Stiglitz: worker rights key to development

Doug Henwood dhenwood at
Mon Jan 10 07:28:22 PST 2000

[From the World Bank's daily clipping service. Of course, Stiglitz isn't going to be at the WB much longer.]


In a new broadside against Washington's response to the Asian financial crisis, outgoing World Bank Chief Economist Joseph Stiglitz said on Saturday that workers' rights should be a central focus of development, Reuters reports. Stiglitz, who leaves the Bank later this month after a string of well-publicized complaints about 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.

"A standard message was to increase labor market flexibility, and the not-so-subtle subtext was to lower wages and lay off workers," Stiglitz is quoted as saying at the American Economics Association in a keynote address that won a standing ovation from fellow analysts. "In 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."

Stiglitz admitted that [international] lenders [during the Asian financial crisis] had also encouraged countries to develop a social safety net to help those laid off in the post-crisis recessions, but said this would not solve the problems. "There 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," he said. "It is imperative that countries work not only to put in place policies that prevent crises and minimize their magnitude and adverse consequences, but also to respond to these crises in ways that maintain as high a level of employment as possible."

Stiglitz also said on Saturday that free capital movements had brought few benefits for ordinary workers. "Capital 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," he said.

The Canberra Times (Australia, p.18), the Advertiser (Australia, p.27), and the Age (Australia) also report.

Meanwhile, economist Paul Krugman, commenting on "the new policy prominence of economists" in a New York Times piece reprinted in the International Herald Tribune (p.8), writes that new challenges to orthodoxy, like the growing backlash against globalization, are brewing. Economics is an inherently political subject, on which everyone has an opinion.

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