Talk about a baptism of fire. The crisis in Mexico erupted soon after economist Stanley Fischer joined the IMF in September 1994 as first deputy manager. It was a brutal lesson in the ways of the real world for the former head of the Massachusetts Institute of Technology's world-renowned economics department.
Fischer had written prolifically on macroeconomics and the stabilization of inflationary economies. But, he says: "I wasn't used to thinking of the banking and financial sector as having such a critical role." Floating exchange rates, tightening budgets, liberalizing markets and worrying about wages were "all according to the book", he says. "Tesobonos were not."
Now it's Thailand's turn to shake up academic theory - not to mention the rest of south-east Asia. And it's all happening just in time to make the World Bank/IMF meetings interesting, notes Fischer. "We were heading for boredom before the Thais obliged," he quips.
On a more serious note, as the IMF moves to stem another crisis exacerbated by what Fischer calls "these damned capital flows", he's still learning. But he's willing to stick his neck out: "I very firmly hold the view that liberalizing completely before a country has the financial sector and macroeconomics in shape can be pretty dangerous." What that means, for starters, is that some countries might have to limit capital inflows. Fisher says he wouldn't be "knee-jerk opposed to" such an action. "The globalization of the capital markets and what it means for different countries is clearly a huge challenge in front of us. We're grappling with it."
That type of down-to-earth thinking (and speaking) makes Fischer one of the most important people in the development community, and the most forceful IMF deputy manager for years. Fischer was appointed by the Clinton administration on the advice of his former student, Lawrence Summers, now deputy treasury secretary. Summers was also Fischer's successor as World Bank chief economist, a post each held for a short period. Both are part of the coterie of MIT and Harvard economists who dominate international public economic policy.
The high profile that Fischer has taken, most recently with Thailand, indicates that he clearly has the confidence of his boss, managing director Michel Camdessus. But he has also revitalized staff at an institution that tends to be unmotivated and authoritarian.
"He has the capacity to communicate both with the staff and with his academic peers all over the world as well as with the authorities of the member countries. It is a unique combination," says his old friend Jacob Frenkel, Israel's central bank governor and former IMF head of research. Frenkel describes Fischer as modest but determined. The key to his intellectual and policy strength, according to friends and former colleagues, is that Fischer is neither an ideologue, nor an ivory tower intellectual. "He's not a man of passion, other than about doing things right," says Rudi Dornbusch, a fellow MIT economist who co-wrote a macroeconomics text book with Fischer. "He's very predictable, very steady, very analytical. Those are the qualities of long-distance running."
He's no pushover, either. This summer, as Thailand balked at going to the IMF for a bail-out, Fischer encouraged it to make the move through comments in the press. "That was the first time the Fund ever spoke out loud about a country that should come for treatment. It wasn't an accident," says Dornbusch.
Fischer is used to taking unpopular positions. When he was chief economist at the World Bank in the late 1980s, the Bank was split on whether to provide more assistance to what was then the Soviet Union. He was on the activist side. Once he left the Bank to return to MIT he became an outspoken advocate of western support for Russia and the other transition economies. (Fischer says his interest in the region is unrelated to his background. His parents were Jewish émigrés - his father from Latvia and his mother from Lithuania - who moved to Africa in the 1920s. Fischer was born in Zambia, and his family moved to Zimbabwe when he was 13.)
"For him, the IMF is the ideal platform," says Dornbusch, noting that Fischer has "gone far beyond the script to say: 'Here are important issues and here's how the IMF can be an essential part of making it work'." He can afford to, says Dornbusch. "He isn't there to make a career; he wouldn't sit by while something wrong is done just because it would disturb someone else. He has alternatives." Fischer, who is on leave from MIT, could easily return to academia or find a lucrative job on Wall Street.
But neither is likely to hold much interest for Fischer, who became a US citizen after coming to MIT to study economics under Paul Samuelson, the Keynesian standard-bearer. Dornbusch sees a future for his former colleague in diplomacy: as an undersecretary of state, or possibly ambassador to Israel. Fischer's first public-policy job was working with the Bush administration to help stabilize inflation-torn Israel in 1985.
With his eastern European Jewish heritage, African childhood, studies at the London School of Economics and move to the US, Fischer is an internationalist who seems to have absorbed the best of all he has encountered on the way. Says Dornbusch: "He's very British in the positive sense of pulling up one's socks and doing one's duty. That's why he's turning out so successful for the Fund." Michelle Celarier