Joseph Stiglitz - United States

Rebel with a Cause

The Re-education of Joseph Stiglitz

by Eyal Press

The Nation magazine, June 10, 2002

Joseph Stiglitz is-as usual-running late. It is nearing 2:30 PM on a sunny afternoon in New York City and Stiglitz, an economist at Columbia University, is standing on the corner of 103rd Street and West End Avenue trying desperately to hail a cab. He needs to get across town to the Guggenheim Museum, where in five minutes he is scheduled to deliver an address on the state of the global economy in the aftermath of September 11. Stiglitz has not prepared a speech-half an hour earlier, as we were talking over lunch, he had completely forgotten the event was today-but that is the least of his worries. For Stiglitz, getting to appointments on time is a challenge; finding something provocative to say once he gets there is not.

Over the past several years, Stiglitz, a celebrated theorist who was awarded the 2001 Nobel Prize in economics for his work on asymmetric information, has grown accustomed to being at the center of controversy. From 1997 to 2000, he served as senior vice president and chief economist at the World Bank-a title that did not stop him from publicly criticizing the bank's sister institution, the International Monetary Fund. In a series of speeches and articles that culminated in a scathing April 2000 essay in The New Republic, Stiglitz blasted the IMF for being every bit as secretive, undemocratic and indifferent to the poor as its critics claimed. Stiglitz's outspokenness, unprecedented for a high-ranking insider, infuriated top officials at the IMF and US Treasury Department, and eventually led James Wolfensohn, the World Bank's president, to inform him that he would have to mute his criticism or resign. Stiglitz chose to leave.

He has not, however, quieted down. Since trading in his job at the World Bank for a chair at Columbia, Stiglitz has stepped up his crusade to reshape the popular debate about globalization. At Columbia, he has launched an organization, the Initiative for Policy Dialogue, designed to furnish developing nations with alternative views on everything from trade policy to financial reform. His lectures on campus draw overflow audiences, and being purged from the World Bank seems only to have enhanced his mystique in the developing world. He is an adviser to several developing countries, including Serbia and Bulgaria, and he meets informally with the leaders of many more, often dispensing advice that puts him at odds with the IMF. He was recently flown down to Mexico at the invitation of that country's Foreign Ministry; afterward, he went to Ecuador to meet with leaders of that nation's central bank.

Stiglitz, 58, is hardly the first person to accuse the IMF of operating undemocratically and exacerbating Third World poverty. But he is by far the most prominent, and his emergence as a critic marks an important shift in the intellectual landscape. Only a few years ago, it was possible for pundits to claim that no mainstream economist, certainly nobody of Stiglitz's stature, took the criticism of free trade and globalization seriously. Such claims are no longer credible, for Stiglitz is part of a small but growing group of economists, sociologists and political scientists, among them Dani Rodrik of Harvard and Robert Wade of the London School of Economics, who not only take the critics seriously but warn that ignoring their concerns could have dire consequences. In his new book, Globalization and Its Discontents (Norton), Stiglitz argues that many of the complaints voiced by protesters in recent years-. that IMF structural adjustment programs have caused widespread suffering; that free-trade agreements mainly benefit the rich; that privatization has proved disastrous in many countries-have a solid basis in fact. Unless the rules of global capitalism are radically altered, he warns, the gap between the world's rich and poor, and hence the social conditions that have fueled instability in places like Pakistan, will not go away anytime soon.

How did an economist who until recently enjoyed the trust of the world's most powerful financial authorities come to sympathize with their most ardent critics? Stiglitz's break with the World Bank has earned him a reputation in the business press and among policy elites as an enfant terrible inclined to stir up trouble wherever he goes. His academic peers, however, describe him in markedly different terms. "There is something innocently nice about Joe," says Jagdish Bhagwati, one of his colleagues in the economics department at Columbia. "He's a big puppy dog," says Barry Nalebuff, an economist at Yale who has written papers with him.

In person, Stiglitz indeed comes across as good-natured and agreeable. When we first met, he invited me to his house for dinner. When he spoke about his experiences at the World Bank, his voice betrayed not a trace of bitterness. With his scruffy gray beard and frequently disheveled appearance-he is famous for walking around shoeless, and has trouble keeping his shirt tucked in-Stiglitz looks like the typical absent-minded professor. He also acts like one. Most of our interviews began at least an hour later than originally scheduled, a pattern that Stiglitz appeared to take in stride, as though this were an inevitable part of being Joseph Stiglitz.

