September 14, 2002
Michel Camdessus Is Not a Happy Camper...

After a substantial amount of sniffing around, I have come to the conclusion that Joe Stiglitz's account of this is much more likely to be true than Michel Camdessus, and that whatever Camdessus says on this is unreliable:

Camdessus on Stiglitz

http://www.imf.org/external/np/vc/2002/091202.htm

Michel Camdessus Responds to Joseph Stiglitz
A Commentary
By Michel Camdessus, Honorary Governor of the Bank of France
Nouvel Observateur
Week of Thursday, September 12, 2002 - No. 1975 - Economics

In our July 18 issue, the author of Globalization and Its Discontents, a
former World Bank Chief Economist, had personally criticized Michel
Camdessus, former Managing Director of the International Monetary Fund,
in these terms: "In December 1997 in Kuala Lumpur, during a meeting of
Ministers of Finance of the G-7 and leading Asian countries, I told
Michel Camdessus, then the head (French) of the IMF, of my poor opinion
of his recommendations. He replied that for a people to recover
economically, "they must suffer...""

The following is Michel Camdessus' response:

To confine myself to the facts, I would make the following points: the
only G-7 meetings I-but not Mr. Stiglitz-attended in my official
capacity at the International Monetary Fund were Ministers of Finance
meetings. No such meetings were held in November or December 1997 in
Kuala Lumpur. I did stop over for a few hours in Kuala Lumpur in early
December 1997 to deliver a speech (the text of which I have located) to
the ASEAN Business Forum; but I never made, in Kuala Lumpur or anywhere
else, the remarks he attributes to me-"they must suffer."

It is precisely against that argument-the notion that the suffering of
adjustment has redeeming qualities-that I fought so tirelessly during my
13 years at the IMF. I challenge anyone to find, in the thousands of
pages of speeches that I delivered during those years, the slightest
trace of such an argument. On the contrary, it is the policy of strong
support for countries in difficulty, when they are making every effort
to solve their problems, that I consistently defended. I was criticized
enough for that, especially in the United States. In contrast to what
Mr. Stiglitz insists on trying to prove, this latter strategy, when
combined with the requisite structural reforms, did achieve the expected
results, sometimes within exceptionally short periods of time, when
local political circumstances so allowed. That was the case in Korea. If
Mr. Stiglitz requires proof of this, he need look no further than a
response made to him early in his campaign against IMF policies (a
response with prophetic implications for his Nobel Prize). The author of
that response, whom nobody would accuse of indulgence toward the IMF,
was the recently deceased MIT Professor of Economics and International
Management, Mr. Rudi Dornbusch. "When countries arrive at the IMF, on a
stretcher, this is not the time for cute ideas. Drastic policies are
necessary to avoid hemorrhage, currency collapse and irreparable
meltdown. Stabilization is neither a popularity contest nor a research
seminar. Today no finance minister will opt for the Stiglitz Clinic of
Alternative Medicine; they have the ambulance rush them to the IMF. And
when they do, markets start taking confidence very soon and from there
it is a short step to normalization. (...) Asia is doing well. The chief
lesson for the IMF is that next time they should apply exactly the same
remedies and enjoy as spectacular success."

Obviously, further lessons could be drawn from a serious discussion of
the crises of the 1990s. At any rate, if Mr. Stiglitz wishes to take
part usefully in that discussion, he would do well to avoid basic
inaccuracies and, above all, such discreditable insinuations as those he
made against my closest colleague, Mr. Fischer, whose unimpeachable
integrity is admired worldwide, as is his intellectual and moral stature...

Posted by DeLong at September 14, 2002 03:18 PM | Trackback

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