Joseph E. Stiglitz (2002) Globalization and Its Discontents
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Transcript of Joseph E. Stiglitz (2002) Globalization and Its Discontents
Joseph E. Stiglitz (2002) Globalization and ItsDiscontents
GIOVANNI FERRI�
For three reasons, it wasn’t easy for me to write a review on this book for
Economic Notes–Review of Banking, Finance and Monetary Economics.
First, Joseph E. Stiglitz (henceforth JES) is an active member of this Journal’s
Advisory Board: I could then be accused of favouritism if my review is too
positive. Second, the book is not so much about economics as much as it is
about the political economy of economic policy making at the international
level: A challenging topic indeed, where maybe other scholars possess better
theoretical foundations than I. Last but not least, I worked somewhat close to
the author during the East Asian crisis, while he served as the World Bank’s
Chief Economist: One might therefore hold that any appreciation depends on
partisanship. Transparency demands this be stated upfront.
Has the ‘‘boy from Gary, Indiana’’ (as JES likes to define himself) grown
mad? The question needs to be posed if one reads what Rogoff (2002) contends
in his open letter confronting JES on the book under comment. In my view the
answer is that, as Mark Twain put it, ‘‘the reports are greatly exaggerated’’.
Before we go into some of the details, it is in fact to be mentioned that, on
most of what he argues in the book, JES is neither substantially innovating
with respect to what he already publicly said in the past, nor is he alone in the
economics profession or the world elites at large. Indeed, what the book does
is providing for an escalation as to the tone and the terrain of the confrontation.
While it is legitimate to complain that this escalation is harmful to elicit sound
reform tackling the problems at stake, in my opinion, the success or failure of
the book will have to be assessed in the future once it will be possible to fully
evaluate whether the change in JES’ strategy paid up or backfired. In the
meantime, preliminary evidence (see below) seems to show that the book is
being effective in exhuming more open discussion on the debated issues, also
at the International Monetary Fund (IMF), the main target of the book’s
criticism and allegations. If confirmed, this in itself would be a success as one
of the chief accusations in the book is that the IMF erred because its debates
were kept behind closed doors.1
# Banca Monte dei Paschi di Siena SpA, 2003. Published by Blackwell Publishing Ltd,9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA.
Economic Notes by Banca Monte dei Paschi di Siena SpA, vol. 32, no. 2-2003, pp. 123–142
� Department of Economics – University of Bari – Italy – [email protected] While I will try to keep away from taking a position in the confrontation, what should be
stated is that transforming the debate into a personal fight is not helpful. It would be useful if this
were avoided on both sides, but particularly on the part of the IMF, which is an institution and not
an academician.
Before substantiating this conclusion, we need to go into some of the
specific elements in the book. This means that we have to synthesize the main
ingredients of the debate, even though this risks being pedantic to the many
observers who are already very well familiar with it.
The bulk of JES’ accusations is that globalisation is a boon only if it is
properly governed, but the International Economic Institutions (IEIs) and,
primarily, the International Monetary Fund (IMF) that should ensure such a
governance have failed the task. The conclusion is that the IMF and the other IEIs
(i.e., the World Bank and the World Trade Organization) have to be reformed to
deliver policies that will make globalisation more equitable and, thus, avoid that
it is perceived by many around the world more as a problem than as an
opportunity. Lacking such reform, JES admonishes, discontents might grow:
Globalisation might be checked and its great potential benefits might go lost.
Most of the book is devoted to chastise the IMF for its failure in three
main areas: (i) crisis management (e.g., the East Asian crisis); (ii) development
of poorer countries (a problem that JES doesn’t see in the IMF agenda); (iii)
transition from planned to market economies (e.g., the problems with Russia).
More generally, the IMF is accused of having undergone a great mutation from
Keynes’ creature to fight global depressions to ‘‘the cockpit of market
fundamentalism’’ and the ‘‘Washington Consensus’’. In this regard, JES
stresses that IEIs need to have a more open mindset rather than rely on a
unique model (there is a plurality of models: There’s no single way to the
market economy) and refrain from prescribing one-size-fits-all policies that
may be harmful. The allegation is that, by prescribing seemingly pro-market
policies that however exacerbate the risks of systemic shocks (e.g., early
capital account opening, premature domestic financial liberalization) and
disregard the need for social safety nets, the Washington Consensus is under-
mining globalisation. Since, according to JES, they do not cater for the benefits
of globalisation to be shared and, to the contrary, produce growing inequality
such policies may have become the most serious obstacle to expand free trade,
the extent of markets and, accordingly, reap larger gains for the world.
