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Joe Stiglitz: The Globalizer Who Came In From The Cold

Date: Thu, 11 Oct 2001 14:29:50 -0400 (EDT)

From: Mark Ritchie [email protected] Organization: Institute for Agriculture and Trade Policy www.iatp.org

The World Bank�s former Chief Economist�s accusations are eye-popping - including how the IMF and US Treasury fixed the Russian elections

by Greg Palast, The Observer, London October 10, 2001

�It has condemned people to death,� the former apparatchik told me. This was like a scene out of Le Carre. The brilliant old agent comes in from the cold, crosses to our side, and in hours of debriefing, empties his memory of horrors committed in the name of a political ideology he now realizes has gone rotten.

And here before me was a far bigger catch than some used Cold War spy. Joseph Stiglitz was Chief Economist of the World Bank. To a great extent, the new world economic order was his theory come to life.

I �debriefed� Stigltiz over several days, at Cambridge University, in a London hotel and finally in Washington in April 2001 during the big confab of the World Bank and the International Monetary Fund. But instead of chairing the meetings of ministers and central bankers, Stiglitz was kept exiled safely behind the blue police cordons, the same as the nuns carrying a large wooden cross, the Bolivian union leaders, the parents of AIDS victims and the other �anti-globalization� protesters. The ultimate insider was now on the outside.

In 1999 the World Bank fired Stiglitz. He was not allowed quiet retirement; US Treasury Secretary Larry Summers, I�m told, demanded a public excommunication for Stiglitz� having expressed his first mild dissent from globalization World Bank style.

Here in Washington we completed the last of several hours of exclusive interviews for The Observer and BBC TV�s Newsnight about the real, often hidden, workings of the IMF, World Bank, and the bank�s 51% owner, the US Treasury.

Borrowing to finance purchase of stocks and other purely financial instruments might be prohibited entirely. There might also be an absolute ceiling on the amount an individual or corporation is allowed to borrow for any purpose. This would increase equity investment relative to borrowing and reduce opportunities for a wealthy few to monopolize control of productive assets and create financial bubbles with borrowed money.

* Tax Speculative and Other Unearned Gains�If there is any place where a tax increase is justified, it is in taxing away speculative profits. Appropriate measures would encourage long-term investments in real assets. A first step would be a small tax on all purely financial transactions such as the exchange of one currency for another or the exchange of money for a financial instrument like a stock or bond. A second step would be a time graduated capital gains tax. Profits from the sale of any asset held less than a week might be taxed at a confiscatory rate of 90 percent or more on the ground that the gains are almost certainly speculative. Profits from the sale of a productive asset held more than 20 years might be taxed at a concessionary rate of 10 percent or less. A third step might be to tax land at its fair rental value. The tax would apply only to the rental value of the land itself, not to physical improvements, thus encouraging investment in physical improvements while eliminating the incentives for land speculation.

Such changes will not be easily accomplished, and will depend on a massive political mobilization of those who believe that the benefits of the wealth-creation process should go to the productive and the needy.