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Sunday, September 03, 2006

“Making Globalization Work”

A review of Joseph Stiglitz new book:

Aiming to Level a Global Playing Field, by Stephen Kotkin, NY Times: ...Dr. Stiglitz’s new book, “Making Globalization Work”, is billed as a sequel to his “Globalization and Its Discontents” (2002). It reads like an unacknowledged reply to a searing review in The Economist of that previous best seller. Gone is the innuendo about colleagues in Washington doing the dirty work of Wall Street in their capacity as public servants... New are The Economist’s requested chapters on trade and growth, market forces and the environment, the multinational monopoly — in short, on globalization, the advertised subject.

Two notions still animate the author.

The first is that neoliberal economics — derided as “market fundamentalism” or the “Washington consensus” — vandalized the developing world. This supposed reign of neoliberal economic terror (privatization, open capital markets) has become a bogeyman of political liberalism (social justice, environmentalism), in whose ranks Dr. Stiglitz enjoys cult status globally. The second is that smart people in Washington and New York with the correct ideas can help set the world right. This supposition — even when cast in terms of promoting democracy rather than proffering special expertise — is an occupational hazard, and it enthralls many conservatives, too.

Dr. Stiglitz’s vision for more equitable globalization — with caveats about the toughness of the task — entails freer trade ..., curtailed intellectual property rights (“monopolies”) and green accounting... It also means more transparency in international finance (to curb corruption), debt forgiveness (foolhardy creditors must take responsibility, too) and democracy (less secretive procedures opened to nongovernmental organizations and others).

Designing a new global trade regime is a snap for Dr. Stiglitz. But how might it be put into place? .... Dr. Stiglitz identifies some “special” interests opposed to change, but he offers less sense of ... [how to] level the field for all.

Often, he exhorts. “Rich countries,” he writes, “should simply open up their markets to poorer ones, without reciprocity.” As for global enforcement of rules, “what is needed is an international tribunal.” Would its judges be appointed or elected? ... Details omitted.

There is another catch. Developing countries, after getting their “fair share,” must “use the money well,” he writes. So they’ll need nonkleptocratic governments, uncensored media, enforced property rights, the rule of law. How to acquire them? He wants “developed country governments to provide role models,” and to inhibit the collusion in malfeasance abroad.

Intent on championing regulation over an “unfettered” market, he turns to postwar Japan and South Korea as examples of how governments can pilot an economic boom, though this view has been undermined on empirical grounds. ... The rigor and nuance of his economics work are not as evident in his handling of recent world history.

Faithful to post-Soviet legend, Dr. Stiglitz conflates I.M.F. advice and Russian rhetoric about shock therapy with what actually took place in the 1990’s. Some prices, but far from all, were instantaneously liberalized. Much property was privatized, though often by management theft before any government program; privatization of land had to wait more than a decade. Dr. Stiglitz spotlights Ukraine’s 3,300 percent inflation, neglecting to add that Ukraine had even more fitful liberalization and limited privatization, just as he advocates... But never mind. The talking point that neoliberalism wrecked Russia is too valuable to yield to facts.

Attacking the idea of free-for-all markets in a superfluous debate with conservative purists only overshadows Dr. Stiglitz’s practical suggestions, like adding labor and environmental ministers to trade negotiations. Boasting that his many critics now see the light, thanks to him, is not a technique of persuasion. ...

In his most intriguing chapter, Dr. Stiglitz explains how the United States benefits from other countries holding vast quantities of dollars, while those countries incur substantial costs, from depressed growth to instability — the very condition that such foreign reserves are meant to forestall. He observes that in Asia — which drives globalization more than Washington does — an alternative reserve system may be emerging. Dr. Stiglitz imparts his spin to this issuing of money substitutes, calling them “global greenbacks,” which could be used to finance global public goods like health vaccines. “This single initiative,” he suddenly concludes deep into the book, “could do more to make globalization work than any other.” And instead of waiting for the United States to act in the interests of global humanity, he says, a coalition of Asian countries could move to this new reserve system even if America objected. ...

    Posted by on Sunday, September 3, 2006 at 02:48 AM in Economics, International Trade | Permalink  TrackBack (0)  Comments (5)

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