IMF critic Stiglitz wins economics Nobel prize

By Lea Paterson, Economic Editor

11th October, 2001

A controversial academic, who resigned as chief economist of the World Bank after a series of high-profile clashes with the International Monetary Fund and the US Treasury, has been awarded this year’s Nobel Prize for Economics.

Joseph Stiglitz, who shares the SKr 10 million (£670,000) prize with two other US academics, left the World Bank in November 1999 following a stormy two-and-a-half year tenure that saw him become a vocal critic of IMF and US policies towards the developing world.

Professor Stiglitz, who has since returned to a life of academia at Columbia University, had argued that the IMF was wrong to insist that struggling economies adopted strict anti-inflation policies in return for financial aid.

The academic, awarded the Nobel prize for work done during the 1970s on the economics of information, claimed that the so-called "Washington consensus", championed by both the IMF and the US Treasury, undermined the quality of life in the developing world.

His outspoken nature made for a cool relationship with James Wolfensohn, his World Bank boss, who famously dismissed the economics professor as a "free spirit", who did not necessarily represent his institution’s views.

But although relations between Professor Stiglitz and his World Bank colleagues were often strained, it was the IMF and the US Treasury that were particularly riled by his stance. When Professor Stiglitz resigned his post, the Treasury was forced to deny widespread rumours that it had pressed for his departure.

"Rather than muzzle myself, or be muzzled, I decided to leave," Professor Stiglitz said, following his departure from the World Bank.

Professor Stiglitz shares the Nobel prize with George Akerlof, of Berkeley University, and Michael Spence, of Stanford University. The prize was awarded for ground-breaking studies into the impact on markets of imperfect information.

The Royal Swedish Academy of Sciences, announcing the award, acclaimed Professor Akerlof’s 1970 essay, The Market for Lemons, a study of the economics of the second-hand car market, as the most important work in the information economics field.