Date: Wed, 3 Nov 1999 17:43:31 -0500
From: Robert Weissman <email@example.com>
To: Multiple recipients of list STOP-IMF <firstname.lastname@example.org>
Subject: FEER:Interview with WB's Stiglitz: growth will come from Asia's huge internal market (fwd)
Economist predicts growth will come from Asia's 'huge internal market'
From Far Eastern Economic Review
4 November 1999
Joseph Stiglitz, chief economist at the World Bank, isn't very popular at
the International Monetary Fund. Over the past two years, he has from time to
time challenged the Washington orthodoxy on the Asian crisis. What's really
annoying for the fund is that he has often been right. Early in 1998, he
said the IMF's fiscal and monetary policy was too tight in the Asian crisis
countries. The IMF later agreed that might have been the case. Then he said
short-term capital flows are dangerous and there are times when inflows
should be controlled. That now has become conventional wisdom. Stiglitz is
an unabashed fan of Asia and is confident the region will get back on track.
The REVIEW's G. Pierre Goad spoke to him in Singapore about the longer-term
outlook for the region. Excerpts:
What will Asia look like five years from now?
I predict it will have fully recovered from the crisis. China will continue
its remarkable growth. So Asia will have created within itself this huge
internal market, which I think will be the key change. Whereas in the
previous two to three decades it has all been export-oriented toward the
United States and Europe, those markets are becoming saturated. So the real
growth is going to come from the internal demand in the region.
What has to happen to get there?
Trade in Asia is not free. Southeast
Asia's natural market is Northeast Asia and Northeast Asia hates imports.
The psychology of countries will change. Remember 30 years ago these
countries were trying to jump-start. They saw themselves at a marked
disadvantage to developed countries. They had to move from producing very
low-quality goods to the high-quality market. They succeeded. And they
succeeded I think beyond even their expectations. Countries like Korea had
a per-capita gross domestic product roughly comparable with India. When
you're starting from a position of that kind of weakness, it's natural to say we
have to protect ourselves, our markets. Even in the United States, where
it's clear there's a very strong economy, there's a protectionist sentiment that
is still alive. At the same time I think the United States has learned the
huge benefits that come from allowing competition, allowing goods to come
I think Japan, Korea and China will all recognize the basic principles of
open trade. That process will be facilitated if protectionist measures are
resisted in the United States and Western Europe.
What about within Asian countries? Are there things countries can do and
should do to liberalize internally and encourage the kind of dynamic growth
they have had in their external sectors?
There are areas like retail trade in which the kind of dynamic competition
we've seen in the United States and Western Europe has been very slow to
come. But it is beginning to manifest itself. I think these global forces
of competition will play out not only in the manufacturing area but also in
the service sectors. With improved information flows due to the Internet and
travel, people know the prices that goods are being sold all over the
A consumer in any of these countries knows what consumers in other
countries are paying, and people will begin to ask: "Why do we have to pay more for
How important is it for the region to regain self-confidence?
I do think the concept of confidence is important. In the face of the
crisis, there was a lot criticism that I think was misplaced and unwarranted.
Whether it was intended to have that effect, it certainly did have the effect of
undermining confidence. I think the quick comeback is helping to regain
confidence. I think the way that Asia has defined itself in the past is
that it has tried to learn from each experience and tried to incorporate the
lessons in going forward. My own suspicion is Asia will do that again, and
that will provide the basis for this renewed confidence.