By Joy McMasters
Daily Bruin Staff
The protests which so frequently surround the meetings of
international financial institutions demonstrate that at least some
think they need reform, and yesterday, the chief economist from the
World Bank agreed.
Joseph Stiglitz, the organization’s chief economist and
U.S. economic policy adviser, shared his thoughts Monday in Korn
Convocation Hall on the failures of international financial
organizations such as the International Monetary Fund as part of
the Forum Public Policy Lecture series.
“The purpose of these lectures is to benefit from the
real-world experience of economists as they deal with public
policy,” said economics professor Costas Azariadis, who
introduced the speaker.
“It’s an interesting balance between ivory tower
thinking and real world problems,” Azariadis added.
Though Stiglitz titled his lecture “Reforming
International Financial Institutions,” he focused on one, the
IMF.
“There are fundamental differences between the IMF and the
World Bank,” Stiglitz said. “The World Bank has to
interact with every facet of government and has a broader sense of
what is going on in the country.”
Because of this, he called the bank more in check and added that
its goal is to give countries control rather than forcing
reforms.
The IMF’s goals include increasing worldwide economic
stability and helping former communist states transition to a
market economy, but Stiglitz said successes in these countries have
come from ignoring IMF policies.
“The outcomes have not been the outcomes promised by the
international financial institutions,” Stiglitz said.
“Over the past 25 years, economic crises have been more
common and deeper,” Stiglitz said. “Rather than leading
to stability, (IMF policies) have had an adverse effect.”
He said this can be seen in the IMF’s handling of a recent
recession in Thailand.
The economy was on a downturn, and the IMF recommended
increasing taxes and decreasing spending though the reverse has
been shown to stimulate economies, according to Stiglitz.
“In retrospect, the IMF has recognized it made a
mistake,” Stiglitz said. “It is unambiguously clear
that the policy was just wrong.”
Though statistics on the overall Thai economy were slow in
coming, before long it was learned that car sales, which are an
indictor of economic health, were down about 70 percent.
“I would have resigned at seeing that,” Stiglitz
said.
He said the approach to transitioning Russia to a market economy
has been a “dismal failure” as well.
“Many recognized there might be a transition recession,
but hoped it would be short-lived,” Stiglitz said.
Instead, about half of Russians still live on less than $4 per
day, production levels are only 40 to 50 percent of what they were
10 years ago, and product consumption also reflects a lowered
standard of living, he said.
Some point to traffic jams of luxury cars in Moscow as proof the
economy is improving, but Stiglitz said they just show the rich
getting richer and the poor getting poorer quickly.
An audience member asked Stiglitz what he would do to improve
Russia’s economy if he were given the power to do so.
“Russia ought to rigorously enforce tax and credit
laws,” Stiglitz said. “In the United States if you
don’t pay your taxes, the government seizes your property. In
Russia if you don’t pay your taxes, you just don’t pay
your taxes.”
Though he focused on IMF failures, dozens listened to
Stiglitz’s thoughts about the global economy.
“It’s nice to have a speaker who is as direct and
outspoken about public policy issues,” said John Keffer,
president of Forum Financial Group, which funds the lecture
series.
“It’s important to sponsor things that allow public
policies to be publicly debated,” Keffer said.