The event, “Globalization and Its Discontents”, held at the World Bank on June 28, 2002, not only launched Joseph Stiglitz’ highly controversial book, but it also marked the climax of a heated and now famous debate between two highly esteemed and influential academics. Stiglitz, former World Bank Chief Economist and winner of the Nobel Prize in Economics, faced Kenneth Rogoff, Economic Counselor and Director of the Research Department at the International Monetary Fund to discuss their openly diverging ideas on the appropriate role of the World Bank and the IMF in promoting—and dealing with the outcomes-- of globalization.
Stiglitz introduced his book by stating that it covered issues surrounding many aspects of globalization, and that the role of the International Monetary Fund (IMF) and the World Bank were only a small part of the issues covered. He expressed concern that globalization has developed according to a set of rules that have been set by special interests within the advanced industrialized countries. While many countries have benefited from globalization, he stated that there are hypocrisies and inequities in the way globalization has been managed. As an example, he pointed out that although the Uruguay Round of trade negotiations (which transformed the General Agreement on Tariffs and Trade into the World Trade Organization) was considered an overall success, most have neglected the fact that as a result Sub Saharan Africa became worse off by 2%.
Stiglitz stressed that there is not a single dominant policy that works in economics. The role of economic advisors, he said, is to point out the alternative policies, and the political process is supposed to make the choice between these alternatives. He criticized the IMF for so faithfully adhering to policies of what he called “market fundamentalism”, which is a belief that reliance on the markets is the best way to deal with economic problems. He pointed out that the problem with this idea is that it does account for the fact that markets do not function well in developing countries, as a result of weak institutions and imperfect information. Stiglitz also criticized the IMF’s response to the East Asian crises of the 1990’s by citing that they used excessively austere fiscal policies, and that even though this has been recognized, similar policies are still applied in some Latin American countries. Moreover, he criticized the IMF’s lack of transparency. Finally, he stated that the one area where he was still in extreme disaccord with the IMF was the issue of monetary policy issues. More specifically, he stated that the IMF’s policies of raising the interest rates in the East Asia crisis only exacerbated the crisis and led to more bankruptcies. He pointed out that the IMF saw this as a way to support exchange rates.
Kenneth Rogoff’s response was formatted as a letter he had written to Joseph Stiglitz. In this letter, he covered the many aspects of the book which were critical of the IMF. He first stated that there are indeed many aspects of the book with which the IMF agrees, including the need to seriously re-examine how the IMF deals with countries that are going bankrupt. However, he stated that this was not a novel idea. In response to Stiglitz’ critique of the IMF’s overly austere fiscal policies, Rogoff countered that the IMF did indeed allow room for deficits, and actually had done so in the East Asia crisis. He responded to the book’s criticism that the IMF did not listen to its critics by stating that he himself had once been a critic of the institution, and that not only did the IMF listen, but it published his criticisms themselves. Rogoff also staunchly defended some of the people he felt were personally slandered by Stiglitz’ book, such as former IMF First Deputy Managing Director Stanley Fischer. Finally, Rogoff ended his address by stating that while he considers Stiglitz a brilliant academic more than deserving of his Nobel Prize, he does not consider him an equally brilliant policy maker.
Among the questions posed by the audience was whether we have learned anything from the multiple debt crises that have hit virtually every emerging market, and whether the current emphasis on ownership in country programs is reconcilable with the existence of conditionality.