In Chapter 3 (Freedom to Choose?), JES identifies the three pillars of the
Washington Consensus (fiscal austerity, privatisation, and market liberalisa-
tion) and contends that ‘‘. . . the problem was that many of these policies
became ends in themselves, rather than means to more equitable and sustain-
able growth.’’ That’s why these policies had to be pursued quickly – and the
assisted countries had to sign in conditionality to this – while there was no
serious attempt to adapt them to local circumstances. First, according to JES,
quick privatisation policies can be criticized on two grounds: (i) expansive
(and not contractionary as done in the past) aggregate demand policies need to
accompany privatisations, with the former creating jobs to match the job
destruction by the latter; (ii) privatisations have to be equitable and transparent
to avoid breeding corruption; in turn, this requires that appropriate legal
structures and market institutions be formed before privatising. Second, still in
124 Economic Notes 2-2003: Review of Banking, Finance and Monetary Economics
# Banca Monte dei Paschi di Siena SpA, 2003.
the author’s view, liberalisation – through the removal of government inter-
ference in domestic markets as well as the elimination of barriers to trade and
capital exchanges with abroad – is designed to promote more efficient market
allocation. But this approach may do more harm than good if liberalisation is
carried out without putting it in its proper context and lacking the proper
institutional set up. For instance, lacking adequate regulation and supervision
of banks, early capital account opening and also domestic financial liberal-
isation are likely sources of instability. Third, according to JES, sequencing of
reforms is crucial or liberalisation will not be successful. In fact, institution
building must precede or at least accompany liberalisation but also there must
be a social consensus in the nation that is undertaking such transformation.
And the social consensus may only rest on the respect of a social contract
whereby benefits will be widely shared. Unfortunately, the Washington Con-
sensus does not worry about the social contract, as it believes in ‘‘trickle down
economics’’, i.e., the idea that growth by itself will heal the problems it
initially causes. But, according to JES, this is not so and even the IFIs have
recognised that poverty reduction must be explicitly addressed in order to
make growth sustainable. However, according to JES, here comes the problem
of the priorities: if poverty reduction is inserted as the 39th item in a list of 40
objectives, maybe it will not get much attention after all and its inclusion
appears driven more by a maquillage intent than by serious concern.
In Chapter 4 (The East Asia Crisis – How IMF Policies Brought the World
to the Verge of a Global Meltdown), JES holds that IMF policies did not work
in managing the East Asian crisis because they were wrong. Approaching the
management of the East Asian crisis with its one-size-fits-all policies of the
Washington Consensus, the IMF founded its intervention on: (i) higher interest
rates; (ii) fiscal austerity; (iii) structural reforms. When the policies failed, ‘‘the
IMF charged the country(s) with failing to take the necessary reforms
seriously. In each case, it announced the world that there were fundamental
problems that had to be addressed before a true recovery could take place.
Doing so was like crying fire in a crowded theatre: investors, more convinced
by the diagnosis of the problem than by the prescriptions, fled. Rather than
restoring confidence that would lead to an inflow of capital into the country,
IMF criticism exacerbated the stampede of capital out.’’ ‘‘Because of this . . .the perception through much of the developing world . . . is that the IMF itself
had become a part of the countries’ problem rather than part of the solution.
Indeed, in several of the crisis countries, . . . people continue to refer to the
economic and social storm that hit their nations simply as ‘the IMF’ . . .’’. This
has much to do with the fact that those liberalisation policies were forced onto
the East Asian countries that – also because of their long impressive growth –
didn’t have social safety nets. In JES’ view, the single most important factor
leading to the crisis was early capital account liberalisation that, in turn, was
pushed onto the countries by the Washington Consensus, representing in that
the vested interests of the financial community.
125Book Review
# Banca Monte dei Paschi di Siena SpA, 2003.
In JES’ recount, there were three rounds of mistakes by the IMF. The first
derived from applying to East Asia the policy menu elaborated for high public
deficit and inflation-driven Latin American crises of the 1980s without taking
into account that, in light of the impending recession, the problem for East
Asia was lack (and not excess) of aggregate demand and also that East Asian
firms were highly leveraged. So, the IMF advised contractionary fiscal and
monetary policies that aggravated the recession by reducing aggregate demand
and trade across the region. Furthermore, instead of attracting capital via
higher yields and stabilising exchange rates, tight monetary policies magnified
bankruptcies of the highly leveraged East Asian corporates and, thus increasing
the risk of default, aggravated the fall in confidence in these countries. The
second round of IMF mistakes had to do with its inadequate understanding of
the policies needed to address bank and corporate restructuring in the face of
macro-driven large scale bankruptcies. Failure to perform a quick and com-
plete closure of endangered banks, uncertainties on the extent and modality of
state intervention triggered major bank runs through the region, disrupting
credit flows and destroying precious informational capital in the banks. In
addition, restructuring strategies were unclear and slow, driving to increased
uncertainty and unneeded bankruptcies. The third round of mistakes was the
IMF’s failure to recognize that the harsh policies it was recommending could
cause damage to the East Asian social fabric – lacking social safety nets so
badly, just thanks to its marvellous growth record – and even generate turmoil
(as was clearly the case in Indonesia). The problem was later admitted – e.g.,
after being cut, food subsidies in Indonesia were restored – but the damage
had already been inflicted.
