Joe Stiglitz, Nobel Laureate and former World Bank Chief Economist, is out again making headlines. This time because of his new book Freefall - America, Free Markets and the Sinking of the World Economy (W.W. Norton & Company, New York, 2010).   I had the pleasure of hosting his presentation at the World Bank’s Infoshop a few days ago – see video conference here -, and there were several things that struck me from what he said. Freefall might be mainly about the US economy but we can draw some very important lessons relevant for our development work.

Let’s see. Stiglitz provides considerable evidence that the US and others got into trouble by ignoring standard economic and financial guidelines that we recommend to developing countries, and which –by and large—the latter have been following in recent years. Mainly, rich countries overindulged in weak financial sector regulation, the housing bubble, and ended up giving out financial sector bailout packages that are almost textbook examples of what not to do.

"As chief economist of the World Bank, I had seen gambits of this kind," writes Stiglitz. "If this had happened in a Third World banana republic, we would know what was about to happen - a massive redistribution from the taxpayers to the banks and their friends. The World Bank would have threatened cutting off all assistance. We could not condone public money being used in this way, without the normal checks and balances."  (p. 122).