Re: My almost friend is not my enemy

["J. Barkley Rosser, Jr." <rosserjb@xxxxxxx>]

     I have just finished writing a
commissioned piece for a journal about
the recent Nobel recipients.  After
digging through the work of Stiglitz in
more detail over his whole career (the list
of his publications is 30 pages long, in
small font size), and also hearing some
personal insights from various folks, I am
convinced that Stiglitz has evolved and
changed his mind about things.  He is clearly
not a "full blown heterodox," but he is also
very clearly not the "golden boy of neoclassicism"
that he was early in his career.
     I think two things have happened.  One
is clearly his experiences within the policy
making arena, especially once he got to the
World Bank.  Major international crises erupted
after he got there and he clearly differed with
what the rest of those running things in Washington,
Summers and the IMF folks, were doing about it.
The other is that he has been through a long
process of gradual intellectual evolution that has
made him open to such a shift of views.  He has
always from a very early time been interested
in development problems and has written on how
peasants could be exploited by landlords, using
the asymmetric information approach.  Indeed, those
were some of his very earliest papers using that
approach and idea, after he picked it up from
George Akerlof's "lemons" paper of 1970.  This
evolution in turn reflects a broader opening up
that is going on among many economists who are
identified as "mainstream."  But, Stiglitz has
had a "slap across the face" experience at the WB.
I think the guy is someone who came in "looking
safe" and got "unsafe," partly based on his own
intellectual evolution, but I think partly taking
his own intellectual evolution seriously.  After all,
Larry Summers went through many of the same
intellectual paths, although not the sympathetic
to peasants work on development.  But, look how
he behaved and where he has ended up (Pres. of Harvard).
Barkley Rosser
----- Original Message -----
From: "Clifford Poirot" <cpoirot@xxxxxxxxxxx>
To: <pkt@xxxxxxxxxxxxxxxx>; "Gunnar Tomasson" <gunnar.tomasson@xxxxxxxxxxx>
Cc: <gang8@xxxxxxxxxxxxxxx>
Sent: Wednesday, May 15, 2002 9:55 AM
Subject: My almost friend is not my enemy


> I have argued in the past ( now in print in two places as of June) that
> Stiglitz is guilty of the sin of theoretical inconsistency on a number of
> points.
>
> That said, in many ways Stiglitz is probably the best of the New
Keynesians
> and has developed models that are in many ways consistent with at least
some
> Post-Keynesian directions in research. For example, Stiglitz' work on
credit
> rationing is certainly consistent with the view of some Post-Keynesians
that
> credit markets can be "lumpy" and that agents might have to resort to
rules
> of thumb in decision making. Of course, it would be good if Stiglitz would
> move from here to full acceptance of uncertainty.
>
> Stiglitz conception of the Microeconomy as characterized by non-market
> clearing, imperfect competition is at least not inconsistent with views of
> the Microeconomy advanced by heterodox economists such as Ingrid Riima.
>
> I will grant everyone on here that Stiglitz is not the second coming of
> Keynes. But is he really our enemy-or is he almost our friend?
>
> Stiglitz has made a lot of interesting theoretical contributions, that
IMO,
> are useful to some directions in Post-Keynesian research.
>
> -----Original Message-----
> From: Henry C.K. Liu [mailto:hliu@xxxxxxxxxxxxxx]
> Sent: Tuesday, May 14, 2002 10:26 PM
> To: Gunnar Tomasson
> Cc: pkt@xxxxxxxxxxxxxxxx; gang8@xxxxxxxxxxxxxxx
> Subject: Re: Argentina and the IMF
>
>
> Gunnar,
>
> I agree.  Hence the McNamara comparison.  Michsel Hudson's post on Peter
> Bauer
> was along the same thread.  The World Bank changed its mission from one of
> helping the poor to one of creating "friendly" conditions for private
> enterprise
> in poor countries.
>
> Had Bauer lived for a few more years, he migh see how his theories of
> economic
> development delivery the world into the hands of neo-fascism.
>
> Henry
>
> Subject:  Re: [gang8] Another bastard bites the dust
> Date:     Tue, 14 May 2002 21:24:16 -0400
> From:   "Henry C.K. Liu" <hliu@xxxxxxxxxxxxxx>
>  To:  gang8@xxxxxxxxxxxxxxx
>
> The evil that men do lives after them - Shakespeare.