JES points out that China and Malaysia are the best examples of how Eat
Asian countries could avoid or reduce the negative impact of the crisis by
following policies that were markedly different than what recommended by the
IMF: China did not have free capital movements and Malaysia introduced
temporary capital controls. In addition, JES holds that: (i) via de-leveraging,
IMF policies may have reduced long-term growth in East Asia; (ii) IMF policy
failures – and even the strategy to adjust policies as they prove inappropriate is
very serious, since ‘‘bankrupted firms cannot be un-bankrupted’’ – partly
derived from its insufficient accountability.
At the end of the chapter, JES proposes his seven-point alternative strategy
to manage the crisis: (1) follow expansionary fiscal and monetary policies; (2)
promote quick financial restructuring; (3) but the financial restructuring needed
to be coupled with maintaining finance flows to corporates and a standstill of
scheduled debt repayments; (4) financial restructuring could then be followed
by real restructuring; (5) however, real restructuring should take place only with
special bankruptcy provisions (a ‘‘super-Chapter 11) aimed at the quick resolu-
tion of distress from macro-driven disturbances; (6) strong (temporary) inter-
vention by the government is required; (7) once all the previous points are in
place, firms can effectively benefit from the large exchange rate depreciation.
126 Economic Notes 2-2003: Review of Banking, Finance and Monetary Economics
# Banca Monte dei Paschi di Siena SpA, 2003.
In Chapter 5 (Who Lost Russia?), JES maintains that the deep problems
with Russia’s transition from a planned to a market economy have to be
explained in light of the shock therapy chosen by the country, especially thanks
to the advice of Western ‘‘market Bolsheviks’’ advisers, mostly reflecting US
Treasury/IMF mindset and policies. The main shortcoming of these policies
was their failure to recognise and give adequate weight to social and political
issues fundamental to the transition. Part of the problem was the failure to
understand that institutions with the same name (e.g., a bank) as their Western
homologues existed under the USSR but they played a totally different role.
Thus, the trouble came from disregarding the deep need for institution
building: More attention to this issue could only change the choice from shock
therapy to gradualism, as the success of China testifies.
According to JES, examples of the fiasco of the shock therapy abound.
First, a partial price liberalisation accompanied by stabilisation and ‘‘friendly’’
privatisation played a major role in the advent of ‘‘rent seeking’’ capitalism in
Russia and the situation was only made worse by the early capital account
opening that allowed massive capital flows out of the country. In addition, in
light of its fiscal problems, Russia couldn’t even afford building its needed
safety nets. If the near cause of Russia’s 1998 default was the Asian crisis and
the fall in oil prices, the long overvalued ruble built the background conditions
by depressing the economy, helping the ‘‘oligarchs’’ drive capital out, and
lowering confidence in the country. In the occasion, the IMF led Russia to
resist the speculative attacks by borrowing heavily in foreign exchange, a move
that can be rationalised with an attempt to outsmart the market and/or close the
devaluation option. There was heated debate across 19th Street about making a
further large loan to Russia in July 1998 since some believed that this would
only aggravate the situation. When the default came (in August) this renewed
the global financial crisis. While the oligarchs gained and Western banks were
helped to limit their losses, the burden of the additional loan eventually came
on the shoulders of Russian taxpayers. Finally, the good news was that the wild
devaluation of the ruble revived the economy and this proved that the Russian
economic implosion had to do not only with the lack of supply but also with
the lack of demand induced by (overly) tight policies.
Though Russia had the good company of most other transition economies,
its case is the paramount example of the failure of the transition. The big
persistent drop in GDP was coupled with increased poverty and inequality. JES
asks how much of this could be avoided through better policies. He claims
that: (i) over-zealous anti-inflation policies drove the ruble overvalued and
chocked aggregate demand, provoking de-industrialisation; (ii) privatisation
without proper tax, institutional and corporate governance set ups induced
asset stripping by the oligarchs and even by local governments; (iii) the major
drive to favour the oligarchs came in 1995 when Yeltzin launched a massive
privatisation through a loan-share swap with the banks that were controlled by
his friends; (iv) at the same time, disregard for the enlarging poverty led to a
127Book Review
# Banca Monte dei Paschi di Siena SpA, 2003.
breach in the social contract, in turn this destroyed social capital and trust and
prevented markets from well functioning; (v) the above shows that the problem
with the shock therapy was not in its speed but rather in its wrong incentives:
lack of understanding on institution building led to policies with far reaching
depressing effects on the role of the middle class (the keystone of a market
economy) that were further aggravated by lack of focus on independent media.
In Chapter 6 (Unfair Fair Trade Laws and Other Mischief), JES states that
the problem with the Russian faulty transition and the choice of wrong policies
derived not only from choosing the ‘‘wrong horse’’ (Yeltzin) but also from
trying to avoid public discussion both in the US and at the international level.
