Who is Joseph Stiglitz, and how has this otherwise bland academic economist managed to become the Howard Beale of Washington, infuriating colleagues up and down Pennsylvania Avenue?
Howard Beale, you will recall, was the anchorman in the movie "Network" who got tired of repeating the usual TV blather and began proclaiming: "I'm mad as hell, and I'm not going to take it anymore!"
Stiglitz is chief economist of the World Bank, a job that normally generates as much controversy as chief statistician at the Chamber of Commerce. His rants come with footnotes and mathematical equations. But in a town that prizes discretion and cautious consensus, Stiglitz recently has emerged as the economist's version of a bull in a china shop.
Ever since he joined the World Bank two years ago after a stint as chairman of the Clinton administration's Council of Economic Advisers, Stiglitz has been on something of a mission. He's been traveling the world telling the truth about economics, as he sees it, and denouncing the mistakes of fellow policymakers. In the process, he's been giving a lot of important people heartburn--including his boss, World Bank President James Wolfensohn, and Treasury Secretary Lawrence Summers.
Take, for example, Stiglitz's trip to China last July. The visit came at a particularly delicate time, just after China's central bank governor had suggested that Beijing might consider devaluing its currency, the yuan. Financial markets were jittery, and so were finance ministers from Bangkok to Washington, who worried that a Chinese devaluation might plunge Asia into a new financial crisis.
So what did the World Bank's roving economist have to say? According to the headline in the July 26 Financial Times, Stiglitz said a devaluation "could be good for China's economy" by helping to alleviate the problem of deflation. Like most of Stiglitz's comments, this one had some intellectual justification--there's a growing body of opinion that the Chinese should modestly devalue their currency to encourage growth.
But in Washington, officials were livid. Tim Geithner, Treasury's top international economics official, asked the World Bank to issue a statement repudiating Stiglitz's comment. The bank drafted a careful release explaining that it wasn't officially advising the Chinese to devalue, but Treasury wanted a more explicit disavowal of Stiglitz's comments.
Wolfensohn then talked directly with Summers, arguing that it would be wrong to denounce Stiglitz simply on the basis of the Financial Times report, which might have misinterpreted what he'd said. The two agreed to let the matter rest.
Then came Stiglitz's broadside on Russia. An Aug. 8 article on "Who Lost Russia?" in the New York Times magazine quoted Stiglitz attacking Summers and other officials at the World Bank and the IMF who had favored rapid privatization of the Russian economy.
"[T]hose who put privatization above all else were clearly wrong," he said. Without strong legal institutions, Stiglitz suggested, the Russian version of instant capitalism quickly turned corrupt as the new capitalists "took their money out."
Here again, Stiglitz's comments had intellectual merit. Many people now agree that Russian economic reform has become an exercise in thievery. But Stiglitz's blunt, ad-hominem attack upset many colleagues.
This time, Wolfensohn publicly repudiated his chief economist. Asked at a press conference last month about Stiglitz's views on Russia, the World Bank president tartly rebutted the Russia critique: "[T]o stand back later and say, 'If you'd done it my way everything would have been different,' is a little generous to yourself." He called his chief economist "idiosyncratic" and "usually interesting."
Michel Camdessus, the IMF's managing director, chimed in the same day. The IMF had been peeved at Stiglitz ever since he attacked the fund back in December 1998, contending in a report that the IMF's austerity policies had made the Asian financial crisis far worse than necessary. A Washington Post story at the time described Stiglitz's comments as "exceptionally scathing."
Now Camdessus had a bankerly sort of revenge. Asked about Stiglitz on Sept. 24, the Frenchman made reference to Wolfensohn's criticism and observed: "There is a saying in my country which goes . . . 'Never shoot at the ambulance.' I see that my friend Mr. Stiglitz has problems with his boss. I will not add to his problems."
As they say in Hollywood, You'll never eat lunch in this town again.
What makes the Stiglitz contretemps so unusual is that Washington policymakers almost never speak their mind in ways that will offend people. It's regarded as bad manners and worse--it's disruptive to the policy process.
I don't agree with all of Stiglitz's critiques, but I do applaud his willingness to break the code. Washington needs more debate--more loose cannons--not less. Indeed, I had hoped Stiglitz might detonate a few more bombs for this column.
But his handlers say Stiglitz has decided to adopt a "lower profile" and is refusing interview requests. Now that's playing the game the Washington way.