Not since Dario Fo was awarded the literature prize has a Nobel laureate been seen as a thorn in the ruling elite’s side. At 59, Joseph Stiglitz (Economics, 2001) is the most prominent defector from what he describes in his new book, Globalization and Its Discontents, as the ” ‘Washington Consensus’—a consensus between the IMF, the World Bank, and the U.S. Treasury about the right policies for developing countries.” Once an economic adviser to President Clinton, then chief economist at the World Bank, Stiglitz now advises leaders of developing countries from Ethiopia to Vietnam on economic alternatives to the West’s “free market mantra.”
Stiglitz appears suddenly in the doorway, left shoe untied, wire-rimmed glasses slightly askew, for an interview at his office at Columbia’s business school, where he has also founded the Initiative for Policy Dialogue (IPD). With demands of a book tour upon him, in addition to troubleshooting throughout the world (this summer he’ll be in Bulgaria, Greece, and Moldova), this economics wizard is surprisingly at ease.
Stiglitz publicly announced his opposition to the Consensus’s one-size-fits-all approach in an inflammatory cover story for the April 17, 2000 New Republic. He argued that the IMF is unaccountable to the public, undemocratic, and guilty of exacerbating poverty worldwide. A year and a half later the Swedish Academy called.
In the new book—his 18th—Stiglitz the populist emerges, expanding his TNR argument with bardic ease. He not only lambastes the IMF, but also explains clearly the East Asian economic crisis of the late ’90s, the inevitable failure of the Soviet Union and Communist bloc countries to morph into successful market capitalist nations, and the patent unfairness of global trade laws. The book is an insider’s account of the failure of market fundamentalism (the belief that market forces are the only force in economic development, no matter the nature of a country’s economy). It is a war story from inside the halls of the White House and the World Bank, the confession of a powerful economist with a political conscience and a healthy degree of common sense. And it is, in its way, a people’s manifesto as well: Stiglitz has been embraced by anti-globalization activists for lending legitimacy to their own positions. “The critics of globalization accuse Western countries of hypocrisy,” he writes, “and the critics are right.”
It’s a strange moment, this peak of his career: a Nobel prize winner seen as both visionary and scold, as insider and outsider. With his grizzled salt-and-pepper beard, well-fed midriff, and easy smile, he resembles a Buddha, as Voice photographer Sylvia Plachy put it. He appears placid, but hungry for global good.
In a conference room at Columbia, where Stiglitz regularly holds foreign press briefings, he offers three reasons why he sees his role now as to advise, not to enforce, economic policy: “I have a strong belief in democracy, that countries need to make their own choices; I believe there are choices, and it is my role to help clarify the alternatives and their consequences; when countries make choices based on a broad degree of participation from advisers, the more likely change will be sustained.” The IPD is Stiglitz’s answer to the IMF and World Bank, his vision of what a global development organization ought to look like: A broad network of economic experts and scholars will set up partnerships with local government officials and civilians in developing countries, and sketch out policy alternatives.
Many of these countries—Ethiopia, in particular, to which Stiglitz devotes an entire chapter of his book—have been cut by the double-edged sword of the IMF. They’ve accepted badly needed loans, but with conditions attached, including reductions imposed on education and health care, two areas they cannot afford to scale back if they hope to rise out of poverty. At the same time, loan interest leaves them floundering in perpetual debt.
Globalization and Its Discontents is packed with like examples. The IMF comes across as an alternately bumbling and hyper-controlling parent who demands perfection from its unruly and ignorant children, brushing off criticism as merely the bias of fools. “Founded on the belief that markets often worked badly,” he writes, “it now champions market supremacy with ideological fervor. . . . ” He continues: “The IMF is a public institution established with money provided by taxpayers around the world,” and yet it does not need to report to the citizenry it affects. Rather, it perpetuates “taxation without representation.”
But Stiglitz only gently implicates the World Bank for its inability to lift populations out of poverty, part of its professed mission. (Four billion people worldwide live on less than $2 a day.) In his account, the IMF schoolyard bully runs roughshod over earnest World Bankers. “I knew the tasks [of alleviating poverty] were difficult, but I never dreamed that one of the major obstacles the developing countries faced was man-made, totally unnecessary, and lay right across the street—at my ‘sister’ institution, the IMF.”
The surprise in reading Stiglitz’s account of his awakening is that he didn’t realize earlier in his career that Wall Street dominates these global institutions. How is it that a whip- smart man, who developed his Nobel-winning ideas about “asymmetric information” (or as he puts it, “some people know more than others”) in the early ’70s, did not realize until the ’90s that government and finance ministers often put commercial interests ahead of the citizenry and the environment? How is it that someone who witnessed rural poverty in Kenya, met Islamic guerrillas in the Philippines, and trekked through the Himalayas to visit remote schools in Bhutan only recently discovered that an imbalance of information can explain why developing nations accept industrialized nations’ monopolistic prescriptions for economic progress?
His canny conversational style adds to the mystery. He gracefully ducks an opportunity to criticize the World Bank. When asked if he is scorned at the IMF, he talks about those on the inside who agree with him; when asked whether he’s uncomfortable being embraced by demonstrators, he lauds them for putting the issues in the public eye. He was, after all, a tenured professor at the age of 27 on a path toward prominence. The solution may lie in a naive optimism that those who profess to do good indeed do good. In a sense, Stiglitz is the ultimate idealist, a believer in waging a real war on poverty, who now sees that (as he puts it) “the emperor has no clothes” and is doing something about it. It is also possible that had he discovered this imbalance earlier and spoken out, he might have been sidelined and not achieved his current credibility (as it was, the World Bank tried to muzzle him); perhaps he treads gently on the World Bank because its advisers take part in the IPD—or because, as he says, he believes it can still be reformed, unlike the IMF.
In pushing to understand how one man came to see economics in human terms while others saw only export quotas and rising stock prices, it is useful to know where he came from. Stiglitz grew up in a middle-class family in Gary, Indiana. His father was a small businessman dealing in insurance, his mother a public school teacher; his lawyer uncle supported the New Deal and organized labor. Politics was discussed at the table. Stiglitz says his Gary roots made him aware of three things as a young economist: “Unemployment is a problem, and economic theory missed this whole point; Gary was marked by a high degree of inequality among people who migrated from the South and had no education; poverty is often associated with race, and economic theory said there was no such thing as discrimination.” He explains that “in Gary you couldn’t help but feel something was wrong. I entered the field of economics because I wanted to do something to affect the way people live.” The civil rights movement was strong at the time, and “you went from thinking of yourself as just one part of the country to thinking about it as a whole. Globalization is analogous. We’re thinking about ourselves in a global context now.”
But didn’t many of his peers at the IMF live through a similar public history? Ideology blinds the most ardent believer, he insists.
His concluding chapter, “The Way Ahead,” should be required reading for the leaders of the G8 (industrialized Western countries and Russia) and other casual pooh-poohers of the massive demonstrations from Seattle to Genoa. In that chapter, they’ll find proposals similar to those of the more moderate protesters: reform of global financial institutions; a stronger role for government in mitigating market failures and ensuring social justice; and a recognition that opposition to globalization is opposition to market fundamentalism, not to globalization per se.
In a just world, copies of Globalization and Its Discontents would appear in the goodie bags of the G8 trade representatives, who will meet June 26 through 28 in Kananaskis, Canada—a place whose remoteness, organizers hope, will dissuade demonstrators and avert the bloodshed that marked the G8 meeting in Genoa last July. But if they want to silence the anti-globalization movement, they’ll have to silence Joseph Stiglitz as well.