JES believes that the debacle was not the result of a deliberate attempt to
undermine Russia – though US/Western interests were taken care of when the
July 1998 loan allowed for the bailing out of the investment banks – but
simply depended on bad economic policies.
In Chapter 7 (Better Roads to the Market), JES further exemplifies his
point by contrasting the success of the transition economies that chose
gradualism (e.g., China and Poland) relative to those that chose the shock
therapy approach (e.g., Russia and the Czech Republic). Specifically, gradual
privatisation was a fundamental ingredient to avoid assets stripping. China
offers an example of good sequencing: (i) start the liberalisation from
agriculture; (ii) set up the right incentive ‘‘at the margin’’ (e.g., additional
output can be sold at the market price); (iii) pay due attention to social stability
(via the two-track system); (iv) within a context of stability and growth, foster
competition before privatisation.
Finally, in Chapter 9 (The Way Ahead), JES holds that the fact that the
IEIs propose the one-size-fits-all policies of the Washington Consensus –
shaped by the ideology of market fundamentalism and refusing government
intervention even when there is a strong case for it – results from the existence
of a major problem with their governance. This is a case of global governance
without global government. To whom are the IEIs accountable? They are
controlled by officials from the developed nations representing specific inter-
ests even within their own countries: finance ministers and central bank
governors for the IMF-WB, trade ministers for the WTO. This leads JES to
conclude that behind the mindset imposing (questionable) Washington Con-
sensus policies is the fact that the IEIs cater for particular interests associated
with a parochial perspective. As such, the IEIs lack representation of and
accountability to groups other than the financial community and the business/
commerce community of developed countries. Les liaisons dangereux between
top US Treasury/IMF officials and big finance companies reinvigorates the
suspect that IMF views and actions are distorted by these specific interests.
And in many instances there is a conflict between pursuing global stability and
catering for these specific interests. Beside, since the mindset behind policies
is pre-established with no open debate – IMF resistance to account for success
stories whose upbringing violated the principles of the Washington Consensus
128 Economic Notes 2-2003: Review of Banking, Finance and Monetary Economics
# Banca Monte dei Paschi di Siena SpA, 2003.
(e.g., the East Asian miracle) is but an example of the danger of shielding
debate behind closed doors – countries receiving support form the IMF feel
left out. Globalisation calls for global institutions addressing global external-
ities: according to JES, major changes are needed in the governance and voting
rights of IEIs. Also more openness and transparency is needed as secrecy
undercuts democracy and accountability. While some changes are occurring
(e.g., more transparency, rethinking the strategy behind the large bailouts) the
pace is too slow. JES makes two proposals: one directly to reshape the IMF, the
other to more broadly reform the international financial system. The former
proposal is to streamline the IMF and make it more accountable by: (i)
refocusing it on its core business of crisis management, while keeping it away
from development and transition issues; (ii) separate its statistical production
from its program management since there may be conflicts of interests between
the two functions; (iii) abandon Article 4 global monitoring in favour of
regional monitoring. The latter is a 7-point proposal: (1) acceptance of the
problems with early capital account opening and of the need to govern short-
term capital flows (a Tobin tax?); (2) need for payments standstill and new
workout procedures (e.g., super-Chapter 11) to deal with macro-driven bank-
ruptcies; (3) phase out the large IMF bailouts since these are major sources of
distortions and moral hazard for creditors; (4) improve banking regulation to
limit short-term lending frenzies (capital/asset requirements may not be
enough); (5) better risk management of exchange rate fluctuations; (6) improve
safety nets; (7) enhance crisis response by maintaining credit flows, avoiding
to depress trade, putting responses in proper social and political context,
mandating the IMF to help countries in crisis keep up aggregate demand.
To get this process of reform moving, JES believes that ‘‘voices must be
raised . . . to address the legitimate concerns of those who have expressed
discontent with globalization, if we are to make globalization work for the
billions of people for whom it has not, if we are to make globalization with a
human face succeed’’.
In my view, this ideological need to mobilise the peoples of the world is
the ultimate motivation behind this book. We may believe this is a wrong
approach, but if we don’t recognise his deep motivation we would fail to
understand while a Nobel Prize winner ventured into such dire straits.
Some criticisms are in order. First, the book is sometimes repetitive and it
could be substantially shorter without loosing much of its contents. Second,
not enough credit is given to some of the changes that are occurring. I’ll give
just one example. Ann Krueger, representing the USA in the top ranks of the
IMF, has made an important proposal to build a new framework to assist
countries unable to meet their debt payments to international financial markets
(thus facilitating re-negotiation; IMF, 2001). Third, personal attacks on IMF
top ranking officials – e.g., the allegation that some of them moved from 19th
Street to Wall Street – are bad taste and debase the essay, rather than making it
more forceful, also because JES’ thesis is not that there is a Wall Street
129Book Review
# Banca Monte dei Paschi di Siena SpA, 2003.
conspiracy but, rather, that an unaccountable IMF has outmoded ideas and
mindset. Fourth, sometimes causality can be reverse with respect to what
envisaged by JES: e.g., did the barter economy in Russia come about because
of tight monetary policy or because hyperinflation (that was later fought with
tight money)? Fifth, a book with exactly the same title was published just two
years ago (McBride and Wiseman, 2000): Even though choosing the same title
is lawful, it would be elegant to acknowledge it.