And yet beneath the mellow exterior lies a fiercely independent, and at times disputatious, thinker. As far back as high school, when he was a star on the debating team, Stiglitz displayed a taste for intellectual combat, and an occasionally acid tongue. Asked once what developing countries should do with the annual reports the IMF prepares on member nations, Stiglitz recommended "picking it up, saying 'thank you very much' and dropping it straight in the garbage can."

As a scholar, moreover, Stiglitz has been nothing if not iconoclastic, devoting much of his career to challenging one of the bedrock assumptions of neoclassical economics: that markets nearly always act perfectly on their own. Stiglitz has argued that because of asymmetric information-the fact that one party in an economic transaction often knows more than the other-inefficient outcomes are common, and therefore that government intervention is often warranted.

Stiglitz's skepticism about markets can be traced back to his childhood. The son of an insurance agent and a public school teacher, he grew up in Gary, Indiana, the same steel town that produced another Nobel Prize-winning economist, Paul Samuelson. His family was middle-class, but Stiglitz says the periodic layoffs and plant closings in Gary sensitized him at an early age to the bruising realities of a concept-cyclical unemployment- he would later study as a graduate student in the economics program at MIT.

Stiglitz enrolled at MIT in 1963. Five years later, at the age of 26, he was appointed a full professor of economics at Yale. Shortly thereafter, he was invited by the Rockefeller Foundation to go to Kenya. Witnessing the wrenching poverty in the slums of Nairobi sparked a lifelong interest in development policy. But Stiglitz noticed something else as well: In many developing countries, a seemingly inefficient system of farming-sharecropping-continued to predominate. From the standpoint of efficiency, this made no sense (sharecroppers have little incentive to work hard). It did make sense, however, if there was no other way for landlords to monitor workers' output. The problem, in other words, was imperfect information, affecting both their behavior and contractual relations. Over the next few decades, along with a growing school of economists including Berkeley's George Akerlof, he would produce rigorous mathematical models showing that asymmetric information was pervasive and made a measurable difference in everything from the way insurance companies operated to the way corporations treated their workers.

The author of a dozen books and several hundred prominent articles, Stiglitz has achieved eminence as a theorist that is not widely disputed. "If you had asked a broad number of economists before this year whether Joe would at some point win the Nobel Prize, literally 100 percent would have said yes," says Alan Blinder, an economist at Princeton. Where scholars disagree is in the policy prescriptions that should be drawn from Stiglitz's work. "There are people who would say information may be imperfect, but that government intervention to fix the problem will only make things worse," says Blinder.

For all his skepticism about laissez-faire economics, Stiglitz has never been known as a radical. He is a liberal with populist leanings, not a Marxist, and before coming to the World Bank had served as chairman of President Clinton's Council of Economic Advisers, not a job suited for hard-line critics o capitalism. Although he was aware of NGOs and activists who considered the IMF and World Bank neocolonial institutions, Stiglitz says he arrived at the World Bank full of optimism-some would say naive optimism-about the positive role he could play in shaping development policy. "I didn't really take [the criticism] at face value," he says.

That would soon change. In March of 1997, barely a month into his job, Stiglitz flew to Addis Ababa to meet with a group of Ethiopian officials who had become embroiled in a bitter dispute with the IMF. Several months earlier the IMF had suspended Ethiopia's lending program after growing dissatisfied with the way its economy was being run. Stiglitz found the suspension baffling, for the Ethiopian economy appeared to be in good shape: Inflation was low, output was rising and, after decades of famine, the government had launched a rural development program focusing on the needs of the poor. The IMF, however, claimed that Ethiopia was too dependent on foreign aid, which could dry up and then cause a budget crisis, and had failed to meet certain conditions on its loans, such as deregulating its financial market.

