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Los Angeles Times Interview

Stanley Fischer

Advocate of Tough Times Defends IMF from Politicians and Crowds

November 08, 1998|Adrian Wooldridge | Adrian Wooldridge, West Coast bureau chief for the Economist, is coauthor of "The Witch Doctors: Making Sense of the Management Gurus."

WASHINGTON — Stanley Fischer does not look like the sort of man who can move markets or bring demonstrators into the streets. He is polite to the point of being reserved and soft-spoken to the point of being inaudible. At public gatherings, he gives the distinct impression that he would be happier reading a book. But, as first deputy managing director of the International Monetary Fund in Washington, D.C., he has been at the heart of what is perhaps the most serious economic crisis since World War II and has helped to craft policies that have turned his employer into one of the most reviled institutions in the world.

The range of people who hate the IMF is startling, from right-wing Republicans, who accuse it of using taxpayer dollars to bail out foreign dictators and international speculators, to left-wing Democrats, who accuse it of caring more about economic orthodoxy than the plight of the poor, to enormous swaths of the population of the emerging world. Earlier this year, a group of South Korean demonstrators summed up the prevailing attitude across Asia with a simple gesture: wearing bandannas emblazoned with the slogan "IMF=I'm fired."

The reason for the institution's unpopularity is not hard to find. The fund's job is to keep the international financial system in order. But, in the past 18 months, it has spectacularly failed to prevent economic chaos from spreading from Southeast Asia to Russia, and it is only just holding the line in Latin America. Adding to the impression of incompetence is the fact that in some countries, particularly Indonesia, the IMF's usual recipe of economic austerity threatened to sink millions of people into poverty and had to be dramatically rethought.

There must have been times recently when the 55-year-old Fischer, who is married and has three grown sons, craved the tranquillity of the Massachusetts Institute of Technology, where he was an economics professor for more than 25 years before being tempted to Washington in 1994. He has spent the past year and a half rushing from one global hot spot to another. Back in the United States, he has had to deal with withering criticism from some of the sharpest minds in his profession, notably Harvard's Jeffrey D. Sachs. The IMF habitually relies on Fischer, its No. 2 official, rather than his French boss, IMF Managing Director Michel Camdessus, to explain its actions to American audiences, perhaps because it feels that Camdessus would simply confirm Republican suspicions that the IMF is a tool of foreign interests.

For all the fund's problems, Fischer has a big advantages over even his most eloquent critics: They cannot agree on what they would do if they were in his place. Some want to reduce the fund to a shadow of its former self. Others want to expand it into a global central bank. Some support draconian capital controls. Others argue that currencies should be allowed to float freely. Fischer, at least, knows exactly what he thinks.

Question: Do you think that this is the worst economic crisis since World War II? Is it worse than the international debt crisis of the 1980s, for example?

Answer: My guess is every crisis looks like the worst you've ever been in. I remember 1973 and the oil shock. We had lived for 25 years with cheap energy, and we were not going to have cheap energy anymore. That was pretty frightening. The 1980s were, possibly, a little less so because it was more focused in Latin America, but in 1982 and 1983 it looked bad. I think history always looks better than it felt at the time.

Q: Do you think the IMF got it wrong in Asia? Did the tight policies that you imposed push an already teetering economy into depression?

A: Let me talk about the two countries where it is clearest: Thailand and South Korea. It is very unusual that a country uses up all its reserves. By the time we got to both Korea and Thailand there was no way of avoiding a crisis. The effects of the crisis depended on how much money you could give them. If we had had huge amounts of money, say, $100 million for Korea and $60-70 million for Thailand, you could have enabled them to rebuild their reserves immediately and have somewhat lower interest rates. But that was never in the cards. I'm sure that these crises were in the cards on the day we arrived, and well before that.

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