Is Stiglitz rokin’ or what?

Posted on August 21, 2009



Conservative pubishers got a problem with Joseph Stiglitz. As his weight as a mainstream economist is too heavy to just throw him apart (he chairs the United Nations “Comission of Experts on reforms of the international monetary and financial system”) the new tactics seems to be misrepresent his words, so to round his uncomfortable sharp angles.

Oppenheimer claims to got some statements in an interview with Stiglitz that are bound to curb the enthusiasm of his leftists fans (the likes of Chávez or Cristina F. de Kirchner, who look at Stiglitz as a rock star). According to him, the Nobel laureate is cooling down his critics onto Globalization and the IMF: “It has changed in many ways, and I think everybody needs to recognize it”. Even more: “If Latin America is going to prosper, it has to upgrade its skills, improve its technology to become more competitive in the global economy”. Which is always a healthy advice, of course. But what he says about the global condition itself?

Let’s take a look at Stiglitz own words in his own syndicated column. Back in April he said:

But if we are to avoid winding up in another debt crisis, some, perhaps much, of the money will have to be given in grants. And, in the past, assistance has been accompanied by extensive “conditions,” some of which enforced contractionary monetary and fiscal policies – just the opposite of what is needed now – and imposed financial deregulation, which was among the root causes of the crisis.


It is thus imperative that assistance be provided through a variety of channels, in addition to, or instead of, the IMF, including regional institutions.

And again in July, reporting on the UN Conference on the impact of the crisis on developing countries:

One might have thought that the United States would have taken a leadership role, since the crisis was made there. Indeed, the US Treasury (including some officials who are currently members of President Barack Obama’s economic team) pushed capital- and financial-market liberalization, which resulted in the rapid contagion of America’s problems around the world.

And, in regards to the IMF and the like:

But many developing countries have just emerged from being overburdened with debt; they do not want to go through that again. The implication is that they need grants, not loans. The G-20, which turned to the IMF to provide most of the money that the developing countries need to cope with the crisis, did not take sufficient note of this; the UN conference did.

Now comes the dollar sickness:

The most sensitive issue touched upon by the UN conference – too sensitive to be discussed at the G-20 – was reform of the global reserve system. The build-up of reserves contributes to global imbalances and insufficient global aggregate demand, as countries put aside hundreds of billions of dollars as a precaution against global volatility. Not surprisingly, America, which benefits by getting trillions of dollars of loans from developing countries – now at almost no interest – was not enthusiastic about the discussion.

The proposed solution:

On the last day of the conference, as America was expressing its reservations about even discussing at the UN this issue which affects all countries’ well being, China was once again reiterating that the time had come to begin working on a global reserve currency. Since a country’s currency can be a reserve currency only if others are willing to accept it as such, time may be running out for the dollar.

Finally, Stiglitz real conclusions on the shape of globalization:

The US and other advanced industrial countries pushed globalization. But this crisis has shown that they have not managed globalization as well as they should have. If globalization is to work for everyone, decisions about how to manage it must be made in a democratic and inclusive manner – with the participation of both the perpetrators and the victims of the mistakes.

It looks like “bad boy” Joseph Stiglitz keeps rocking hard and kicking.