Upon returning to Washington, Stiglitz pointed out that the Ethiopian government had resisted financial deregulation for good reason: In neighboring Kenya, the policy had led to higher interest rates, which devastated poor farmers. For several weeks, he waged an intense-and, in the end, successful-internal campaign to get the IMF program restored. But the experience left him deeply embittered. "I found the whole thing astonishing," he says. "Not just the policies but the way the IMF interacted with this country, basically just telling Ethiopia what to do regardless of what its leaders thought."

No sooner had the Ethiopia dispute been settled than the 1997 Asian financial crisis struck-and the tension between Stiglitz and the IMF deepened. To Stiglitz, the crisis, which began with the collapse of the Thai currency and soon spread to Malaysia, Korea, Indonesia and the Philippines, highlighted the danger of lifting constraints on short-term capital flows, a policy that both the IMF and US Treasury Department had enthusiastically promoted in the 1990s. Throughout Asia, governments that had followed their advice were reeling as investors whisked billions of dollars in speculative capital out of their countries overnight. Some nations that had maintained capital controls, such as India and Chile, avoided such problems while enjoying robust growth.

Stiglitz was not the only economist to question the orthodox view: In a widely cited article in Foreign Affairs, Jagdish Bhagwati, a prominent free-trader, blasted the "Wall Street-Treasury Complex," which had pushed unfettered capital flows for its own enrichment. But while Stiglitz expressed his views in more measured tones, being an insider made them far more explosive. In late 1997 the London Economist ran an article contrasting Stiglitz's position with that of the IMF and Treasury Department. The article, he would later learn, prompted an irate telephone call from Lawrence Summers, then Deputy Treasury Secretary, now president of Harvard, to James Wolfensohn. (Summers may have been especially angry because the article pointed out that he, too, had questioned the wisdom of liberalization before joining the Treasury Department, only to reverse course.)

Stiglitz had still not said anything directly critical of the IMF. When the IMF called on South Korea and other crisis-wracked nations to raise interest rates and cut spending as conditions for receiving loans, however, his frustration reached the boiling point. The IMF claimed these austerity measures would stabilize local currencies and restore investor confidence (not coincidentally, many of these investors might also be bailed out). But in meetings with top IMF officials, Stiglitz pointed out that most East Asian nations already had balanced budgets and high interest rates.

Adopting austerity measures could spur massive unemployment and bankruptcy; Western nations facing recessions would never consider such policies. In response, Stiglitz says, IMF officials told him countries needed to "feel the pain" in order to recover.

Stiglitz did not wait long to strike back. In a speech delivered in January 1998 in Helsinki, he declared that the solutions to the problems facing developing countries "will not be found in the Washington Consensus," whose rigid insistence on fighting inflation and "getting government out of the way" had failed to foster egalitarian development. At a press conference several months later, Stiglitz denounced the IMF's response to the Asian crisis as an abject failure. "Who is paying the price?... Workers who are going to be put out of jobs." Unemployment indeed increased fourfold in Korea, threefold in Thailand and tenfold in Indonesia, where cuts in food subsidies sparked riots.

Today, of course, most of the affected countries have recovered, leading the IMF's defenders to argue that in the end, its prescriptions worked. "In the countries where IMF guidance was followed promptly and without fail, recovery was faster, argues MIT's Rudiger Dornbusch. Not so, counters Stiglitz: A study by Dani Rodrik found that nations that defied the IMF and kept interest rates low, such as Malaysia, recovered more quickly than those that heeded its advice, such as Indonesia.

To some degree, the mounting criticism from Stiglitz and other quarters has had an impact. IMF officials recently acknowledged the potential risks of capital market liberalization, and both the IMF and World Bank have begun speaking more openly about debt relief and poverty reduction. But while the rhetoric has changed, Stiglitz maintains that a doctrinaire ideology of "free-market fundamentalism" continues to shape policy. The IMF and World Bank are pushing developing countries to privatize their pension systems, for example, which is highly controversial in the First World. The IMF demanded fiscal austerity in Argentina, where unemployment had reached 20 percent and, in December, sparked riots that led to the government's collapse. It preaches the gospel of free trade to developing countries-even though most Western countries built their economies by protecting certain industries and continue to subsidize some domestic producers. The blind push to privatize and deregulate has not only failed to fuel sustainable development, Stiglitz contends, but reflects an idealized vision of how markets function that neither economic theory nor concrete experience supports.

