Top IMF economist blasts Nobel winner Stiglitz
In an unusually personal and public rebuke, the International Monetary Fund’s top economist on Tuesday accused Nobel-winning economist Joe Stiglitz of slander, self-aggrandisement and intellectual vanity.
The blunt assault on Stiglitz, a former World Bank chief economist, came from IMF Chief Economist Ken Rogoff in response to the Columbia University professor’s best-selling new book, “Globalization and its Discontents,” which takes what the IMF man sees as too many cheap shots.
In his book, Stiglitz contends that IMF prescriptions of demanding that crisis-torn countries implement budget cuts and higher interest rates to restore market calm worsen recessions and plunge more people into abject poverty.
But in an open letter published on the IMF’s Web site, Rogoff berated his former academic colleague for his arrogance. He recalls a conversation with Stiglitz in the late 1980s about former Federal Reserve Chairman Paul Volcker—a man admired for his successful fight against inflation.
“At one point, you turned to me and said, ‘Ken, you used to work for Volcker at the Fed. Tell me, is he really smart?’ I responded something to the effect of, ‘Well, he was arguably the greatest Federal Reserve chairman of the twentieth century,’ to which you replied, ‘But is he smart like us?’”
With that scathing start, Rogoff unleashed a no-holds-barred attack on Stiglitz’s ideas and his latest work, in which Stiglitz derides IMF policy prescriptions during the Asian financial crisis of 1997-99, in Russia and elsewhere.
Tensions have long existed between the IMF and World Bank.
While the IMF helps governments formulate macroeconomic policy, the World Bank works on issues related to poverty.
Officials from both institutions have often bickered privately about this delicate division of labour.
But rarely have those differences been made so public or articulated so eloquently.
Of Stiglitz’s criticism of the IMF’s proposal for allowing nations to declare bankruptcy, Rogoff said, “In February you sharply criticised the whole idea ... now (you) want to take credit as having been the one to strongly advance it first.”
“Your book is long on innuendo and short on footnotes.”
Stiglitz, known for his forthright statements, certainly created a stir with his latest work. The New York Times, in a June review, praised much of his insight. But it found flaws.
“His book seems overly tendentious, even vengeful,” Times reviewer Joseph Kahn wrote, before taking the renowned economist to task for “conceit,” for being “sanctimonious” and for writing a book, “full of innuendo.”
Rogoff notes that Stiglitz, who was ousted from the World Bank in 1999 for his outspoken comments, paints himself as “a heroic whistleblower, speaking out against macroeconomic policies adopted during the 1990s Asian crisis that you believed to be misguided.”
“Do you ever think that just maybe, Joe Stiglitz might have screwed up? That, just maybe, you were part of the problem and not part of the solution?”
In a World Bank-hosted private debate last Friday, Stiglitz stood by his book but conceded he was worried about making anti-globalisation comments while working at the World Bank.
“Yes, I was worried about it and I spent months talking about it in private,” Stiglitz said, adding that at that time the IMF was unwilling to talk to him or debate his concerns.
Of Stiglitz’s assertion that governments should print more money when investors are nervous, Rogoff was particularly harsh: “We at the IMF - no, make that we on the planet Earth - have considerable experience suggesting otherwise.”
“We earthlings have found that when a country in fiscal distress tries to escape by printing more money, inflation rises, often uncontrollably.”
But it was in defence of Stanley Fischer, the former IMF first deputy managing director who was at the forefront of IMF policy during the Asian crisis, that Rogoff was most acerbic.
In his book, Stiglitz suggested a possible conflict of interest in Fischer taking a top job at Citibank upon leaving the IMF—a job that saw Fischer rejoin former U.S. Treasury chief Robert Rubin, another mastermind behind Asian bailouts.
“Stan Fischer is well known to be a person of unimpeachable integrity,” Rogoff wrote.
“Of all the false inferences and innuendoes in this book, this is the most outrageous. I’d suggest you should pull this book off the shelves until this slander is corrected.”
“Joe, as an academic, you are a towering genius. Like your fellow Nobel Prize winner, John Nash, you have a ‘beautiful mind.’ As a policymaker, however, you were just a bit less impressive,” Rogoff said.
Stiglitz shared a Nobel Prize last year for his work analysing the imperfections of markets. - Reuters