>
> Neo-liberal market fundamentalism, after 2 decades of running amok all
over
> the
> world, has destroyed
> not only the economies of the developing world, but the advanced economies
> as
> well.  All the
> economies that followed neo-liberal policy advice, Hong Kong, Singapore,
> Argentina, Turkey, Russia,
> are all in emergency wards waiting for intensive care. Neo-liberal
> globalization
> has unleashed global
> terrorism that forces all societies to suspend civil libery in the name of
> national security. The US
> economy is heading for a collapse that makes the Great Depression of 1929
> look
> like a minor upheaval.
> The self destruction of financial capitalism may well originate from its
> fountainhead - the US, in the
> form ofneo-protectionism and neo-state interventionism.  Just look at
steel
> and
> agriculture, not to
> mention high tech.
>
> Henry
>
>
> Hudsonmi@xxxxxxx wrote:
>
>    "Peter Bauer, British Economist, Is Dead at 86," NYT, May 14, 2002.
>   In 1982 Mrs. Thatcher made him a life peer for his belief in free
markets
> rather than government planning. "Lord Bauer challenged the widely
accepted
> belief that development required extensive government involvement in
> economic
> life and large infusions of foreign aid, since so-called developing
> countries
> were trapped in a vicious circle  of poverty, lacking the income needed to
> produce savings and investment capital. He argued that if these
assumptions
> were true, the Western world would still be living in the Stone Age.
> Opportunities for private profit, not  planning and aid, held the key to
> economic growth, he said, and the duty of government was merely to ensure
> individual freedom, safeguard private property and enforce contracts."
>   But this was precisely what Mesopotamia did not do, at least in the
sense
> that
> it annulled debt contracts and
>   subordinated the idea of private gain to the long-term survival of the
> social
> community. (But then Mrs. Thatcher said  that there is no such thing as
> society.
> If she and Bauer had there way we would not be living in the Stone Age, to
> be
> sure; we wouldn't be living at all.)   He accused government planning of
> providing "'preferential treatment of the incompetent, the improvident and
> the
> dishonest' and tends to promote the 'politicization of economic life,'
> encouraging central planning and diverting a  country's energy from
economic
> to
> political ends."   "Lord Bauer's true intellectual affinity was with the
> Austrian economist Friedrich Hayek and the American Milton  Friedman, who
> helped
> inspire the economic policies introduced by Mrs. Thatcher and Ronald
Reagan
> that  emphasized the importance of giving free play to market forces and
> rejecting the centralized planning and demand  management associated with
> the
> Keynesian school of economics."
>   Bauer died on May 2, 2002. "The Cato Institute, a conservative research
> institution [the New York Times here uses a  euphemism for lobbying effort
> for
> financial raiders and tax-cutters] in Washington was scheduled to give him
> the
> first  Milton Friedman Prize for Advancing Liberty last Thursday [May 9],
a
> week
> after his death. The $500,000 prize has  now gone to his estate."   "He
> elaborated on these ideas in publications that included Economic Analysis
> and
> Policy in Underdeveloped  Countries (Duke, 1957); The Economics of
> Underdeveloped Countries (Nisbet, 1957); Markets, Market Control and
Market
> Reform (Weidenfeld & Nicholson, 1968), and Two Views of Aid to Developing
> Countries (Institute of Economic  Affairs, 1966)."
>   "Critics called his views extreme and exaggerated. But over the years
Lord
> Bauer and his allies brought about a shift  in the priorities of
aid-giving
> institutions [sic; they should have said aid-lending, or better yet,
> anti-aid
> lending] like the  World Bank. Financing dams and other large development
> projects went out of fashion, replaced by a new emphasis  on making
> developing
> countries [sic, he means non-developing ones] more friendly toward private
> entrepreneurs by  helping them foster an educated, healthy work force,
> provide
> basic infrastructure and, above all, ensure individual  freedom, good
> governance
> and the rule of law." Ie, the king of rule of law that will block and
> distort
> education, cut  back health care of the work cost and loot the basic
> infrastructure by turning it all into a Railtrack.
>  Good riddance.