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."

Notwithstanding such pressure, a growing number of people within the World Bank seem to be questioning the official wisdom-and to be paying the price. In June 2000 the economist Ravi Kanbur resigned from the bank after reportedly feeling pressure to tone down the emphasis on poverty reduction in the annual World Development Report. More recently, the World Bank launched a disciplinary investigation into the conduct of William Easterly, a staff economist who had published an editorial in the London Financial Times (based on his book, The Elusive Quest for Growth) that questioned the effectiveness of IMF and World Bank development assistance projects in the postwar era. "The World Bank is like a church-it has a dogma," says David Ellerman, another staff economist, who recently published an editorial in a World Bank newsletter calling for greater tolerance for dissenting opinions. "The problem is that we are dealing with some of the most complex issues facing mankind."

Now that he is no longer bound by institutional constraints, Stiglitz is speaking his mind more than ever. His message is at once simple and incendiary. As he declared recently before a packed hall at Columbia's School of International and Public Affairs, "Countries have to own their development strategies.... Development is not just the accumulation of capital-it is about a transformation of society, a change in ways of thinking. That can't come if countries have everything dictated to them."

Stiglitz was there to talk about his new organization, the Initiative for Policy Dialogue, through which he hopes to do nothing less than end the World Bank and IMF's fifty-year monopoly on development policy. The IPD will, among other things, bring together task forces of economists to outline alternative approaches to a range of policy questions (trade, macroeconomic policy, pension reform). It will also oversee country dialogues, in which economists, policy-makers and members of civil society from developing countries will debate strategies and ideas. Such dialogues have already taken place in Serbia, Vietnam, Ethiopia and the Philippines.

Though ambitious, there is something amorphous about the IPD's mission. The organization does not, for example, put forward a clear-cut, alternative blueprint to the policies of the Washington Consensus. There are also questions about whether Stiglitz, whose lack of management skills was notorious at the World Bank, is capable of running such an organization effectively.

If the IPD's agenda seems nebulous, however, that's in part because its founder does not really believe in blueprints. The whole problem with the Washington Consensus, Stiglitz argues, is that it represents "cookie-cutter" economics: a uniform set of prescriptions imposed regardless of history, social conditions, institutional factors, information asymmetries. In a forthcoming essay on the ethics of serving as an economic adviser, Stiglitz argues that rather than prescribe solutions, economists should emphasize choices, underscoring the risks and trade-offs of pursuing various alternatives. As a rallying point for activists, promoting dialogue and highlighting alternatives may seem frustratingly murky. Yet there is also something potentially radical about it. At bottom, it is an argument for an end to unilateral rule by global elites, and for greater democracy in economic decisionmaking. It also puts the lie to the notion that in a global marketplace, there is only one true road to prosperity.

As Stiglitz notes, during the 1990s the number of people living in extreme poverty (less than $2 per day) increased by nearly 100 million. Other studies show that in places like Latin America, the policies of the Washington Consensus have not even succeeded in promoting growth, much less in reducing inequality. The events of September 11 bring home the fact that addressing such issues is important for security reasons as well as for moral ones. The point has not been lost on Stiglitz. "Clearly, terrorists can be people like bin Laden who come from upper-income families," he told me. "Nevertheless, abject poverty and economies without jobs for males between the ages of 18 and 30 are particularly good breeding grounds for extremism. Solving the economic problems doesn't eliminate the risk of terrorism, but not solving them surely enhances it."

Eyal Press is a writer based in New York. Research support was provided by the Investigative Fund of the Nation Institute.

*****

The globalizer who came in from the cold: Joseph Stiglitz

by Gregory Palast

International Socialist Review, Aug/Sep 2001

"It has condemned people to death," the former apparatchik told me. It was like a scene out of Le Carre. The brilliant old agent comes in from the cold, crosses to our side, and in hours of debriefing, empties his memory of horrors committed in the name of a political ideology he now realizes has gone rotten. But this was a far bigger catch than some used Cold War spy. Joseph Stiglitz was chief economist of the World Bank. To a great extent, the new world economic order was his theory come to life.

