Making economic globalization work in an equitable way.
Nobel Prize Winner in economics, Joseph Stiglitz has recently published a new book, Making Globalization Work (Norton, 2006). Joseph Stiglitz has worked extensively in the field of economic policy. He chaired Clinton’s Council of Economic Advisors and spent several years at the World Bank as chief economist. How accessible is the book and how useful?
Globalization is a tricky topic: the term can mean all things to all people. Stiglitz looks at economic globalization and sees it as problematic. On the one hand it holds the potential to improve the pace of useful economic development. On the other hand whilst it may under some circumstances lead to enhanced wealth, it rarely leads to enhanced social equality. It needs help and this requires, according to Stigliz, help at two levels. The rules governing international economic life need to be made more democratic, more transparent, with ‘fair’ trade seen as a means of generating freer trade. Also, within countries, policies must be created that foster a better and more equitable and sustainable pattern of economic and social development.
I have always felt that ‘globalization’ is a partial concept. It needs to be contextualized by the addition of ‘of what’. Stiglitz does this directly by limiting the focus to economic issues (in as much as that is possible: he is drawn into the issue of democracy, for example). It also seems to me to be a euphemistic term for much of the process is currently governed by free-market capitalism. Capitalism is good at innovation, change and income generation but it is not so good at the generation of equality except over the very long run. Policy is needed. The policy concerns to the critics of contemporary patterns of economic globalization are summarized by Stiglitz as five: rules governing the international economy are unfairly balanced in favor of the developed market economies; the process is materialistic rather than welfare-led; current globalization undermines sovereignty and democracy; claims that all will be winners are unrealistic; globalization currently implies American cultural imperialism. Stiglitz is nuanced about ‘market economies’: these come in many forms and the American model is but one of a possible range of models. Developing countries with sound administration and partly opened and partly closed economies can do well.
In essence the book explores in a number of different ways— using lots of examples from all around the developing world— the five key topics identified at the outset. It is not possible to give, in a short review as this perforce must be, a range of examples. I will quickly survey the notion of making trade fair.
Stiglitz does not reject the idea of a global market place. His concern is that the global market place needs to be operated fairly. Developed market economies are ‘in charge’ of the institutions. ‘In part’, says Stiglitz ‘free trade has not worked because we have not tried it’. He cites the NAFTA as an example that ought to have worked but has not because of the ‘asymmetric’ terms that were applied to Mexico with respect, for example, to US maize subsidies. This benefits city-dwellers who get cheaper maize (solving, I suppose, a problem for the political authorities concerned about stability) but leads to devastation amongst Mexican maize farmers. NAFTA lacks sophistication as a result (presumably) of Mexico’s inability to put forward countervailing arguments during trade negotiations. Everyone misses out from this for if Mexico does not grow rapidly then more people are forced into illegal migration to the United States. I recommend his brief account of the NAFTA. It is clear and to-the-point.
Stiglitz is very good on the question of agricultural subsidies and how it distorts the development of an international market in agricultural commodities—the current and stagnant Doha Round was meant to help sort some of the problems out. Did you know that the total subsidies applied to agriculture in the United States, the EU and Japan amounts to ‘75%’ of sub-Saharan Africa’s income? African farmers (with some exceptions, I would add, such as cattle-owners from Botswana) find it hard to compete internationally and even at times on their own domestic markets. We need to know this as citizens. Why do we do this? Would we support the Farm Bill if we knew? It is little wonder that people are migrating from sub-Saharan Africa to Europe.
This book deals with a complex set of issues in a highly accessible way. It operates globally and thematically but it also examines lots of particular problems (and solutions) in particular places. Stiglitz does not reject globalization. He wishes to reform the process. There is much in this that is worth thinking about.