People in Economics: World Trade Defender
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Bibliographic details
- Authors: BOB SIMISON
- Published: June 1, 2023
Profile and contemporary stance
- Anne O. Krueger, age 89, continues active public engagement through speaking engagements and a monthly column for Project Syndicate.
- Responded to rising protectionism and the Trump-era trade war with China by publishing a 300-page book in 2020, International Trade: What Everyone Needs to Know.
- Recent column titles include “America’s Industrial Policy Is Counterproductive,” “Multilateralism Is Still Better,” and “Sleepwalking into a Global Trade War.”
- Quote summarizing her view on recent US policy: “It’s discouraging. Things will show up soon as mistakes. [US President Joe] Biden is an internationalist, but the Biden administration has turned highly protectionist. It will hurt the US and the rest of the world.”
- Emphasizes that “Protection does not create jobs” and warned that “Should the trade war continue, the economic damage to the entire world will increase.”
Research findings and empirical contributions
- Career spanning more than six decades producing research that changed policymaker thinking on trade and development.
- Field research in Türkiye (on assignment for the US Agency for International Development in 1965) documented effects of exchange controls and import curbs, including:
- smuggling and waste such as “the ‘exportation’ of shiploads of stones, which were then dumped overboard (to collect export subsidies), the misgrading of commodities such as tobacco (tobacco inspectors were bribed by farmers to overstate the quality of tobacco), [and] the wasteful stockpiling of spare parts and even entire machines” to evade import controls.
- Study of more than 50 auto parts suppliers in India in 1968 uncovered firms keeping “three sets of books—that for the taxman, that for the public, and that for purposes of management.”
- Landmark paper “The Political Economy of the Rent-Seeking Society,” published in 1974 in the American Economic Review, documented welfare costs of policies encouraging rent-seeking (trade restrictions, import licenses).
- The American Economic Review listed that paper among the top 20 articles in its first century through 2010, crediting it with launching “a voluminous literature on the role of corruption and governance in the process of economic development.”
- Comparative research (with Jagdish Bhagwati) on trade policies in 10 developing economies showed consistent phenomena across countries: costs of restrictive import policies outweighed benefits.
- Observed policy shifts since the 1980s: “most developing countries have removed most of their quantitative restrictions, moved to more realistic exchange rates, and greatly lowered their tariffs.”
Impact on countries and policy
- Documented turnaround examples:
- South Korea: restrictive 1950s trade policies hampered growth; more open trade policies coincided with rapid economic takeoff benefiting millions.
- Türkiye and India: empirical evidence informed broader arguments for liberalization and trade-based growth.
- As World Bank chief economist (1982–86), influenced institutional lending priorities, including moving the bank away from lending for government-owned tourism facilities and reducing discrimination against investing in agriculture.
- As IMF first deputy managing director (2001–06), promoted strengthening IMF capacity to evaluate financial-sector stability; recruited Raghuram Rajan as chief economist to expand IMF’s financial-sector expertise.
Sovereign debt restructuring initiative (SDRM)
- Krueger developed a proposal for a sovereign debt restructuring mechanism (SDRM) intended to provide bankruptcy-reorganization-like protections for sovereigns, including protection from creditor lawsuits and a legal framework enabling a majority of creditors to make binding decisions for all creditors.
- Political resistance led to the SDRM’s rejection by the US, the UK, and the Group of Seven; the proposal “died a political death, but not an intellectual death.”
- Alternatives adopted instead: collective action clauses in government bonds to allow a majority of bondholders to bind all bondholders.
- Krueger’s later commentary (April 2023 Project Syndicate column) highlighted ongoing sovereign-debt risks:
- Noted that China accounts for almost half of all lending to poor countries and criticized China’s “refusal to take the same haircut as other creditors” as a stumbling block to resolving crises (example cited: Sri Lanka).
- Argued that “The world’s poor should not have to pay the price for disagreements among the world’s largest creditors.”
- Advocated that the IMF play a central role in helping debtor nations work out equitable restructuring plans involving private financial institutions.
Notable works, recognition, and influence
- Dozens of books and research papers; one paper selected among top 20 articles by the American Economic Review in its first century through 2010.
- Served in senior roles:
- Chief economist of the World Bank, 1982–86.
- First deputy managing director of the IMF, 2001–06 (IMF’s No. 2 official during 2001–06).
- Trained generations of economists at the University of Minnesota, Duke, Stanford, Johns Hopkins, and elsewhere.
- Praised by peers:
- Condoleezza Rice: “Anne Krueger is an absolutely transformative figure.”
- Douglas A. Irwin: “She showed the distortions and welfare costs of specific policies, combining real-world experience with a theoretical basis.”
- Arvind Panagariya: “She has had a very big influence on outcomes in the world and a tremendous impact on the lives of millions of people who were lifted out of poverty.”
- Recognized as a barrier-breaker for women in economics; described as “a force of nature,” “tough cookie,” and a role model for women in senior economic roles.
- Self-description: “For her part, Krueger says she just wants to be known as an economist.”
Content in this bundle
- WORLD TRADE DEFENDER: People in Economics profile of Anne O. Krueger