These criticisms notwithstanding, several points the book makes cannot be
rejected without thorough discussion.
It is important to reiterate that JES is not alone to make allegations of
IMF’s misconduct. After all, if we disregard his pugnacious tones, so much of
what JES writes in this book had not only been already spelled out by the
author in his own speeches and policy papers, but it seems to substantially
overlap with what other respected scholars wrote on the two most noticeable
episodes where IMF policies have been under criticism: The East Asian crisis
and the transition in Russia and other former communist countries. To quote
just a few, we can refer to Blustein (2001), Feldstein (2002), Krugman (1999)
and Radelet and Sachs (2000): It is interesting to note that even this short list
includes economists holding very different perspectives on the balance trade-
off between government and market failures.
Another point is the assessment of the extent to which past errors are
leading to correction. While the IMF has moved to adjust, to some degree in
the right direction (e.g., Krueger’s proposal cited above), not all of its moves
are credible. For instance, one of the main allegation by JES was that the IMF
lacks accountability. Perhaps in response to this criticism, in July 2001, the
IMF established an Independent Evaluation Office (IEO). Unfortunately, up to
now, the IEO is judged ineffective (if not a maquillage) by most respected
scholars. The way the IEO was structured does not conform to the best
received principles: (i) the unit does not have an autonomous budget; (ii) most,
if not all, of its staff come from the IMF; (iii) the unit seems to lack capability
to acquire autonomous information and is thus forced to rely on information
derived from the subject it is supposed to evaluate; (iv) in general, it appears
that its whole incentive structure is not conducive to the IEO taking a strong,
independent (and sometimes confrontational) position vis-a-vis the official
IMF standpoint.
But, coming back to the big picture, as said, the book is about the political
economy of economic policy making at the international level. What does this
cacophonous phrase mean? It means that more often than not, there is no
single policy option to deal with one particular problem. A choice has then to
be made among different policies and the way this choice is made must itself
be cast in an economic framework to consider its tradeoffs. To be sure,
however, different policy choices will help/harm different interest groups.
Transparency and accountability are fundamental at this juncture, and the need
arises for open debate. As said above, in my view, we need not evaluate the
130 Economic Notes 2-2003: Review of Banking, Finance and Monetary Economics
# Banca Monte dei Paschi di Siena SpA, 2003.
book in terms of its analytic contents but, rather, in terms of its impact to elicit
such open debate. In other words, the book doesn’t intend to offer analytic
contributions. Most of JES’ theses in the book are grounded in analytical work
already conducted by himself and others. Naturally, consensus varies across
these theses (e.g., agreement is large on payments standstills and super-
bankruptcy procedures to deal with systemic shocks, while debate is still on as
to the link between tight monetary policy and the exchange rate), but this is
not the point with the book.
Is then JES’ book being effective at stimulating the needed more open
(even harsh) debate? And, is such debate becoming more open at the IMF? To
answer this question, I performed the following exercise. On 8th November
2002, I downloaded form the IMF website open to the public all the documents
having the word ‘‘Stiglitz’’. I obtained 78 documents starting from one dated
26th May 1997 to finish with one dated 30th October 2002. Then I grouped the
documents into three different categories: (i) ‘‘substantive feedback’’, those
documents where IMF (officials) were fighting back JES’ allegations of its
misconduct;2 (ii) ‘‘institutional report’’, all the documents where reference was
made to JES’ institutional engagements; (iii) ‘‘academic citation’’, those
documents where academic reference was made to one or more JES’ publica-
tions. Table 1 presents all of these documents by title according to their
grouping, while Figure 1 pictures the quantitative importance of each one of
the three groups over the twelve half-years between early 1997 and late 2002.
Figure 1 clearly shows a bimodal shape: The first hump crests at 9
documents in the second half of 1999, then the number of documents reduces
as JES returns to academia, but after the book is out the second peak reaches
much higher to 21 documents in the second half of 2002 (even though my
search covers only four of the six months in H2-02) and we can’t even tell yet
whether this is the tip or the phenomenon will still mount in the first half of
2003. What’s more, the composition of the documents by type changes
drastically between the first hump and the second hike. In the second half of
1999 – while JES was Chief Economist and Senior Vice President at the World
Bank – most of the documents were academic citations (8 out of 9), one was
an institutional report, but none of them was a substantial feedback, though
JES was heavily and publicly critical of the IMF even at the time. On the
2 As it happens, substantive feedbacks may take widely diverse shapes. The most natural one
is when Mr. Dawson (Director of the External Relations Department of the IMF) writes a letter to a
newspaper or magazine that has shown sympathy to JES’ ideas. Then, when the situation becomes
more heated, even the Chief Economist abandons his readings to write letters to newspapers.
