Reflecting the changing face of the World Bank, Joseph Stiglitz is an economist who is a hero in some left- wing circles. Ferial Haffajee reports
World Bank leaders have traditionally been whipping boys. In the ranks of the international left wing, there is no type of banker more maligned or caricatured as the cold-hearted architects of world poverty.
The reason is these economists have, since the advent of the Bretton Woods institutions – the World Bank and the International Monetary Fund (IMF) – been responsible for economic structural adjustment programmes.
Steep cuts in social services like pensions, health care and education – necessary to reduce budget deficits – followed the implementation of these programmes and earned the bankers this reputation.
But this week an entirely new World Bank man visited South Africa: Joseph Stiglitz, the avuncular and affable 56- year-old chief economist and vice- president of the World Bank. He is engaging and non-dogmatic, as comfortable at the Reserve Bank – which he visited – as he was at the meeting of world spiritual leaders he came to address in South Africa.
Stiglitz has unseated many holy cows since the end of 1996 when he was appointed to his new job. He fired one of the first intellectual missiles in the attack against standard macro- economic thinking when he argued that “budget deficits can be okay, that macro-economic stability is the wrong target and that moderate inflation is not harmful”, according to a summary of his arguments by author Joe Hanlon.
This week the greybeard was at it again. He recommended in front of an audience which included first lady-designate Zanele Mbeki and Archbishop Njongonkulu Ndungane that “maintaining full employment should be at the centre of all economic policy”.
Then he added that all economists should take a type of Hippocratic oath when they receive their PhD degrees, promising they will never sculpt policies which create unemployment.
“We must provide employment for those who can work,” he said. “It’s partly about providing income, but it’s also about providing dignity. Employment must be a keystone. Those that do not pursue full employment must be attacked.”
Stiglitz spoke lyrically about poverty, about the problems with current measures of poverty and the pitfalls of calculating poverty on income levels alone. While “the dollar a day” measure of world poverty is relevant in determining “the magnitude of the problem”, it tells little of the human costs.
There were new sound bites, too: “Poverty reflects much more than income. Poverty encompasses a lack of security. [Poverty breeds] a lack of hope and the breakdown of values that leads to a sense that life is without meaning.”
Stiglitz is at the coalface of an institution which is working to make itself relevant. Faced with programmes which were failing as wealth failed to trickle down and world poverty stood firm in the face of its policies, the World Bank has for some years now begun to listen to its detractors.
In 1986 already, author Susan George wrote: “Agencies like the World Bank and the IMF … are no longer regarded as sacred cows. Their programmes and practices are being critically examined and they are increasingly seen as structures [that are] irrelevant or downright harmful to genuine development.”
Under the glare of criticism, the bank has become more open and inclusive. In Uganda it pioneered the first country assistance package designed with local NGOs. Its policy prescriptions, once stamped “Top Secret”, are now available for scrutiny.
This week’s meeting was the first of 10 global meetings at which World Bank leaders will talk about poverty and poverty reduction with world leaders before the release of the 10-year World Development Report in October next year.
The bank, too, has been caught off-guard by the international tremors of the global economy and it has watched almost helplessly as one after another emerging economy has tumbled. Africa has so far failed to stake a place in the international economy despite the bank’s ministrations for many years.
Stiglitz pleads for better risk- assessment techniques, and this week he again suggested that privatisation may not be the panacea it is painted to be. The state must be an active player in the economy, he argues.
Despite the hero status he has earned in some left-wing circles, Stiglitz is no advocate of radical economic shifts. He neatly side-stepped Ndungane’s call for international banks to scrap Third World debt. In fact, he didn’t deal at all with debt and argued in favour of the importance of export-led economies.
Development economists have a reputation for being aloof number-crunchers who see little more than the inside of hotel rooms in the countries for which they prescribe the economic medicine to cure ills. Their mantra that these countries “must swallow the bitter pill” has become a subject of scorn.
Stiglitz was tongue-in-cheek about the stereotype. He said: “Most of the people talking about taking the pain are in secure jobs and earning good salaries. There’s a lot more sharing of gain than the pain.”
Instead he is a master mechanic of contemporary capitalism. A Princeton graduate, he teaches at Stanford University in the United States and served on President Bill Clinton’s inner economic circle.
Among his many specialisations is the discipline of “market failures”. His curriculum vitae describes this approach as “attempts to delineate those areas … where the market, by itself, may lead to inefficient outcomes and where cost- effective government remedies may be developed”.
His economic recommendations remain a work in progress not yet tested en masse by implementation. His intention, however, is noble: to “free the poor from the powerlessness that is such a feature of poverty”.