Thursday, May 5, 2011

Stiglitz Salutes DSK Leadership of IMF

If, as widely anticipated, Dominique Strauss-Kahn becomes a presidential candidate, you can be sure that his stewardship of the IMF will become a major issue. Already the institution has been attacked both from the left (by J.-L. Mélenchon) and the right (by M. Le Pen). So it is noteworthy that Joseph Stiglitz, a Nobel-winning economist and longtime critic of international economic institutions, thinks that DSK has done an excellent job:

For progressives, these abysmal facts are part of the standard litany of frustration and justified outrage. What is new is that the IMF has joined the chorus. As Strauss-Kahn concluded in his speech to the Brookings Institution shortly before the Fund’s recent meeting: “Ultimately, employment and equity are building blocks of economic stability and prosperity, of political stability and peace. This goes to the heart of the IMF’s mandate. It must be placed at the heart of the policy agenda.”
Strauss-Kahn is proving himself a sagacious leader of the IMF. We can only hope that governments and financial markets heed his words.


randcoop said...

I have enormous respect for Stiglitz and so certainly will credit Strauss Kahn for these particular policy shifts. But I'm disappointed that Stiglitz chose not to address the other side of the IMF, which is its complicity with the EU to impose severe austerity budgets on Greece, Ireland and Portugal. If indeed DSK believes that employment is the essential building block, then the IMF should have sought far better solutions for the debt crises facing those three countries. The austerity imposed by the EU AND the IMF will cause higher unemployment for years.

Mr Punch said...

Surely imposing austerity is what the IMF is for?

randcoop said...

Actually, the IMF seems to exist for the purpose of protecting the Western lenders to less fortunate countries. In the past, this has meant sacrificing the interests of the poor people who live in the debtor nations in order to assure that the debts of the creditors (both private and public) get paid.

What I'm suggesting is that if Stiglitz believes that DSK actually cares about employment in the debtor nations (i.e., he actually cares about the people who live in those countries), then he should point out that employment cannot be enhanced if the creditors must be paid in full with their interest. The only way to promote employment and growth for the debtor nations is to at least partially forgive (we use the euphemism "restructure") the debt.

That would mean, of course, that the creditor nations that the IMF truly serves would have to accept less...and that their banks would have to accept less. But until that happens, there's little reason for Stiglitz to believe DSK's words...his actions speak much louder.