Perhaps the most special case is that of Mr. Barro Chambrier (Executive Director at the IMF for
Benin, Burkina Faso, Cape Verde, Central African Republic, Chad, Comoros, Republic of Congo,
Cote d’Ivoire, Djibouti, Equatorial Guinea, Gabon, Guinea, Guinea-Bissau, Madagascar, Mali,
Mauritania, Mauritius, Niger, Rwanda, Sao Tome and Prıncipe, Senegal, and Togo) who, in his
farewell speech to the Executive Board of the IMF confesses he discovered that even his daughter
was reading JES’ book and, though trying, he’s not sure of being successful to convince her that
JES is wrong.
131Book Review
# Banca Monte dei Paschi di Siena SpA, 2003.
Table 1: Documents with Word ‘‘Stiglitz’’ in IMF Website Grouped by Motive
Date Substantive feedback Institutional report Academic citation
26 May 1997 (i) Report WB’s ABCDE Conf. +(ii) Program IMF-WB Meetings
1 Sep 1997 (i) Program IMF-WB Meetings +(ii) Program IMF-WB Meetings
21 Jan 1998 Reference by Mr. Saito Director Asia Reg.IMF
23 Feb 1998 Program IMF-WB Meetings20 Apr 1998 Report WB’s ABCDE Conference11 May 1998 Report WB’s ABCDE Conference4 Sep 1998 Journalist’s reference at IMF Press Conference1 Oct 1998 (i) References to two papers +
(ii) Reference to a paper21 Dec 1998 Mr. Mussa questions JES’ views at IMF Press
Conference25 Jan 1999 Report AEA Annual Meeting18 Mar 1999 Program IMF-WB Meetings1 May 1999 Reference to a paper10 May 1999 Report IMF-WB-WTO Meeting24 May 1999 Report WB’s ABCDE Conference1 Jun 1999 Reference to a paper30 Jun 1999 Reference to a paper20 Sep 1999 Reference to a paper23 Sep 1999 Reference at IMF Press Conference24 Sep 1999 Reference to a paper14 Oct 1999 Reference to a paper20 Oct 1999 Reference to a paper22 Oct 1999 Reference to a paper26 Oct 1999 Reference to a paper1 Nov 1999 Reference to a paper1 Dec 1999 Reference to a paper
13
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# Banca Monte dei Paschi di Siena SpA, 2003.
21 Jan 2000 Reference to a paper20 Mar 2000 Reference to a paper23 Mar 2000 (i) Reference to a paper +
(ii) Reference to a paper1 Apr 2000 Reference to a paper15 Apr 2000 Letter to Barrons to attack article friendly to
JES’ views8 May 2000 Report WB’s ABCDE Conference1 Jun 2000 Conference calendar19 Sep 2000 Reference to a paper3 Nov 2000 Reference to a paper20 Nov 2000 Report IMF Conference1 Dec 2000 Reference to a paper18 Dec 2000 Reference to a paper22 Jan 2001 Report JES participates to two panels at IMF31 Mar 2001 Reference to a paper2 Apr 2001 Reference to a paper3 May 2001 Letter to The Observer to attack article
friendly to JES’ views1 Sep 2001 Report of two JES’ papers coming out16 Nov 2001 Reference to a paper13 Dec 2001 Executive Board’s review on transparency17 Jan 2002 Journalist’s reference at IMF Press Conference11 Mar 2002 Report JES participates to a IMF Conference14 Mar 2002 Report WB paper citing JES paper16 May 2002 Mr. Dawson attacks JES on Argentina at IMF
Press Conference13 Jun 2002 Mr. Dawson attacks JES in speech at MIT
Club Washington17 Jun 2002 Letter to Les Echos to attack article friendly to
JES’ views18 Jun 2002 Three references in three IEO separate
documents
continued overleaf
13
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# Banca Monte dei Paschi di Siena SpA, 2003.
