Rogoff contra Stiglitz

[rosserjb@xxxxxxx]

    Have been off list for a couple of weeks while
traveling.  Good to see some of you in Kansas City.
Anyway, am back now, at least for a while.
    I wanted to bring to your all's attention the
brouhaha that has erupted between Ken Rogoff, Chief
Economist of the IMF, and Joe Stiglitz.  There was
a meeting in Washington at the same time as the PK
Workshop in KC at which Stiglitz and Rogoff were to
discuss IMF policies in debt crisis situations.  Rogoff
started off by reading a prepared statement that included
a review of Stiglitz's new book, _Globalization and its
Discontents_.  Stiglitz and many others have interpreted
this review as a personal diatribe, and there has been
commentary on this in the press.  For any interested in
the full text, Rogoff's "Open Letter" is up on the IMF
website under "News Releases."  Anyway, I gather the
meeting in Washington did not go well and was pretty
unproductive.
    A few tidbits from Rogoff's "Open Letter," which
I offer without commentary.

    [at the IMF]"I meet superb professionals who regularly
work 80-hour weeks, who endure long separations from their
families.  Fund staff have been shot at in Bosnia, slaved
for weeks without heat in the brutal Tajikistan winter, and
have contracted deadly tropical diseases in Africa.  These
people are bright, energetic, and imaginative.  Their
dedication humbles me, but in your speeches, in your book,
you feel free to carelessly slander them."

     "...there are many ideas and lessons in your book
with which we at the Fund would generally agree, though most
of it is old hat.  For example, we completely agree that
there is a need for dramatic change in how we handle
situations where countries go bankrupt."

   "Your ideas are at best highly controversial, at worst,
snake oil. ...  In your role as chief economist at the
World Bank, you decided to become what you see as a heroic
whistleblower, speaking out against macroeconomic policies
adopted during the 1990s Asian crisis that you believed
to be misguided. ... In the middle of speculative attacks,
that you labeled a crisis of confidence, you fueled the
panic by undermining confidence in the very institutions
you were working for.  Did it ever occur to you for a
moment that your actions might have hurt the poor and
indigent people in Asia that you care about so deeply?"

   "Governments typically come to the IMF for financial
assistance when they are having trouble finding buyers
for their debt and when the value of their money is falling.
The Stiglitzian prescription is to raise the profile of
fiscal deficits, that is, to issue more debt and to print
more money.  You seem to believe that if a distressed
government issues more currency, its citizens will suddenly
think it more valuable.  You seem to believe that when
investors are no longer willing to hold a government's debt,
all that needs to be done is to increase the supply and it
will sell like hot cakes.  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."

   "No, instead of Keynes, I would cloak your theories
in the mantle of Arthur Laffer and other extreme expositors
of 1980s Reagan-style supply-side economics. ... The Stiglitz-
Laffer theory of crisis management holds that countries need
not worry about expanding deficits, as in so doing they will
increase their debt service capacity more than proportionately.
George Bush, Sr. once labeled these ideas 'voodoo economics.'
He was right."

    "On p. 112, you have Larry Summers (then Deputy U.S.
Treasury Secretary) giving a 'verbal' tongue lashing to
former World Bank Vice-President Jean-Michel Severino.
But, Joe, these two have never met.  How many conversations
do you report that never happened?  You give an example
where an IMF Staff report was issued prior to the country
visit.  Joe, this isn't done; I'd like to see your
documentation.  On page 208, you slander former IMF number
two, Stan Fischer, implying that Citibank may have dangled
a job offer in front of him in return for his cooperation
in debt renegotiations.  Joe, Stan Fischer is well known
to be a person of unimpeachable integrity.  Of all the
false inferences and innuendos in this book, this is the
most outrageous.  I'd suggest you 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.
    Other than that, I thought it was a pretty good book."

Barkley Rosser
--
Rosser Jr, John Barkley
rosserjb@xxxxxxx