Nobel sentiment : Joseph Stiglitz and the Washington Consensus

Commonweal, Dec 7, 2001 by Robert A. Senser

Unlike some critics on the left and right who favor closing down the IMF and similar institutions, Stiglitz sticks to advocating reform. Indeed, top officials of the U.S. Treasury also seemed to be in a serious reform mode three years ago, when a financial crisis was sweeping much of the world. Robert E. Rubin, then Treasury secretary, even suggested that strengthening the "architecture" of the international financial system should include implementing core labor standards throughout the world. But when the financial crisis faded, so did almost all interest by policymakers in reform.

Stiglitz holds that there is no single "best" strategy for development, that different policies impose different costs and confer different benefits on different groups, and that the choices of alternatives should be made through a democratic process. As a replacement for the Washington Consensus, he offers what he calls a new Democratic Consensus, built around "democratic, equitable, and sustainable development." Among its components, he said in his Boston address, are these three principles: (1) the rights of workers should be "a central focus" of development policy; (2) "labor unions and other genuine forms of popular self-organization are key to democratic economic development"; and (3) worker representatives should be heard at every level, from the workplace all the way up to the international level.

Are those ideas radical ones for a mainline economist? Not really, according to Daniel Rodrik, professor of economics at the Kennedy School of Government at Harvard. "What is striking about Joe's views," Rodrik says, "is not that much their substance (similar and often more 'radical' views are expressed, using appropriate economics jargon, in academic seminars and conferences) but that they were offered by such a prominent neoclassical economist in a quasi-public forum. Economists tend to close rank, and defend the orthodoxy in their public comments, even when their own research runs counter to them."

Robert A. Senser, a former labor attache in the U.S. Foreign Service, edits Human Rights for Workers (www.senser.com).