The spinning world of Joseph Stiglitz

Joseph Stiglitz. Photo © Miguel Bueno
13 March 09 - Nobel laureate and former World Bank economist, Joseph Stiglitz is in Geneva this week to present a film illustrating his view that it is in the interest of rich nations to pay more attention to human rights in the developing world

Pamela Taylor/Human Rights Tribune – In the film ‘The World According to Stiglitz’, shown at the International Human Rights Film Festival (FIFDH) the message from Joseph Stiglitz was that international institutions such as his former employer the World Bank must do more to help developing nations through economic crisis.

Stiglitz, who left his job as chief economist at the World Bank in 2000 following economic policy disagreements with the US government, has been very critical of the US and the IMF for encouraging poorer countries to adopt monetary policies he considers contrary to democratic processes and resulted in the East Asian economic crisis of the late 1990s.

Stiglitz briefed a commission of UN experts in Geneva on Wednesday (March 11) about short term and long term measures he is recommending to stem the current economic downturn and prevent a reoccurrence in the future. He told them the US stimulus plan is too small and too slow.

Stiglitz, who advised President Barak Obama’s economic team during the presidential campaign says that team has moved in a different direction. “Some who are central in the Obama economic team didn’t behave very well in the East Asian crisis and supported IMF/World Bank policies during that time which were disastrous. I am hopeful that they learned something since then but only time will tell.”

Speaking to journalists before the showing of his film on Tuesday (March 10), Stiglitz seemed to back off somewhat from this criticism and praised current IMF Director, Dominique Strauss-Kahn and his attempts to reform the institution.

“The irony is while the US lectures countries around the world about good regulation and good institutions, the US was following bad monetary policy and bad regulation and the consequences have been severe not only for the US but all over the world.” According to Stiglitz “the quality of monetary policy at some central banks in poorer countries such as India and Malaysia is much better than in the United States.”

When making his film with French filmmaker Jacques Sarasin in 2007, Stiglitz said he had predicted there would be a world economic downturn but didn’t know when it would happen or how bad it would be. Nevertheless, the film seems prophetic, a case of pictures being worth a thousand words.

“We wanted to show both the positive and the negative sides of globalization,” Stiglitz said, “we went around the world and looked at India, China, Botswana, Ecuador and examined issues not only involving the IMF, WTO but also the exploitation of minerals by multinationals.”

The film begins in his hometown, Gary, Indiana, whose bleak landscape tells the story of what happened in many US cities devastated by globalization and the end of the 1900s. “Many people here cannot believe there is a city in America that is so devastated. It looks like a war zone and in fact people have made films there about Somalia!”

In 2007 The Indian steel company, Mittal managed to do what no US company had done and bought a failing steel mill in Gary, saving hundreds of jobs. The Mayor of Gary is now going to China to persuade them to create assembly lines in the US for Chinese goods to be sold in the US.

The film also illustrates another theme that Stiglitz considers crucial, creating an international legal mechanism to protect developing countries from the environmental and human disasters caused by exploitation of natural resources, whether by Texaco in Ecuador or Union Carbide in Bhopal, India.

“The US refuses to extradite relevant people to stand trial in India. It’s like in the old cowboy movies – multinationals can escape the sheriff simply by crossing the border. Although we have globalization we still don’t have a global legal framework that would allow developing countries to chase the outlaws across the border.”

Stiglitz is heavily critical of the trade talks known as the Doha Development Round which broke down last year when the US and European Union failed to agree to modify their agricultural subsidies. In his film, Stiglitz draws a direct connection between such subsidies and the drop in cotton prices in India which led to thousands of poor farmers committing suicide last year.

“These people have seen their environment degraded, their jobs lost, they’ve been thrown out of their homes, pushed off their land…At the very lease we must insure that a portion of benefits from natural resources accrue to those on whose land the resources lie.”

But Stiglitz is a firm believer in the benefits of globalization and says the world must simply learn how to manage it better, that taking environmental protection and human rights into consideration ultimately means a win-win for both rich and poor nations and thereby the whole world.

“The World According to Stiglitz” will be shown on TSR 2 (Swiss TV, channel 2) on Sunday, March 15 at 20hrs.

More on Joseph Stiglitz

When Joseph Stiglitz turned down US President Bill Clinton’s offer to continue serving as chairman his Council of Economic Advisors in 1996 to become Chief Economist at the World Bank, he said he was ‘scandalized’ by how much US Treasury and IMF policy differed from the so-called ‘third way’ he had been working on with the President.

In his online biography, Stiglitz said,“All too often they used their economic power effectively to force countries to adopt these policies, undermining democratic processes. As someone who had grown up in mid-America, strongly inculcated with democratic values, I found this hard to accept.”

Stiglitz wanted to create a strategy for developing countries that would reduce ‘conditionality’, the economic and monetary conditions that a country must meet before receiving IMF or World Bank assistance. According to Stiglitz this conditionality undermines democratic processes.

When money was provided for the East Asia crisis for example, these institutions demanded that the countries raise interest rates, cut expenditures and raise taxes. The net effect said Stiglitz was to turn the economic downturns into recessions and the recessions into depressions

He also opposed the World Bank’s ten year review of the transition in former Communist countries to the free market. According to Stiglitz “the failures of the countries that had followed the IMF shock therapy policies - both in terms of the declines in GDP and increases in poverty - were even worse than the worst that most of its critics had envisioned at the onset of the transition. There were clear links between the dismal performances and the particular policies that the IMF had advocated, such as the voucher privatization schemes and excessive monetary stringency.” Stiglitz left the World Bank in 2000.

See online: Stiglitz biography
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