November 25, 1999
Outspoken Chief Economist Leaving World Bank
By RICHARD W. STEVENSON
ASHINGTON -- Joseph E. Stiglitz said Wednesday that he would
resign as the World Bank's chief economist after using the position
for nearly three years to raise pointed questions about the
effectiveness of conventional approaches to helping poor countries.
Stiglitz, who joined the World Bank in February 1997 after
serving as chairman of President Clinton's Council of Economic
Advisers, said he would leave the bank at the end of the year and
would soon return to his academic post at Stanford University.
His departure will remove from Washington perhaps the most
outspoken voice in the debate over how rich countries can best aid
economic development in poor and crisis-afflicted nations. Over the
last two years in particular, Stiglitz had antagonized officials at
the International Monetary Fund and within the Clinton
administration by criticizing their response to the financial
crisis in Asia and their strategy for encouraging the development
of democratic capitalism in Eastern Europe and the former Soviet
Stiglitz said the decision to leave had been his. Treasury
Secretary Lawrence Summers praised Stiglitz as a "major creative
and intellectual force," and administration officials said the
United States had not sought Stiglitz's removal. Caroline Anstey, a
spokeswoman for the World Bank, said Stiglitz had "absolutely
not" been forced out, and the bank's president, James D.
Wolfensohn, praised Stiglitz for having helped to move the
institution "away from the so-called Washington consensus."
But Wolfensohn has suggested in the past that Stiglitz was too
quick to second-guess the international aid agencies and the big
industrial nations that control them. "I think that his recent
things about Russia, in my judgment, are not wholly correct,"
Wolfensohn said during the bank's annual meeting this autumn. "I
think to stand back later and say, 'If you'd done it my way
everything would have been different,' is a little generous to
Stiglitz made no secret Wednesday of feeling constrained in his
ability to speak out as freely as he wished. He said he was looking
forward to the unfettered freedom of expression afforded by his
return to the academic world.
"Whenever you're in an organization there are some pressures,"
Stiglitz said in an interview. "I felt that it was important for
my intellectual integrity to be able to express myself as
forcefully as I thought was appropriate."
A liberal with a strong belief that governments and institutions
have a significant role to play in economic development and that
market forces cannot be counted on to deal with every problem,
Stiglitz challenged the prevailing orthodoxy among policy makers in
He said that the monetary fund went overboard in Asia in
demanding that the countries ensnared in the financial crisis cut
their budgets, arguing that fiscal austerity sometimes extracted
too high a price from poor people without generating a
corresponding improvement in international economic confidence.
He took issue with the view held by the fund and the U.S.
government that controls on the international flow of capital were
counterproductive or impractical, saying that in some cases it was
justified to restrict short-term flows of money in and out of a
developing economy. He said industrialized countries sometimes
pushed developing nations too fast to deregulate their financial
He suggested that the United States and the monetary fund had
failed to acknowledge that their prescription for Russia -- quick
privatization of state-owned industries, an end to state oversight
of the economy, abolition of price controls and an opening up to
the rest of the world -- had not produced the intended results and
indeed had left many people worse off.
"Stiglitz has been a very strong advocate for the poor and the
excluded, and he's been one of the best things in the World Bank in
the last decade," said Seth Amgott, a spokesman for Oxfam, which
promotes poverty-fighting policies. "He's also been very pointed
and insightful in discussing the role of the IMF. We're not used to
that kind of candor."
Stiglitz won few friends among economists and policy makers at
the Treasury Department and the monetary fund. But his message was
greeted enthusiastically in poor countries, and he said he was
leaving the bank feeling that he had helped to stimulate a more
vigorous debate about the policy prescriptions that wealthy nations
impose on developing countries.
"On some of the specific issues, there has emerged really a
broad consensus behind the views I took," Stiglitz said.
"There's a recognition that policies in East Asia were
excessively contractionary on the fiscal side," he continued.
"There's a recognition that capital market liberalization, in the
absence of adequate regulatory structures, exposes countries to
much higher risks. And on the debate about economies in transition,
there's a general consensus that the issues I've been raising are
the right issues, and that while no one has the answers, we're not
going to get answers until we're willing to ask the questions."
Stiglitz had told friends recently that he intended to leave,
and he informed Wolfensohn Wednesday morning of his decision.
Wolfensohn said Stiglitz would continue to act as an adviser to him
and Stiglitz would lead the search for a new chief economist.
Ms. Anstey, the bank's spokeswoman, said that asking Stiglitz to
head the search committee was a signal of the institution's
"intention to select someone who will continue the
Wolfensohn-Stiglitz agenda" of focusing more on the needs of poor
countries and less on more orthodox policies developed in
Stiglitz said his approach was built around two basic themes:
giving more of a voice to poor nations in setting policy and
recognizing the crucial role that government must play in economic
"We are rebalancing our thinking about the role of the state,"
Stiglitz said. "Some of the failures, like in East Asia, involve
cases where government did too little, like in financial
regulation, rather than too much."