Table 1: (continued )
Date Substantive feedback Institutional report Academic citation
2 Jul 2002 (i) Mr. Dawson attacks JES at IMF Press Brief+ (ii) Open letter by Mr. Rogoff
8 Jul 2002 IMF Survey reports open letter by Mr. Rogoff9 Jul 2002 Two letters to The Toronto Star and The Times
to attack articles friendly to JES’ views16 Jul 2002 Letter to The Guardian to attack article
friendly to JES’ views25 Jul 2002 Letter to Far Eastern Economic Review to
attack article friendly to JES’ views3 Aug 2002 Letter to The Financial Times to attack article
friendly to JES’ views5 Aug 2002 (i) Letter to The New Yorker to attack article
friendly to JES’ views + (ii) IMF Surveyreports Mr. Boorman’s criticism of JES
12 Aug 2002 Reference to a paper26 Aug 2002 Letter by Mr. Rogoff to Vedomosti to attack
JES’ views on RussiaReference to a paper
27 Aug 2002 Letter to Le Figaro to attack article friendly toJES’ views
1 Sep 2002 Reference to a paper2 Sep 2002 Letter to Le Monde to attack article friendly to
JES’ views12 Sep 2002 Letter by Mr. Camdessus to Nouvel
Observateur to attack JES’ views on RussiaReference to a paper
19 Sep 2002 Journalist’s reference at IMF Briefing4 Oct 2002 Letter by Mr. Rogoff to Le Monde to attack
JES’ views30 Oct 2002 IMF Executive Director discovers his daugther
reads JES book
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contrary, in the second half of 2002 – with the book out – the driving force
has been substantial feedbacks (16 out of 21).
From this evidence we may draw two conclusions. First, the IMF has
moved from a strategy of ‘‘malignant neglect’’ (when JES was the World
Bank’s Chief Economist and in the first two years he was back to academia) to
one of ‘‘substantive feedback’’ to fight JES’ allegations. Second, even though
some of the IMF’s substantive feedbacks loom around personal accusations,
the debate has been taken to the open: It’s no longer behind closed doors.
Thus, to use a boxing term, was the book a ‘‘hit under the belt’’? In light
of what I argued, it’s difficult to say but even if we believe that it was, we
should recognize that the belt was set rather high and that the hit seems to be
successful.
To finish with another allegory, as those who are familiar with Siena, Italy
(the founding place of this Journal) know well, July the 2nd (together with
August 16th) is a very special date for this medieval city. After a long
preparation behind closed doors, horses come to the open career in the magic
Piazza del Campo and the fighting among the many city parishes will soon
come to an end: The Palio prize will be awarded before dusk. In coming to the
public arena with the most vibrant and substantive feedback yet from the IMF
to JES, Prof. Rogoff probably didn’t notice that he was riding on July 2nd. Is
there any recondite prophecy? As people know, the Palio race is full of tricks:
Horse-back-riders can try privately bribing rivals before the race starts and, if
that fails, can fight and even hurt each other during the race; sometimes riders
Figure 1: Documents with Word ‘‘Stiglitz’’ in IMF Website by Half-year and MotiveSource: Author’s calculations on data downloaded on 8 November 2002 from: http://www.imf.org
and listed in Table 1.
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Table 2: Documents with Word ‘‘Stiglitz’’ in IMF Website as of 8 November 2002
Date Substantive feedback Institutional report Academic citation Book out JES Chief Econ Intermediate Period
30 Oct 2002 1 0 0 1 0 04 Oct 2002 1 0 0 1 0 019 Sep 2002 0 1 0 1 0 012 Sep 2002 1 0 0 1 0 012 Sep 2002 0 0 1 1 0 02 Sep 2002 1 0 0 1 0 01 Sep 2002 0 0 1 1 0 027 Aug 2002 1 0 0 1 0 026 Aug 2002 1 0 0 1 0 026 Aug 2002 0 0 1 1 0 012 Aug 2002 0 0 1 1 0 05 Aug 2002 1 0 0 1 0 05 Aug 2002 1 0 0 1 0 03 Aug 2002 1 0 0 1 0 025 Jul 2002 1 0 0 1 0 016 Jul 2002 1 0 0 1 0 09 Jul 2002 1 0 0 1 0 09 Jul 2002 1 0 0 1 0 08 Jul 2002 1 0 0 1 0 02 Jul 2002 1 0 0 1 0 02 Jul 2002 1 0 0 1 0 018 Jun 2002 0 1 0 1 0 018 Jun 2002 0 1 0 1 0 018 Jun 2002 0 1 0 1 0 017 Jun 2002 1 0 0 1 0 013 Jun 2002 1 0 0 1 0 016 May 2002 1 0 0 1 0 014 Mar 2002 0 1 0 1 0 011 Mar 2002 0 1 0 1 0 017 Jan 2002 0 1 0 1 0 0
