November 26, 1999	atimes.com

Global Economy 'Gentleman Joe' leaves World Bank By Abid Aslam WASHINGTON - The World Bank's Chief Economist Joseph Stiglitz, who crossed swords with the International Monetary Fund over the 1998 Asian financial crisis, will leave the global lending agency next month, the Bank announced Wednesday. Known among his associates as ''Gentleman Joe'' - because of his collegial manner, collegiate style and infectious smile - the independent-minded Stiglitz launched sometimes searing attacks on the Bank's Bretton Woods sibling - the IMF. Stiglitz joined the Bank in February 1997 after a career in academia and as Chairman of US President Bill Clinton's Council of Economic Advisers. He planned to return to research and teaching but had agreed to stay on as special adviser to Bank President James Wolfensohn and to head a committee to find a successor, the Bank said in a statement. In becoming chief economist of the Bank, Stiglitz followed such figures as Stanley Fischer, now first deputy managing director of the IMF, and Lawrence Summers, now the US Treasury Secretary. He was at odds with both. He lambasted the Fund for what he saw as its indiscriminate and unsound insistence that countries in economic tailspin - notably the former Asian ''tigers'' - implement deflationary policies. ''These are crises in confidence,'' he said of the fiscal wild fire that swept Asia in January, 1998. ''You don't want to push these countries into severe recession. One ought to focus...on things that cause the crisis, not on things that make it more difficult to deal with.'' He defended Asian governments' fiscal performance in the face of IMF demands for immediate interest-rate hikes and budget cuts. ''Virtually every American economist rejects the balanced-budget principle during a recession,'' Stiglitz added pointedly. ''Why should we ignore this when giving advice to other countries?'' His attacks on the IMF - and, by extension, the US Treasury-led 'Washington Consensus' on economic liberalization and global market integration - won praise from many outsiders and even some dissenters within the Bank. They caused tension, however, in his relations with Wolfensohn. The Bank president, no stranger to the soapbox himself, always exercised caution when commenting on the policies of the IMF and the Bank's strongest shareholders - particularly the United States. Reaction to Stiglitz's public act of dissent was severe. Managing Director Michel Camdessus and other senior IMF officials called to demand that Stiglitz be put on a short leash, senior Bank sources told IPS at the time. And, according to two officials, Summers - who was then Deputy Treasury Secretary - paid a personal visit to vent spleen before Wolfensohn and other Bank higher-ups. Stiglitz subsequently vanished from public view and telephone callers to his office were told he was ''unavailable''. Another Bank vice-president, asked about the chief economist's fate, joked to IPS: ''We tied him up and threw him in a padded cell.'' As a practical matter, the agency could not muzzle its politically well-connected chief economist for long. A tamer Stiglitz eventually resurfaced and - taking his cue from the Bank's external relations staff - said his comments had been offered in the Socratic tradition of nurturing debate. Nevertheless, the dispute continued to fester as Bank and IMF economists took thinly-veiled pot shots at one another. Hostilities flared again in September, 1998 when the Bank's Global Economic Prospects report assailed the high interest rates and austerity measures the IMF had demanded of crisis-stricken Asian countries - though the document took care not to name the Fund. ''You ask the question, 'Who are you protecting?' '' by raising rates, Stiglitz said in releasing the report. ''You're protecting firms that gambled'' on currency markets. ''Who is paying the price?...Workers who are going to be put out of jobs.'' Events had forced a softening of that stance - including recognition that Asian countries would have to run bigger budget deficits than originally prescribed, the report acknowledged. But the initial hard line had wreaked ''contractionary consequences'', deepening the crisis in Asia and adding to a ''substantial risk'' of global recession. Wolfensohn denied media reports saying that the report and Stiglitz's comments amounted to a broadside against the IMF's initial response to the turmoil in Asia. But the bullet had left the barrel and IMF Chief Economist Michael Mussa returned fire. ''Those who argue that monetary policy should have been eased rather than tightened (immediately after crisis struck) are smoking something that is not entirely legal,'' Mussa quipped. Stiglitz shot back, disparaging the high interest rate policy as ''bad psychology and worse economics''. Despite those skirmishes along 19th Street, which separates the headquarters of the World Bank and the IMF in downtown Washington, the agencies worked together to assemble more than $100 billion in financial bailouts - only to see 40 percent of the world economy fall into recession anyway. ''The Bank has pushed the same policy of deregulating financial markets that led to the instability,'' said author and veteran Bank-watcher Catherine Caufield. In the aftermath of crisis, ''the Bank has been trying to distance itself from the IMF, but the fact is that it has pursued the same flawed policies since the 1980s.'' Wolfensohn, in a statement Wednesday, skirted the more interesting aspects of Stiglitz's tenure at the Bank. ''Joe has an extraordinary mind,'' Wolfensohn said. ''We will miss him greatly but we will carry on with the work begun five years ago to transform the development business as we know it...in the three years that Joe has been with us, he has contributed greatly to that endeavor.'' (Inter Press Service)

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