He is in Washington for this week's Spring Ministerial, the big confab of the World Bank and the International Monetary Fund (IMF). But instead of chairing the meetings of ministers and central bankers, Stiglitz was kept outside the blue police cordons the same as the nuns carrying a large wooden cross, the Bolivian union leaders, the parents of AIDS victims, and the other "antiglobalization" protesters.

Two years ago, the World Bank fired Stiglitz. He was not allowed quiet retirement; the U.S. treasury secretary demanded a public excommunication for Stiglitz's having expressed his first mild dissent from globalization World Bank style.

Here in Washington, we completed the last of several hours of exclusive interviews with Stiglitz for the Observer and BBC TV's "Newsnight" about the real, inside workings of the IMF, World Bank, and the Bank's 51 percent owner, the U.S. Treasury.

And here, from sources unnamable (not Stiglitz), we obtained a cache of documents marked "confidential," "restricted," and "not otherwise (to be) disclosed without World Bank authorization." Stiglitz helped to translate one from bureaucratese, a "Country Assistance Strategy." There's an assistance strategy for every poorer nation, designed, says the World Bank, after careful in-country investigation. But according to insider Stiglitz, the Bank's staff" investigation" consists of close inspection of a nation's five-star hotels. It concludes with the Bank staff meeting a begging, busted finance minister who is handed a "restructuring agreement" pre-drafted for his "voluntary" signature.

Each nation's economy is individually analyzed. Then, says Stiglitz, the Bank hands every minister the same exact four-step program. Step one is privatization-which Stiglitz said could more accurately be called "briberization." Rather than object to the sell-offs of state industries, he said national leaders-using the World Bank's demands to silence local critics-happily flogged their electricity and water companies. "You could see their eyes widen" at the prospect of 10 percent commissions paid to Swiss bank accounts for simply shaving a few billion off the sale price of national assets. And the U.S. government knew it, charges Stiglitz, at least in the case of the biggest "briberization" of all, the 1995 Russian sell-off. "The U.S. Treasury view was this was great, as we wanted Yeltsin reelected. We don't care if it's a corrupt election. We want the money to go to Yeltsin" via kickbacks for his campaign. Stiglitz is no conspiracy nutter ranting about Black Helicopters. The man was inside the game, at that time a member of Bill Clinton's cabinet as chairman of the president's council of economic advisers.

Most ill-making for Stiglitz is that the U.S.-backed oligarchs stripped Russia's industrial assets, with the effect that the corruption scheme cut national output nearly in half After briberization, step two of the IMF/World Bank one-size-fits-all rescue-your-economy plan is "capital market liberalization." In theory, capital market deregulation allows investment capital to flow in and out.

Unfortunately, as in Indonesia and Brazil, the money simply flowed out and out. Stiglitz calls this the "hot money" cycle. Cash comes in for speculation in real estate and currency, then flees at the first whiff of trouble. A nation's reserves can drain in days, hours. And when that happens, to seduce speculators into returning a nation's own capital funds, the IMF demands these nations raise interest rates to 30 percent, 50 percent, and 80 percent.

"The result was predictable," said Stiglitz of the hot money tidal waves in Asia and Latin America. Higher interest rates demolished property values, savaged industrial production, and drained national treasuries. At this point, the IMF drags the gasping nation to step three: market-based pricing, a fancy term for raising prices on food, water, and cooking gas. This leads, predictably, to step-three-and-a-half: what Stiglitz calls "the IMF riot."

The IMF riot is painfully predictable. When a nation is "down and out, [the IMF] takes advantage and squeezes the last pound of blood out of them. They turn up the heat until, finally, the whole cauldron blows up," as when the IMF eliminated food and fuel subsidies for the poor in Indonesia in 1998.

Indonesia exploded into riots, but there are other examples-the Bolivian riots over water prices last year and, this February, the riots in Ecuador over the rise in cooking-gas prices imposed by the World Bank. You'd almost get the impression that the riot is written into the plan.

And it is. What Stiglitz did not know is that, while in the States, "Newsnight" obtained several documents from inside the World Bank, stamped over with those pesky warnings "confidential," "restricted," "not to be disclosed." In one, last year's "Interim Country Assistance Strategy" for Ecuador, the Bank several times refers-with cold accuracy-that the plans could be expected to spark "social unrest," to use their bureaucratic term for a nation in flames.