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13 Dec 2001 1 0 0 0 0 116 Nov 2001 0 0 1 0 0 11 Sep 2001 0 1 0 0 0 13 May 2001 1 0 0 0 0 12 Apr 2001 0 0 1 0 0 131 Mar 2001 0 0 1 0 0 122 Jan 2001 0 1 0 0 0 118 Dec 2000 0 0 1 0 0 11 Dec 2000 0 1 0 0 0 120 Nov 2000 0 1 0 0 0 13 Nov 2000 0 0 1 0 0 119 Sep 2000 0 0 1 0 0 11 Jun 2000 0 1 0 0 0 18 May 2000 0 1 0 0 0 115 Apr 2000 1 0 0 0 0 11 Apr 2000 0 0 1 0 0 123 Mar 2000 0 0 1 0 0 123 Mar 2000 0 0 1 0 0 120 Mar 2000 0 0 1 0 0 121 Jan 2000 0 0 1 0 0 11 Dec 1999 0 0 1 0 1 01 Nov 1999 0 0 1 0 1 026 Oct 1999 0 0 1 0 1 022 Oct 1999 0 0 1 0 1 020 Oct 1999 0 0 1 0 1 014 Oct 1999 0 0 1 0 1 024 Sep 1999 0 0 1 0 1 023 Sep 1999 0 1 0 0 1 020 Sep 1999 0 0 1 0 1 030 Jun 1999 0 0 1 0 1 01 Jun 1999 0 0 1 0 1 024 May 1999 0 1 0 0 1 010 May 1999 0 1 0 0 1 0
continued overleaf
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Table 2: (continued )
Date Substantive feedback Institutional report Academic citation Book out JES Chief Econ Intermediate Period
1 May 1999 0 0 1 0 1 018 Mar 1999 0 1 0 0 1 025 Jan 1999 0 1 0 0 1 021 Dec 1998 1 0 0 0 1 01 Oct 1998 0 0 1 0 1 01 Oct 1998 0 0 1 0 1 04 Sep 1998 0 1 0 0 1 011 May 1998 0 1 0 0 1 020 Apr 1998 0 1 0 0 1 023 Feb 1998 0 1 0 0 1 021 Jan 1998 0 1 0 0 1 01 Sep 1997 0 1 0 0 1 01 Sep 1997 0 1 0 0 1 026 May 1997 0 1 0 0 1 026 May 1997 0 1 0 0 1 0
23 27 28Correlation 0.587 �0.425 �0.187Standarddeviation
0.490 0.483 0.439
Nobs 78 78 78Year Substantive feedback Institutional report Academic citation1997 0 4 01998 1 5 21999 0 5 112000 1 4 82001 2 2 32002 19 7 4
Substantive feedback Institutional report Academic citationH197 0 2 0H297 0 2 0
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H198 0 4 0H298 1 1 2H199 0 4 3H299 0 1 8H100 1 2 5H200 0 2 3H101 1 1 2H201 1 1 1H102 3 6 0H202 16 1 4
Substantive feedback Book out Jes Chief Econ Intermediate PeriodH197 0.000 0.000 1.000 0.000H297 0.000 0.000 1.000 0.000H198 0.000 0.000 1.000 0.000H298 0.250 0.000 1.000 0.000H199 0.000 0.000 1.000 0.000H299 0.000 0.000 1.000 0.000H100 0.125 0.000 0.000 1.000H200 0.000 0.000 0.000 1.000H101 0.250 0.000 0.000 1.000H201 0.333 0.000 0.000 1.000H102 0.333 0.500 0.000 0.000H202 0.762 1.000 0.000 0.000Correlazione 0.847 �0.583 0.019Rango
Substantive feedback Book out JES Chief Econ Intermediate PeriodH197 7 3 1 5H297 7 3 1 5H198 7 3 1 5H298 4 3 1 5H199 7 3 1 5H299 7 3 1 5H100 6 3 7 1
continued overleaf
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Table 2: (continued )
Date Substantive feedback Institutional report Academic citation Book out JES Chief Econ Intermediate Period
H200 7 3 7 1H101 4 3 7 1H201 2 3 7 1H102 2 2 7 5H202 1 1 7 5Correlazione dirango
0.699 �0.629 0.105
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miserably fall to the ground. But the win comes with the horse, not with the
rider. Even though there is no guarantee that the best horse (and not that of the
most powerful parish) will win the race, sometimes this happens . . . at least at
the Palio.
141Book Review
# Banca Monte dei Paschi di Siena SpA, 2003.
References
P. BLUSTEIN (2001), The Chastening: Inside the Crisis that Rocked the Global Financial
System and Humbled the IMF, New York, Public Affairs Books.
M. S. FELDSTEIN (2002), ‘‘Economic and Financial Crises in Emerging Market
Economies: Overview of Prevention and Management’’, NBER working paper No.
W8837, March.
IMF (2001), IMF Survey, 30, no. 23, December 10.
P. KRUGMAN (1999), The Return of Depression Economics, New York-London, Norton.
S. MCBRIDE - J. WISEMAN (2000; eds.) Globalization and Its Discontents, New York–
St. Martin’s Press & London–Macmillan Press.
S. RADELET - J. SACHS (2000), ‘‘The Onset of the East Asian Financial Crisis’’, in Paul
Krugman (ed.) NBER Conference Report Series. Currency Crises, Chicago-
London, University of Chicago Press.
K. ROGOFF (2002), An Open Letter to Joseph Stiglitz, July 2nd, www.imf.org.
142 Economic Notes 2-2003: Review of Banking, Finance and Monetary Economics
# Banca Monte dei Paschi di Siena SpA, 2003.