>
>   The Wall Street Journal (Claudia Rosett, "A Toast to Liberty," also May
> 14)
> gives some more details about the Cato  affair. "At one table of
> dignitaries,
> the Nobel laureate and free-market economist Gary Becker noted:
'Twenty-five
> years ago it would have been hard to believe that free-market ideas could
> triumph so much.' Nearby, another Nobel  laureate, James Buchanan,
observed,
> 'We're not the back of the bus anymore.'"
>   This reference to blacks obliged to ride in the back of busses led the
WSJ
> to
> note that an Uncle Tom libertarian,  Walter Williams, was there, "one of
the
> first black intellectuals who years ago chose to turn against conventional
> thinking and promote the invisible hand, not welfare, as the way to a
better
> life for all, blacks included."
>   But the key guest was Milton Friedman, who had just come from the White
> House
> where Pres. Bush proclaimed him 'a  hero of freedom' in anticipation of
his
> 90th
> birthday. 'We've moved from an era of galloping socialism to an era of
> creeping
> socialism,' "but what we now need is an era of "'declining socialism.'"
>   The right-wing comedian P.J. O'Rourke concluded: 'The ugliest strip-mall
> shopping development is better than the  most beautiful gulag.' He then
> suggested that 'we all get drunk.'
>   So much for the libertarian caricature of government's role!
>
>   Michael
>
>
> Gunnar Tomasson wrote:
>
> > Henry:
> >
> > I don't know Stiglitz from Adam - but I do know that he would never have
> > been appointed as Chief Economist of the World Bank unless the powers
that
> > be had reason to regard him as "reliable".  That is to say, someone who
> > would not rock the boat.
> >
> > Galbraith wrote something to the effect that an astute scholar in
> economics
> > knows when to break with the past - that when the parade passing down
the
> > street is set to pass him by, he will step out smartly and take up the
> > banner of whatever the parade is about and march up front.
> >
> > All of which leaves me with but one question:
> >
> > Where the hell was Stiglitz when it counted?
> >
> > Gunnar
> >
> > ----- Original Message -----
> > From: "Henry C.K. Liu" <hliu@xxxxxxxxxxxxxx>
> > To: <pkt@xxxxxxxxxxxxxxxx>
> > Sent: Tuesday, May 14, 2002 6:57 PM
> > Subject: Re: Argentina and the IMF
> >
> > > Stiglitz parallels Robert McNamara as part and parcel of the
> establishment
> > > that got the world in a mess and late in life repented.  Stiglitz was
on
> > the
> > > faculty of MIT, Yale and Stanford, joined the Clinton administration
in
> > 1993
> > > as member of the Council of Economic Advisors, later was named the
> > Council's
> > > Chairman. In 1997 he took the post of Senior Vice President and Chief
> > > Economist at the World Bank, the same year of the Asian financial
> crises.
> > > Though a consummate political insider, and up to 1997 a card carrying
> > memeber
> > > of neo-liberal market fundamtalism and globalization, Stiglitz grew
> > > increasingly disillusioned with the failures of neo-liberal policy and
> > began
> > > to voice his thinking in public speeches. He was ousted from his World
> > Bank
> > > post, allegedly on orders from US Treasury Secretary Larry Summers.
His
> > > current policy
> > >
> > > Responding to Economic Crises:
> > >       Policy Alternatives for Equitable Recovery and Development
> > >
> > >                            Remarks at the North-South Institute
Seminar
> > >                                       Recovery from Crisis
> > >
> > >                                                by
> > >                                         Joseph Stiglitz
> > >                         Senior Vice President and Chief Economist
> > >                                        The World Bank
> > >
> > >                                Ottawa, Canada, September 29, 1998
> > >
> > > The most important policy for socially equitable development is full
> > > employment.
> > >
> > > In approaching the challenges of globalization, we must eschew
ideology
> > and
> > > over-simplified models.
> > > Today, with the continuing decline in economic activity in East Asia,
> with
> > the
> > > new crisis in Russia, with
> > > the contagion threatening economies elsewhere, faith in the market
> economy
> > is
> > > eroding in many parts of
> > > the world. It is now clear that the emphasis on privatization,
> > liberalization,
> > > and macroeconomic stability
> > > that dominated thinking about developing economies, represented
neither
> > fully
> > > captured the essentials of a
> > > market economy, nor provided a recipe for growth and stability, let
> alone
> > for
> > > the broader goals of
> > > democratic, sustainable, and equitable development.
