play in economic development and that
     market forces cannot be counted on to deal with every problem,
     Stiglitz challenged the prevailing orthodoxy among policy makers in
     Washington.

     He said that the monetary fund went overboard in Asia in demanding
     that the countries ensnared in the financial crisis cut their
     budgets, arguing that fiscal austerity sometimes extracted too high
     a price from poor people without generating a corresponding
     improvement in international economic confidence.

     He took issue with the view held by the fund and the U.S.
     government that controls on the international flow of capital were
     counterproductive or impractical, saying that in some cases it was
     justified to restrict short-term flows of money in and out of a
     developing economy. He said industrialized countries sometimes
     pushed developing nations too fast to deregulate their financial
     systems.

     He suggested that the United States and the monetary fund had
     failed to acknowledge that their prescription for Russia -- quick
     privatization of state-owned industries, an end to state oversight
     of the economy, abolition of price controls and an opening up to
     the rest of the world -- had not produced the intended results and
     indeed had left many people worse off.

     "Stiglitz has been a very strong advocate for the poor and the
     excluded, and he's been one of the best things in the World Bank in
     the last decade," said Seth Amgott, a spokesman for Oxfam, which
     promotes poverty-fighting policies. "He's also been very pointed
     and insightful in discussing the role of the IMF. We're not used to
     that kind of candor."

     Stiglitz won few friends among economists and policy makers at the
     Treasury Department and the monetary fund. But his message was
     greeted enthusiastically in poor countries, and he said he was
     leaving the bank feeling that he had helped to stimulate a more
     vigorous debate about the policy prescriptions that wealthy nations
     impose on developing countries.

     "On some of the specific issues, there has emerged really a broad
     consensus behind the views I took," Stiglitz said.

     "There's a recognition that policies in East Asia were excessively
     contractionary on the fiscal side," he continued. "There's a
     recognition that capital market liberalization, in the absence of
     adequate regulatory structures, exposes countries to much higher
     risks. And on the debate about economies in transition, there's a
     general consensus that the issues I've been raising are the right
     issues, and that while no one has the answers, we're not going to
     get answers until we're willing to ask the questions."

     Stiglitz had told friends recently that he intended to leave, and
     he informed Wolfensohn Wednesday morning of his decision.
     Wolfensohn said Stiglitz would continue to act as an adviser to him
     and Stiglitz would lead the search for a new chief economist.

     Ms. Anstey, the bank's spokeswoman, said that asking Stiglitz to
     head the search committee was a signal of the institution's
     "intention to select someone who will continue the
     Wolfensohn-Stiglitz agenda" of focusing more on the needs of poor
     countries and less on more orthodox policies developed in
     Washington.

     Stiglitz said his approach was built around two basic themes:
     giving more of a voice to poor nations in setting policy and
     recognizing the crucial role that government must play in economic
     development.

     "We are rebalancing our thinking about the role of the state,"
     Stiglitz said. "Some of the failures, like in East Asia, involve
     cases where government did too little, like in financial
     regulation, rather than too much."