How progressive is Stiglitz?

by Eduardo Gudynas – The figure of economist Joseph Stiglitz appears increasingly often as a reference and source of inspiration for many advocates of new development policies. We find ourselves in a situation where a traditional economist appears as a figure that is cited by the most diverse array of alternative movements. There is something odd in all this: Stiglitz is still a conventional economist and his positions are nearly always rooted in the liberal tradition.

The figure of economist Joseph Stiglitz appears increasingly often as a reference and source of inspiration for many advocates of new development policies. We find ourselves in a situation where a traditional economist appears as a figure that is cited by the most diverse array of alternative movements. There is something odd in all this: Stiglitz is still a conventional economist and does not advocate for any radical or revolutionary change in development economics. On the contrary, his positions are nearly always rooted in the liberal tradition.

It is true that Stiglitz has strongly attacked several of the current economic views. But it is necessary to put his concerns into perspective. His figure gained relevance owing to his sharp criticism of the International Monetary Fund (IMF), and particularly of how some structural adjustment recipes were applied. Although his most popular book, “Globalization and its Discontents”, published in 2002, refers to a title that calls for a revision of all current global processes, that which in fact prevails in its pages are concerns and allegations about the behavior of the IMF. It has a lot to do with personal disputes and jealousy, typical of the Washington-based international community.

Stiglitz starts from a narrow vision of globalization. He defines it as an economic process that is understood as the “removal of barriers to free trade and the closer integration of national economies”, where its “potential” is “to enrich everyone in the world, particularly the poor”. This is an essentially economic globalization, which has in itself a positive potentiality that is not under discussion; the debate should be rather focused on the way that it is “managed”. From the expression of these ideas in “Globalization and its Discontents”, he launches a particular attack on the IMF. Almost everything that is said there is true; from the myopic implementation of instruments to the arrogance of IMF staff in pressing for structural reforms.

However, Stiglitz fails to put forward similar concerns about the Fund’s sister institution, the World Bank. Let us remember that this economist held a top position at the Bank from 1997 to January 2000. Stiglitz has a rather simplistic vision of the World Bank, since he presents it as an institution that is dependent on IMF decisions, and fails to adequately address its role as promoter of development programmes and papers, under which reforms ranging from social security to investments in infrastructure were designed. Although less well-known than the famous letters of intent and structural adjustment programmes of the IMF, World Bank agreements, both in the form of development programmes and structural loans, were responsible for strengthening market reforms until only recently. During Stiglitz’s period in office, no substantial improvements in redressing the social and environmental impact of Bank-financed projects were registered, nor conditions in terms of transparency and access to information were improved.

World Bank reports and particularly its annual world development reports, followed the same line. It is true that the edtition on poverty (2000/2001) became the focus of certain controversy, with the participation of Stiglitz, but anyway the emphasis was placed on “second-generation” reforms. During Stiglitz’s period at the World Bank, a series of structural reform proposals for Latin America was completed, led by the office of the regional chief economist. Those years saw the rise of the well-known trio of authors made up of Shahid, J. Burki and Guillermo Perry, with the “long march” of reforms that should be implemented in Latin America, ranging from trade opening to state decentralization and municipalization. Many of these proposals have been put into practice in several countries.

Notwithstanding the fact that Stiglitz criticized the nomination of P. Wolfowitz to head the World Bank (which won him much approbation), let us not forget that his candidates were the former Mexican president Ernesto Zedillo, the former head of Brazil’s Central Bank, Arminio Fraga, and the former vice-president of the World Bank, Kemal Dervis (Turkey). His basic arguments were that they had experience in economic development and financial markets and were Yale and Princeton PhDs or taught at those universities, or that they had been strongly supported by the Financial Times (Stiglitz in El País, Madrid, March 12, 2005). None of these arguments are truly convincing from a perspective of renewal.

Stiglitz indeed says many interesting things about economics, and at times has heterodox sparkles. It is a very good thing to read him and think about his points. It is also true that his criticism on the future of the core community of global technocrats in Washington, has a strong impact. But it should also be acknowledged that he has a simplistic vision of globalization since he insists on its conventional economic aspects. One of the phrases used by Stiglitz I prefer in order to illustrate his simplicity can be found in the conclusions of “Globalization and its Discontents”, when he asserts: “The world is a complicated place”. He could be expected to deliver a more detailed analysis, although nobody can deny that the world is in fact a complicated place. For many years now and in much more detail, many other economists and social leaders have been saying exactly the same thing.

There are also other processes that are evidently operating along with globalization, such as those ranging from the field of political ideologies to cultural consumption patterns. Stiglitz mentions them once in a while, intuitively perceives them sometimes, but fails to delve deeply into them. For instance, he does not explore an alternative economy with regards to the issue of poverty; there is no dialogue with the position of Amartya Sen; a political reform for a new economy should be further explored, and so forth as regards many respects. Nearly all of Stiglitz’s texts, end up concluding that progress still needs to be made as regards problems; an interesting analysis is announced and a thorough study is thus presupposed, such as the role of the WTO or the renewal of the United Nations…but we remain at the surface of administrative correction and management reforms. Stiglitz’s alternative proposals represent almost a quick revision, stuffed with certain air of superiority, which therefore runs into the problems of recipe books. It is “another recipe”, which in spite of having some quite interesting aspects, is still a recipe. Possibly, the most clear example was given by his text “Towards a New Agenda for Latin America”, published by ECLAC in 2003 and circulated in many countries. A significant part of his proposals are still quite generic, and not substantially different from the “new” reforms being discussed at ECLAC, the IDB and even at the World Bank.

It is inevitable to take one step further and wonder why there are so many people delighted with Stiglitz�s writings. It would seem that the focal points of debate have shifted in such a way to the right that a liberal economist like Stiglitz ends up being labelled as progressive. Or else, we remain circumscribed to the search of people with outstanding reputations, Nobel prizes and faculty positions in the United States. Are not there at the heart of social movements alternative economists saying more or less the same thing? There are indeed, although I agree to some extent with José Luis Fiori when he states that the left has confronted many difficulties in creating its own economic programmes. But for the same reason the time has come to stop looking exclusively at the economics departments of universities in the Northern hemisphere to further promote dialogue and economic analysis within social movements themselves.

E. Gudynas is an analyst of development and sustainability issues at CLAES (Latin American Center Social Ecology) and D3E (Development, Economics, Ecology and Equity – Latin America).

Published in Peripecias Nº 16 on September 27, 2006.  Peripecias is a weekly published by CLAES D3E.