Trailblazer GLOBALIZATION AND ITS DISCONTENTS

Joseph Stiglitz (2002)

In 2002 Globalization and its Discontents was published in the USA and the UK: its final chapter opens with these words:

Globalization today is not working for many of the world’s poor. It is not working for much of the environment. It is not working for the stability of the global economy. (p214)

The author from 1997 to 2000 was chief economist of the World Bank and in 2001 won the Nobel prize for economics. He writes and thinks from within the international monetary system, believes that globalization is inevitable and potentially invaluable, but like many commentators (as Ellwood) sees that the way economic globalization has been managed – by the International Monetary Fund, the World Bank and the World Trade Organisation – has been disastrous for many developing countries. He sees the devastating effect that globalization has had on some developing countries – and on the poor within those countries, but believes that this was due to the policies of these international economic institutions rather than the concept of globalization itself. These policies have too often served the interests of the more industrialised countries and of giant combines within these countries.

Nevertheless Stiglitz argues that globalization can be reshaped to realise its potential for good if the mind-sets of the international economic institutions can be changed. He writes:Caring about the environment, making sure the poor have a say in decisions that affect them, promoting democracy and fair trade are necessary if the potential benefits of globalization are to be achieved. (p216)

He argues for changes in the way that the World Bank, the International Monetary Fund and the World Trade Organisation are governed (less voice to the finance ministers and trade ministers of the industrial nations, more voice to the developing nations), and increase in the openness and transparency of these institutions so that there can be effective public scrutiny of decision-making (so that there can be criticism of intended policies in time to affect their outcomes).

He recognises that market liberalisation (ie the removal of tariffs, quotas and other impediments to free trade) can endanger the livelihoods of people while boosting the wealth of others, and argues that interventions in trading rules may be needed at times of major economic setbacks in order to protect people. He believes that bankruptcy procedures are better than IMF-financed bail-out of creditors when national agencies in developing countries cannot meet loan repayments: he looks for reforms which are debtor-friendly. Beyond this he argues that when international aid is offered it should not be fenced with a myriad of conditions, which can sap political moral and undermine democratic processes. In countries where huge proportions of their current exports go to repaying loans he argues for debt forgiveness as a moral imperative which should reflect basic principles of economic justice.

Stiglitz has sympathy for the protests over globalization that began at the World Trade Organisation meeting in Seattle and refers to the ‘hypocrisy’ of the advanced industrial countries.

While these countries had preached – and forced – the opening of markets in the developing countries to their industrial products, they had continued to keep their markets closed to the products of the developing countries, such as textiles and agriculture. While they preached that developing countries should not subsidise their industries, they continued to provide billions in subsidies to their own farmers, making it impossible for the developing countries to compete. While they preached the virtues of competitive markets, the United States was quick to push for global cartels in steel and aluminium when its domestic industries seemed threatened by imports. The United States pushed for liberalisation of financial services , but resisted liberalisation of the service sectors in which the developing countries have strength, construction and maritime services. (p244-245)

On a positive note he welcomes the ‘everything but arms’ initiative of the European Union which allows the free importing of all goods (other than arms) from the poorest countries into Europe, but he recognises that they still cannot compete against the highly subsidised European agriculture.

Stiglitz argues for ‘globalisation with a more human face’. Seeing that economic growth results in urbanisation which undermines traditional rural societies and threatens cultural identities and values, he argues that global integration should take place more gradually, giving societies time to adjust to new challenges. While the developed countries should endeavour to change the mindset of the financial and trade international organisations, the developing countries, he argues, must assume responsibility for their well-being themselves.

They can manage their budgets so that they live within their means, meagre though that might be, and eliminate the protectionist barriers which, while they generate large profits for a few, force customers to pay higher prices. They can put in place strong regulations to protect themselves from speculators from the outside or corporate misbehaviour from the inside. Most important, developing countries need effective governments, with strong and independent judiciaries, democratic accountability, openness and transparency and freedom from the corruption that has stifled the effectiveness of the public sector and the growth of the private. … What is needed are policies for sustainable, equitable, and democratic growth. … Development is about transforming societies, improving the lives of the poor, enabling everyone to have a chance at success and access to health care and education. (p251-252)