Global Policy Forum

By Rajiv Sekhri

Washington - China is proof that developing countries ignoring Washington's economic policy prescriptions fare better than those who follow their dictates, former World Bank chief economist Joseph Stiglitz said on Tuesday. "We now know that many of the successful developing countries do not follow the precepts of the Washington consensus," Stiglitz told a World Bank conference on development, referring to the recommendations of U.S. Treasury and International Monetary Fund.

"China is probably the most successful of the low income countries, both in terms of growth and in terms of poverty reduction," said the economist known for his blunt criticism of the way Washington handled the Asian financial crisis of 1997-99. Stiglitz, a colorful and controversial figure, announced his resignation from the World Bank in January, saying he needed to leave to freely speak his mind.

He addressed the World Bank's conference on Tuesday, a day after semi-annual meetings of the IMF and World Bank ended in the nation's capital. The two institutions' meetings took place amid protests by anti-IMF groups who complained global lenders were not doing enough for debt relief and that their policy prescriptions only deepened poverty in developing countries.

Stiglitz, a former economic adviser to President Bill Clinton, said recommendations the international community offered to developing countries needed intense scrutiny to find out why these advisers offered policies they preferred, especially when these policies didn't seem to work as well. "Reform cannot be imposed either from the outside or from the top down," Stiglitz said. "The most successful developing countries in the world have not followed the Washington consensus."

He added: "The recent crisis in East Asia has reminded us that economic instability may arise from a multitude of sources. Indeed, it is increasingly being recognized that some of the policies that the international financial agencies pushed in the name of promoting growth, increased economic volatility and insecurity." Stiglitz repeatedly ruffled feathers in Washington with his criticism of the IMF. He said the fund was wrong to tell Asian countries to rein in spending at the start of the crisis and argued that higher interest rates were an inappropriate response to the crisis.

The crisis started in Thailand in July 1997, a few months after Stiglitz joined the bank. The IMF and the U.S. Treasury at first viewed Thailand's problems as a local phenomenon, but the turmoil soon spread across Asia and beyond, pushing many countries into recession and high unemployment. Stiglitz has also said it was foolish of the IMF to foist reforms in Russia without first ensuring the infrastructure was there to make sure that reforms would work.

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