Rebel With a Cause
Such statements have made Stiglitz a hero to critics of globalization, some of whom believe institutions like the World Bank and IMF should simply be abolished. Stiglitz himself, however, believes these institutions should be reformed, not eliminated. He also believes the spread of global capitalism has enormous potential to benefit the poor. As an example of a country that has successfully integrated into the global marketplace--but in a manner that defies the conventional wisdom of the Washington Consensus--Stiglitz points to China. China has adopted privatization and lowered trade barriers, he argues, but in a gradual manner that has prevented the social fabric from being torn apart in the process. With little advice from the IMF, it has achieved high growth rates while reducing poverty. In a series of papers presented while he was the World Bank's chief economist, Stiglitz pointedly contrasted this record with that of Russia, which, following a decade of "shock therapy" and IMF reforms, has seen poverty rise from 2 percent to 50 percent and life expectancy plummet.
Stiglitz's interpretation is an important corrective to the standard free-market view (which portrays China, misleadingly, as a model student of Western economic reform). Some critics of globalization, however, believe a more measured assessment of China is warranted. "Stiglitz is certainly right to point to China as a country that has refused to follow IMF dogma yet achieved fast growth," says John Cavanagh of the Institute for Policy Studies. "But China is an environmental nightmare. It is a country that systematically represses human rights and workers' rights. To people in the global justice movement, it is not the blueprint of a successful society."
Stiglitz's optimism about China, says Cavanagh, underscores the limitations of his critique of globalization. "Stiglitz is part of a school of economists who have begun to question some of the central precepts of globalization," he says, "but not the overall framework." Stiglitz does, in fact, take pains to ground his critique of the Washington Consensus in conventional economic terms, emphasizing that even by standard measures, such as growth, the IMF's prescriptions have often failed.
On the other hand, as Cavanagh acknowledges, Stiglitz has done more to damage the IMF's reputation than any other living economist. And he has not limited his criticism to discrete events such as the Asian financial crisis. While at the World Bank, Stiglitz delivered a series of prominent speeches arguing that growth should not be the sole measure of success, and that developing countries should be able to decide for themselves which policies to adopt. It is a theme he elaborates in his new book, in which he argues that a central goal of development policy should be to benefit and empower the poor.
In retrospect, the only thing Stiglitz seems to regret about his tenure at the World Bank is that he did not speak out sooner. "It took me a while to realize that there was no interest in having a debate about these policies. It was, 'This is how we do things and that is it.' When it became clear to me that some of these things were surely wrong, it seemed derelict not to speak out."
Not surprisingly, those on the receiving end of Stiglitz's criticisms hold a different view. "There was plenty of internal debate" about policy, says Stanley Fischer of the IMF. "But to have vociferous public criticism from someone inside the institution--it was surprising and strange."
Says World Bank president Wolfensohn, "Joe's character is to go straight out.... Institutionally, it's important that when we are projecting the decided view of the institution, we all stick together."