Stanley Fischer Farewell Dinner
Remarks by Lawrence Summers
Harvard University
August 29, 2001

This is quite a remarkable group that has been assembled to celebrate Stan Fischer and the job that he has done at the IMF. It is appropriately remarkable, because Stan has done a truly remarkable job.

As I thought about this evening, I thought about what somebody referred to earlier as the "This is your life, Stan Fischer," aspect. There are some people in this room, like Rhoda, like Paul Samuelson, like most of his children, who have known Stan for longer than I have. But I have known him for nearly 25 years. And that makes us both pretty old, Stan.

When I took his course at MIT and rode the subway from Harvard Square to Kendall Square each Tuesday and Thursday afternoon, I learned a lot about a lot of things. I learned about transversality conditions, Stan, in very, very considerable detail. And I learned about a number of other topics in monetary economics. I have to say that it was one of the best courses I took in graduate school. Fortunately, the fact that the MIT and Harvard registrars made it awkward to cross-register saved me from the embarrassment from having to take and do poorly on your final exam.

I cannot honestly say that every bit of what I learned from that course has informed the work that you and I have done together subsequently, but it was one of the highlights of my graduate school career.

I was then fortunate enough to advance to the point where I was leaving graduate school, and you were instrumental in recruiting me to come to MIT. We were colleagues there for a number of years, and I continued to learn a great deal from you - not just about macroeconomics and monetary economics, but also about how to be an effective teacher and supporter of students.

Life being what it was, we found ourselves at different institutions in Cambridge for some substantial interval. You then made your way to the World Bank, and really showed there what it meant to be a chief economist, and what first rate economic thinking could contribute to a broad range of economic policy questions.

When you left, the World Bank had the whole world to choose from in finding a new chief economist. But in what I guess many people would regard as a somewhat unlikely coincidence, it chose another professor from Newton, Massachusetts, who lived roughly half a mile from you. As I succeeded you, my respect for you increased even more as I saw the influence that you had, and the respect that you commanded, within the Bank.

So our paths crossed. You returned to Cambridge and I went to Washington.

One thing leads to another, and in the spring of 1994 it became clear that the IMF was going to be looking for a new Deputy Managing Director. While the precise judicial status of this is unclear, it was felt that the US had some role in making that choice. I was in very little doubt as to who the right candidate for the position was. You may not recall it, but in the initial conversation you and I had about the subject, you expressed very substantial hesitation on the grounds that you were having a very good time in Cambridge and that you really didn't want to get in the midst of all this. But you soon enough came to your senses. The system took a little longer to come to its senses around this decision, but I was delighted when you came. Stan, don't go correcting the story, or at least not yet.

I was delighted, and it soon became very clear how important a decision that was for the world in light of what took place subsequently. I don't think either of us imagined when we talked about the job how consequential events in global financial markets would be for literally billions of people over the ensuing six years. I don't think we had any idea of the choices that the IMF would be called upon to make, and of their magnitude. I don't think we had any idea how important the partnership between the United States and the IMF would be. Just looking at some of the people who are here tonight - Domingo and Armenio - and thinking about many other people around the world - in Mexico, in Korea, in Russia - makes one realize how important the work that you did during this period was.

I think about many, many aspects of your work here. I remember 90 percent fondly our late-night conversations. We usually agreed. And since Bob has left, I can confess now that sometimes the objective of those conversations was to get our respective bosses to the correct positions on issues that we felt were important. But I guess if I had to think of some major themes, there are really three that stand out for me.

One is the relationship between the IMF and the United States. This is inherently a very complex relationship. The IMF is and should be an international organization that acts as a servant to the world. And yet, the United States is a very large economic actor in the world and a very major shareholder in the IMF. As a shareholder, it appropriately takes views on what a global institution does.

There is a very fine balance that needs to be struck on both sides, recognizing the international character of the IMF, and also recognizing the legitimate interests of the United States. It is a balance that falls on many people to achieve, but probably on no-one more directly than the senior American in the institution. And I know that speaking for the U.S. Treasury, I am very confident that I would be speaking for the IMF staff and members of its Board as well, in saying that you managed the responsibility of helping to find the right balance on those matters with enormous skill and sensitivity. I can think of almost no one else, if anyone, who could have done that very important task nearly as well.

The second theme that I think about when I look back your years at the IMF is the nature of the relationship that the IMF has to maintain with countries who are benefiting from its support. This too it is a very complex and delicate relationship. On the one hand, the IMF is a partner and a supporter of a nation going through a period of profound difficulty, and must have the trust and respect of the nation that it is assisting. On the other hand, the IMF is, and under your leadership certainly became, a very substantial creditor of a number of countries. There is always an inherent and important asymmetry between creditors and debtors. There is a need for discipline and responsibility. If the IMF is to remain viable, what it does can never, never be seen as charity. And so that, too, is an enormously difficult balance that can't be resolved in terms of simplistic absolutes, but must be lived in a practical, real-world way every day. The enormous esteem in which the world has seen that you are held by program countries, by emerging market countries, and by the less developed countries who are part of the IMF is testament to the skill with which you struck that balance.

There is a third theme, and some ways maybe it's the deepest one. It's something that both Michel and Horst touched on in their remarks. It is a conflict which is really at the very center of what an international financial institution is all about. Between the demands of humanity and social concern on one side, and the demands of rationality and effectiveness on the other, it is morally imperative that the world do what it can to maximize stability, and to avoid the kind of shocks and deprivation that we have seen coming from financial crisis after financial crisis. At the same time, if history teaches us anything, it is that there are certain principles of economics, certain laws of arithmetic that control economic and financial phenomena, that cannot be repealed by good intentions. These constraints do not give way, no matter how pure one's heart is. It is the essence of effectiveness in financial policy to keep the moral element present, but not to allow that moral element to divert one from the sometimes unpleasant arithmetic truths. If you try and think in a deep way about why the Fund was formed, and about the quite ambiguous and complex role relative to political processes that it has been given, it is in no small part because of the need to manage exactly that ambiguity between the force of morality and the absolute reality of economic arithmetic. And you managed that balance splendidly, as well.

You know, if there is a common element in these three things - in managing that balance with the United States, in managing relationships with the nations the IMF supports, and in working with the nature of the decisions that the IMF has to make - it is that they all require careful judgments that don't move to absolute extremes. If there are two words that capture uniquely what I think you have brought to this institution, and to the global economy, they have been balance and integrity.

You recognized that there are multiple interests; that they conflict; that you can't make stark and absolute choices and have them be right; but that you have to find practical ways forward that respect the many different considerations at play. To find a balance, and to be universally respected, there is no substitute for integrity as the coin of the realm. You have shown absolute and implacable integrity. Everyone who works with you, be they a research assistant or a head of state - and, by the way, where I work now we think of the former as the higher calling -- they have that absolute faith that while you may not agree with them and you may not do what they want, you will respect them, hear them, and balance their interests.

Stan, you have served the world extraordinarily well in this position. And there are literally a billion people around the world who live in countries that you have helped. The vast majority of them do not know your name. But many, many, many of them are living more prosperous, more secure lives because of what you did. I don't know what more any international civil servant could want to have said of their efforts.

The world is grateful to you, the world is grateful to Rhoda, and speaking as one who has employed several of your sons, the world is grateful to your entire family for the support they have provided you during your years of remarkable service.

Congratulations on a job well done.


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