That's not surprising. The secret report notes that the plan to make the U.S. dollar Ecuador's currency has pushed 51 percent of the population below the poverty line. The World Bank "assistance" plan simply calls for facing down civil strife and suffering with "political resolve"-and still higher prices.

The IMF riots (and by "riots" I mean peaceful demonstrations dispersed by bullets, tanks, and tear gas) cause new panicked flights of capital and government bankruptcies. This economic arson has it's bright side-for foreigners, who can then pick off remaining assets, such as the odd mining concession or port, at fire-sale prices.

Stiglitz notes that the IMF and World Bank are not heartless adherents to market economics. While stopping Indonesia from subsidizing food purchases, "when the banks need a bailout, intervention (in the market) is welcome." The IMF scrounged up nearly $100 billion to save Indonesia's financiers and, by extension, the U.S. and European banks from which they had borrowed. A pattern emerges. There are lots of losers in this system but one clear winner: the Western banks and U.S. Treasury, making the big bucks off this crazy new international capital churn. Stiglitz told me about his unhappy meeting, early in his World Bank tenure, with Ethiopia's new democratic president. The World Bank and IMF had ordered Ethiopia to divert aid money to its reserve account at the U.S. Treasury, which pays a pitiful 4 percent return, while the nation borrowed U.S. dollars at 12 percent to feed its population.

Now, we arrive at step four of what the IMF and World Bank call their "poverty reduction strategy": free trade. This is free trade by the rules of the World Trade Organization (WTO) and World Bank, which Stiglitz, the insider, likens to the Opium Wars. "That too was about opening markets," he said. As in the nineteenth century, Europeans and Americans today are kicking down the barriers to sales in Asia, Latin America, and Africa, while barricading our own markets against Third World agriculture. In the Opium Wars, the West used military blockades to force open markets for unbalanced trade. Today, the World Bank can order a financial blockade, which is just as effective and sometimes just as deadly.

Stiglitz is particularly emotional over the WTO's intellectual property rights treaty, which goes by the acronym "TRIPS." It is here, says the economist, that the new global order has "condemned people to death" by imposing impossible tariffs and tributes to pay to pharmaceutical companies for branded medicines.

By the way, don't be confused by the mix of the IMF World Bank, and WTO. They are interchangeable masks of a single governance system. They have locked themselves together by what are unpleasantly called "triggers." Taking a World Bank loan for a school "triggers" a requirement to accept every "conditionality"-they average 111 per nation- laid down by both the World Bank and IMF, including trade policies more punitive than [those of the] WTO.

Stiglitz's greatest concern is that World Bank plans, devised in secrecy and driven by an absolutist ideology, are never open for discourse or dissent. Despite the West's push for elections throughout the developing world, the so-called Poverty Reduction Programs "undermine democracy." And they don't work. Black Africa's productivity under the guiding hand of IMF structural "assistance" has gone to hell in a handbag, the continent's income dropping 23 percent in the past two decades.

Did any nation avoid this fate? Yes, said Stiglitz, identifying Botswana. Their trick? "They told the IMF to go packing." So then I turned on Stiglitz. OK, Mr. Smart-Guy Professor, how would you help developing nations? Stiglitz proposed radical land reform, an attack at the heart of "landlordism" on the usurious rents charged by the propertied oligarchies worldwide, typically 50 percent of a tenant's crops. So I had to ask the professor: As you were top economist at the World Bank, why didn't the Bank follow your advice? "If you challenge [land ownership], that would be a change in the power of the elites. That's not high on their agenda." Apparently not.

Ultimately, what drove him to put his job on the line was the failure of the banks and U.S. Treasury to change course when confronted with the crises-failures and suffering perpetrated by their four-step monetarist mambo. Every time their free-market solutions failed, the IMF simply demanded more free-market policies. "It's a little like the Middle Ages," the insider told me. "When the patient died they would say, 'Well, he stopped the bloodletting too soon, he still had a little blood in him."' So the solution to world poverty and crisis, then, is simple: Remove the bloodsuckers.

Gregory Palast is an award-winning reporter who writes the "Inside Corporate America" column for the Observer (London). His column and contact information are available at www.GregPalast.com.

Heroes

Home Page