I have just returned from attending the Southern Economics Association annual meetings in Baltimore. Joseph Stiglitz gave a 1 1/4 hour long Distinguished Lecture which Isshall summarize below. I suspect it did not differ substantially from what has been his running road speech.
The title was "Beggar Thyself vs Beggar Thy Neighbor Policies." He argued that the IMF-backed policies in Asia, Russia, and Latin America constitute "beggar thyself" policies that are worse than the trade protectionist "beggar thy neighbor" policies pursued in the Great Depression, which the post-WW II institutions (IMF and World Bank) were supposed to prevent from happening again. A key argument is that competitive devaluations are not globally harmful, and may even be slightly globally stimulative, although trade protectionism is globally harmful. But restraining a crisis-ridden economy to cut imports as a response to deficits and a capital run is a "beggar thyself" policy that is first self-destructive and then is globally destructive.
He noted that the collapse of credit availability in such a situation can lead to an adverse supply shock, in particular an inability to expand exports. This is supposed to be the way out for devaluing countries that are restraining imports, but it has not worked with exports out of East Asia actually declining since the crisis started. He sees a vicious cycle of interacting declines of aggregate supply and aggregate demand resulting.
He argued that excessive volatility of exchange rates suggests that capital accounts should not be liberalized.
He argued that the problem of contagion is one of externalities. He argued that the collapse in Russia in particular has hit Latin America hard. With no internal changes, Brazil has been forced to jack up interest rates and unemployment is rising. The same thing is happening in Argentina.
Real wages in Indonesia are down 50% and 75% of its firms are bankrupt. In Korea, interest rates shot up to over 40% under IMF pressure with an inflation rate of less than 10% (btw, did everybody catch the brief moment of NEGATIVE interest rates in Japan at the end of last week?).
He actually said that the problem was inadequate representation of workers and small businesses in decisionmaking. That these groups were getting "screwed" on behalf of the banks and the big corporations.
He suggested without coming right out and saying so that debt reschedulings are the answer in that they put some of the burden on the lenders and the surplus countries. He noted that, for all the rhetoric to the contrary, Korea, Indonesia, and Russia were all allowed to reschedule their debts. He noted that it took this to stabilize their exchange rates, not their internal contractionary policies (not happening in all cases anyway). Barkley Rosser
-- Rosser Jr, John Barkley rosserjb at jmu.edu