More Chickens Coming Home to Roost

It is widely believed that if Barack Obama wins the U.S. presidency, an Obama administration would nominate to one of its highest economic offices (e.g., the Department of the Treasury, the Council of Economic Advisers, or even an entirely new post altogether — a kind of Economic "Czar") Harvard University‘s Lawrence Summers.


So here’s something to keep in mind. —

Back in November 1999, then Clinton Treasury Secretary Lawrence Summers engineered Joseph Stiglitz’s ouster from his post as the chief economist at the World Bank over an issue as critical as (and as tame as — compared to other alternatives that are unspeakable among Group of 7 – "Washington consensus" – fundamentalists) Stiglitz’s advocacy of controls on international capital mobility, the absence of such controls clearly having racked-up a record of financial and economic catastrophes around the world for many years.


As the New York Times reported back then ("Outspoken Chief Economist Leaving World Bank," Richard W. Stevenson, November 25, 1999):


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, Mr. 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 Union. ….

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, Mr. Stiglitz challenged the prevailing orthodoxy among policy makers in Washington.

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 United States 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 systems.

And 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. ….

"There’s a recognition that policies in East Asia were excessively contractionary on the fiscal side," [Stiglitz said]. "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." ….

Mr. 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 development.

"We are rebalancing our thinking about the role of the state," Mr. 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."


But now we are very deeply into the 2007-2008 phase of exactly the same singular and enduring international crisis that first started turning up in the so-called "emerging markets" around the world during this post-Bretton Woods (ca. 1971 -), free-capital-mobility phase of casino capitalism.


How’s that for the Washington Consensus’ chickens coming home to roost?


"Weapons of Collective Destruction," ZNet, October 7, 2008



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