> > >
> > > Our challenge today is to prevent the pendulum from swinging too far
to
> > the
> > > other side. A sound market
> > > economy integrated into the global system is the key to economic
> success.
> > But
> > > this requires sound
> > > institutional infrastructure, which in turn requires an effective and
> > > efficient government focusing on the
> > > essential functions of the public sector. We have a huge task in
> > redesigning
> > > the international architecture.
> > > But if we set our sights high, if we keep our objectives broad, if we
> keep
> > our
> > > instruments wide, if we
> > > eschew ideology but use all of the limited knowledge that we have
> > effectively,
> > > we can make progress.
> > >
> > > We must not let the perfect be the enemy of the good. In a downpour,
it
> is
> > > better to have a leaky umbrella
> > > than no umbrella at all. There are reforms to the international
economic
> > > architecture that can bring the
> > > advantages of globalization, including global capital markets, while
> > > mitigating their risks. We are beginning
> > > to see a new consensus forming around ways to restrain the risk of
"hot
> > money"
> > > and the goal of
> > > developing procedures for orderly workouts. Hopefully the continuing
> > > international dialogue on these and
> > > other issues will continue to make progress in these and other areas.
> > >
> > >
> > > dkostzer@xxxxxxxxxx wrote:
> > >
> > > > Dear PKTrs:
> > > > A very interesting article by Stiglitz on Argentina was published
last
> > > > sunday in the Washington Post.
> > > > http://www.washingtonpost.com/wp-dyn/articles/A3893-2002May10.html
> > > > I think it is worth taking a look at it.
> > > > The world press highlights the role of corruption on the Argentinean
> > > > crisis, something that it is fully true, but nobodies says that
> > corruption
> > > > is a bilateral crime. Look to whom were the beneficiaries of the
> > > > corruption and you will have the other side of the coin.
> > > > Stiglitz highlights the role of the privatization of the pension
fund
> > > > schema on the fiscal deficit, that reduced state revenues and
enlarged
> > its
> > > > obligations, but at the same time there was a reduction by half of
the
> > > > contributions by employers, what enlarged the deficit, not to
account
> > the
> > > > debt servicing, and all that under the pressure of the IMF.
> > > > The privatization of the pension funds implied an enormous transfer
to
> > the
> > > > private sector of 5 billion dollars per year. The reduction of the
> > > > contributions is of the same amount and benefits mainly the service
> > > > sector, not the tradables.
> > > > Since the beginning of 2001 the banks, mainly international ones,
flew
> > the
> > > > money taking advantage of the currency board. 83% of the reduction
of
> > > > deposits was explained by the private banks, while 59% by the first
10
> > > > banks. The IMF encouraged the internationalization of the banking
> system
> > > > under the argument that the local branches will require funds from
> their
> > > > centrals in Spain, England or USA. None of that happened.
> > > > Didn愒 know the IMF that silently banks were inducing capital
flights?
> > It
> > > > is almost funny to see that public banks saw a reduction of 4.9% in
> > their
> > > > balance sheets of  the item "other credits" and "other liabilities"
> > while
> > > > private banks presented reductions of 48.5%. Something was happening
> > there
> > > > and the IMF and the Central Bank looked to the side.
> > > > To have the silent and ordered withdrawal of reserves from
Argentina,
> > > > banks had the complicity of the IMF auditors and the Central bank.
Is
> it
> > a
> > > > mere coincidence that the IMF was pushing to abolish the laws that
> made
> > > > the heads of the central bank liable for their acts? Is it to adhere
> to
> > > > conspiracies theories to think that there are second intentions in
the
> > > > abolishment of the white collar crime law or the reform of the
> > bankruptcy
> > > > law are a requirement in order to achieve IMF support? One of the
> > bankers
> > > > in jail is the partner of David Mulford . Their bank is accused of
> major
> > > > capital flights after the December crisis.
> > > > On top of that, there is the suggestion of major  orthodox
adjustments
> > in
> > > > the economy.
> > > > Dear PKTers, there should be an alternative for us Argentineans.
> Perhaps
> > > > many of you had thought on that. Will be nice to discuss ideas and
> > > > alternatives.
> > > >
> > > > Daniel Kostzer
> > >
> > >
>