Stanley Fischer, who passed away in May at age 81, was one of the most important figures in the recent history of the IMF and of macroeconomics. He spent just seven years (1994–2001) at the Fund and was only the number two official in management (first deputy managing director), but he left a huge footprint.
Part of Stan’s influence resulted from the era during which he served. He arrived at the Fund in September 1994 from the Massachusetts Institute of Technology (MIT), where he had been professor of economics and chairman of the economics department. Three months later, the Mexican economy descended into financial chaos. The managing director, Michel Camdessus, was on holiday for the Christmas break, and so Stan was in charge at headquarters. Mexico’s highly respected finance minister, Pedro Aspe, had been one of Stan’s students at MIT, as had Luis Téllez, chief of staff to President Ernesto Zedillo. Even after Camdessus returned and took over the reins, Stan’s knowledge of the issues and his relationships with key officials placed him at the center of the Fund’s management of the crisis.
One of Stan’s key insights in responding to the Mexican crisis was that its potential to spread to other emerging markets—even those far from the Americas—was very real and very dangerous. At first he was almost alone in holding this view and in arguing that it justified a massive and rapid response from the IMF and other official creditors, but he soon convinced most of his colleagues. Events proved him to be prescient. The Mexican experience segued into a series of financial crises across the globe, as one emerging market after another called on the Fund to bail them out.
Crisis analysis
Throughout the rest of his time at the IMF, Stan led and oversaw much of the Fund’s crisis analysis in Washington. He also traveled to many crisis countries—Thailand in 1996 and 1997, Indonesia and South Korea in 1997, Brazil and Malaysia in 1998, Ecuador in 1999, Argentina on several occasions, and others—to negotiate with senior finance officials, several of whom he already knew quite well personally. If he had not been there with his commitment to work closely with each country to find sustainable solutions, the path through the thicket would most likely have been longer and thornier.
Stan believed strongly that the Fund had to stay engaged with countries in crisis both financially and with its policy advice. He also had strong views on the thrust of that advice: that heavily indebted emerging market economies had no choice but to implement sound macroeconomic policies, allow exchange rates to respond to market pressures, and live within the limits of available financing. That commitment attracted critics, and Stan listened carefully.
Although he did not shy away from defending his position, he was remarkably open to changing his mind. The Fund’s policy prescriptions were often caricatured under the rubric of the “Washington Consensus.” Rather than run from that tag, he defended it in a 2003 lecture as “an important component of the right approach to economic policy.” More controversially, however, he initially responded to the financial crisis of the 1990s by formulating a “bipolar” view of exchange rate policy, arguing that the only sustainable policies were either a firm peg to an external anchor such as the US dollar or a clean float with the rate determined only by market conditions. He eventually admitted, in a 2001 article, that he and others “probably have exaggerated their point for dramatic effect.”
Strength of personality
A second reason for Stan’s pervasive influence at the IMF was the strength of his personality. He inspired the staff by working harder than anyone else in the building, by at least seeming to be smarter than everyone else, and arguably being nicer than everyone else. By listening to and engaging with the staff, he became a natural mentor to all who worked with him. He could also be single-mindedly persistent. For 50 years before he arrived, the Fund had always zealously guarded the privacy of its activities and information. Stan fought hard against an entrenched culture to remake the IMF into an open and transparent organization.
On a personal note, when Stan arrived at the Fund in summer 1994, he sought me out because he wanted to learn more about the history of the IMF, and he had found the official histories to be hard going. Make it more lively! he urged me. I already admired Stan, but now I was a fan. He was particularly interested in the founders: Britain’s John Maynard Keynes, of course, but also the US official Harry Dexter White. As he prepared to leave MIT, he paid a visit to Paul Samuelson, who asked him to look into allegations that White had been secretly disloyal to the United States. Stan asked me to investigate, and that led to a 25-year quest on my part, culminating in a full biography (and vindication) of a remarkable man.
Perhaps the most remarkable aspect of Stan’s story is that his time at the IMF was just one stage in a long, varied, and highly successful career. The first stage was academic, as a professor at the University of Chicago and then MIT. He made his name practically synonymous with macroeconomics in three ways.
Varied career
First, he wrote articles that quickly became classics, most notably a 1977 paper in the Journal of Political Economy that reconciled neoclassical and Keynesian macroeconomic models and essentially created the New Keynesian school of thought. Second, he coauthored widely adopted economics textbooks for undergraduate and graduate students. Third, his courses at MIT attracted graduate students of the highest caliber, many of whom became famous in the field as academic stars (Olivier Blanchard, David Romer, and many others), central bankers (Ben Bernanke, Mario Draghi, Frederic Mishkin, and others), and other leaders.
Stan first interrupted his academic career in 1988 to spend two and a half years as chief economist at the World Bank. He returned briefly to MIT until he was lured back to Washington as Camdessus’s deputy at the IMF. After Camdessus retired in 2000, Stan stayed on for a time to guide the transition to new leadership. In 2002, he branched out further to try his hand in the private sector, becoming a vice chairman of the vast banking conglomerate Citigroup. Three years later, the governorship of the Bank of Israel opened up. Stan held dual citizenship in the United States and Israel, and he had long harbored a desire to help Israel directly. He accepted the offer to head the central bank and spent the next eight years in Jerusalem, most notably playing a major part in stabilizing the Israeli economy throughout the global financial crisis that struck in 2008.
In 2011, he made an effort to return to the IMF by becoming a candidate for managing director. That effort failed when the Fund declined to waive its rule that blocked candidates over the age of 65. Finally, for a last act, he served three years as vice chairman of the Federal Reserve System. He retired in 2017, ending a career of nearly five decades.
These professional pursuits took Stan from a quite humble beginning, as a child living above a grocery store in Mazabuka, Northern Rhodesia; to Israel (where he met Rhoda Keet, his wife until her death in 2020); England (where he studied at the London School of Economics); the United States for much of his life; and Israel again. It was a remarkable life, well lived.
