Gloomy About Globalization

Making Globalization Work is the third of Joseph Stiglitz’s popular, and populist, books. Like Jeffrey Sachs, Stiglitz is an economist turned preacher, one of a new breed of secular evangelists produced by the fall of communism. Stiglitz wants to stop rich countries from exploiting poor countries without damaging the springs of wealth-creation. In that sense he is a classic social democrat. His missionary fervor, though, is very American. “Saving the Planet,” one of this new book’s chapter headings, could have been its title.

Stiglitz is in favor of globalization—which he defines as “the closer economic integration of the countries of the world.” He criticizes the ways it has been done. The “rules of the game,” he writes, have been largely set by US corporate interests. Trade agreements have made the poorest worse off and condemned thousands to death through AIDS. Multinational corporations have stripped poor countries of their natural resources and left environmental devastation. Western banks have burdened poor countries with unsustainable debt.

Much of this is well said. Although it is not new, it bears repeating. But the main problem at present is not how to make globalization fairer for poor countries. It is how to make it less volatile; and to remove the threat it poses for poor and middle-income people in rich countries—those voters who have the power to derail it. Anti-globalization sentiment is a rich-country phenomenon. It is rather bizarre, therefore, to write a book about making globalization work that pays so little attention to the concerns of people in rich countries.

This is the more regrettable because Stiglitz’s technical work, for which he got a Nobel Prize in economics, is about market failures typical of developed economies. The “Shapiro-Stiglitz” model explains why wages cannot be sufficiently flexible to maintain continuous full employment—an insight that could have been profitably applied to the effects of low-wage competition from East Asia. But, as in his other writings on globalization, Stiglitz has been primarily influenced by his experience as chief economist of the World Bank in the 1990s. This convinced him that Washington-inspired policies to promote economic development in poor countries were, in fact, hindering it. He was particularly outraged by the response of the International Monetary Fund during the East Asian meltdown in 1997–1998, which, he said, through its poorly conceived bailout efforts, turned slowdowns into recessions, and recessions into depressions. His public criticisms are said to have led to his removal from the World Bank in 2000 at the behest of then US Treasury Secretary Lawrence Summers. This book expands on his earlier criticism of Western development policies and proposes social-democratic alternatives.

In Stiglitz’s view, postwar trade regimes—GATT, WTO, NAFTA—have been heavily weighted in favor of the rich countries—by which he means primarily the United States, Europe, and Japan. These countries have used their greater knowledge and economic power to out-bargain poor countries. The rich countries have forced liberalization of trade—first in industrial goods …

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Letters

Gloomy About Globalization’ June 12, 2008