[stop-imf] =?X-UNKNOWN?Q?WORKER_RIGHTS_KEY_TO_DEVELOPMENT_-_WORLD__B?= =?X-UNKNOWN?Q?ANK=92S_STIGLITZ=3B_Reuters_?=

[Robert Weissman]

Reuters January 8, 2000

WORKER RIGHTS KEY TO DEVELOPMENT - WORLD BANK=92S STIGLITZ

BOSTON - In a new broadside against Washington=92s response to the Asian
financial crisis, the World Bank=92s outgoing chief economist said Saturday
that workers=92 rights should be a central focus of development.
=09Joseph Stiglitz, who leaves the bank later this month after a
string of well-publicized complaints of the way the international
community responded to the crisis, said policy makers had been so anxious
to ensure investors did not take flight that they neglected the social
costs of their policy prescriptions.
=09=93A standard message was to increase labor market flexibility, and
the not-so-subtle subtext was to lower wages and lay off workers,=94
Stiglitz told the American Economics Association in a keynote address,
which won him a standing ovation from his fellow analysts.
=09=93In East Asia it was reckless lending by international banks and
other financial institutions, combined with reckless borrowing by domestic
financial institutions ... which may have precipitated the crisis. But the
costs, in terms of soaring unemployment and plummeting wages, were borne
by the workers.=94
=09Stiglitz, a former economic adviser to President Clinton, has
repeatedly angered the Washington establishment with his blunt criticism
of the way it responded to financial problems in Asia and beyond.
Complaining about initial proposals from the so-called Washington
consensus of the World Bank, the International Monetary Fund and the U.S.
Treasury, he said lenders=92 demands that countries curb spending and raise
interest rates had made the crisis worse.
=09=93Not only was the Washington consensus too narrow in its
objectives, in its focus on GDP, but also in what it saw as the
instruments of development,=94 he said Saturday. He added: =93I believe tha=
t
there is some chance that some of the disastrous economic decisions that
were made in responding to the East Asian economic crisis would not have
occurred had workers had a voice in the decision making.=94
=09Stiglitz has also lobbied for capital controls to shield countries
from volatile flows of money and investment and he said on Saturday that
free capital movements had brought few benefits for ordinary workers.
=09=93Capital market liberalization has not only not brought people the
prosperity they were promised, but it has also brought these crises, with
wages falling 20 or 30 percent, and unemployment going up by a factor of
two, three, four or 10,=94 he said.
=09The Asian crisis started in Thailand in July 1997, some months
after Stiglitz joined the bank. Initially viewed in Washington as a local
problem affecting one not particularly significant country, it spread
quickly across Asia and beyond, pushing countries into recession and
forcing unemployment up.
=09=93When the crisis hit, the international institutions forced,
encouraged, the countries to raise interest rates and to engage in
contractionary fiscal policies which led to severe recession,=94 he said.
=93Firms were encouraged to lay off workers.=94
=09Stiglitz admitted lenders had also encouraged countries to develop
a social safety net to help those laid off in the post-crisis recessions.
But this would not solve the problems. =93There is no safety net that can
fully replace the security provided by an economy running at full
employment, no welfare system will ever restore the dignity that comes
from work,=94 he said.  =93It is imperative that countries not only work to
put into place policies that prevent crises and minimize their magnitude
and adverse consequences, but respond to these crises in ways that
maintain as high a level of employment as possible.=94