AND ITS DISCONTENTS GLOBALIZATION CONTENTS Preface IX Acknowledgmems XVII 1. The Promise of Global Institutions 2. Broken Promises lJ 3. Globalization and Its Discontents CHAPTER I The Promise of Global Institutions I nternational bureaucrats—the faceless symbols of the world economic. PDF | On Jan 1, , Dieter Bögenhold and others published Globalization and its Discontents.
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Globalization and its Discontents. The section on process identifies the “three c's” of process co-ordination, co-operation and communication. A process. GLOBALIZATION AND ITS DISCONTENTS the institutions made it difficult for Congress-or anyone else-to see what was going on. Only because ofa leak was . reviews. Globalization and Its. Discontents. Joseph E. Stiglitz. Globalization and Its Discontents. New York: W.W. Norton & Company. xxii + pages.
Communism still controlled large swaths of territory.
And there were fiscal tensions as the new trade system relied on fixed exchange rates, with currencies pegged to the U. It was only with the collapse of fixed exchange rates and the unmooring of the dollar from the gold standard in the late s that capital could be moved easily around the world. And it worked: Dollars generated in Europe by U. Global transfer of wealth While capital could now survey the world to ensure the best returns, labor was fixed in place.
This meant there was a profound change in the relative bargaining power between the two — away from organized labor and toward a footloose capital. When a company such as General Motors moved a factory from Michigan to Mexico or China, it made economic sense for the corporation and its shareholders, but it did not help workers in the U. Freeing up trade restrictions also led to a global shift in manufacturing.
'Globalization and its Discontents Revisited': Joseph E Stiglitz on the state of the world
In the West as factories shuttered, mechanized or moved overseas, the living standards of the working class declined. Meanwhile, in China prosperity grew, with the poverty rate falling from 84 percent in to only 12 percent by Political and economic elites in the West argued that free trade, global markets and production chains that snaked across national borders would eventually raise all living standards.
But as no alternative vision was offered, a chasm grew between these elites and the mass of blue-collar workers who saw little improvement from economic globalization. The backlash against economic globalization is most marked in those countries such as the U. Expanding free markets Over the decades, politicians enabled globalization through trade organizations and pacts such as the North American Free Trade Agreement, passed in The most prominent, though, was the European Union , an economic and political alliance of most European countries and a good example of an unfolding political globalization.
They signed the Treaty of Rome in to tie former combatants into an alliance that would preclude further conflicts — and form a common market to compete against the U. Over the years, more countries joined, and in the European Union EU was created as a single market with the free movement of goods, people and capital and common policies for agriculture, transport and trade.
Access to this large common market attracted former Communist bloc and Soviet countries, to the point where the EU now extends as far east as Cyprus and Bulgaria, Malta in the south and Finland in the north. With this expansion has come the movement of people — hundreds of thousands of Poles have moved to the U. The EU is now at a point of inflexion where the previous decades of continual growth are coming up against popular resistance to EU enlargement into poorer and more peripheral countries.
Newer entrants often have weaker economies and lower social welfare payments, prompting immigration to the richer members such as France and the U.
Cultural backlash The flattening of the world allowed for a more diverse ensemble of cultural forms in cuisine, movies, values and lifestyles. Cosmopolitanism was embraced by many of the elites but feared by others.
In Europe, the foreign other became an object of fear and resentment , whether in the form of immigrants or in imported culture and new ways. The ruling BJP party in India, for example, combines religious fundamentalism and political nationalism. Professor Stiglitz argues that markets require perfect competition and perfect information p Since agents in markets lack perfect information and face transaction costs, markets will fail to deliver efficient results, and government can, in principle, improve upon market outcomes.
Professor Stiglitz commits the Nirvana Fallacy by assuming that government can, in principle, always improve upon market imperfection Demsetz Considering that his book points to many examples of government failure, his failure to avoid this fallacy is particularly odd.
Professor Stiglitz gives much credit to the intellectual progenitor of the IMF, John Maynard Keynes, for explaining why markets need government intervention to work. Unfortunately, he does nothing to prove this claim.
Keynes argued that markets fail due to a lack of total private spending2. Yet he describes pp how the IMF triggered a financial meltdown in Asia with its banking and monetary policies.
IMF insistence on the tightening of monetary policy and bank closures in Asia caused a collapse of banking in Asia, and denied businessmen access to credit. This example is reminiscent of the work of Milton Friedman and Anna Schwartz in showing how policy-induced monetary and financial collapse cause economic downturns, rather than of sudden shortfalls in private aggregate spending Friedman and Schwartz Professor Stiglitz also has a strange take on free trade.
He rightly accuses many industrialized nations of hypocrisy, in pushing free trade on developing nations while practicing protectionism. He condemns Western agricultural subsidies and the protection of the US aluminum and uranium producers.
He also recognizes that international trade has led to high growth rates and a reduction of poverty p4.
Yet he endorses infant industry arguments p The Principle of Comparative Advantage alone should have prevented the author from making such an argument.
Also, the authors examples of special interests shaping policy indicate that tariffs may instead protect established industries from competition. The author identifies inconsistencies in his belief that free market thinking pervaded the IMF.
He claims that IMF logic implies that markets know best p Yet, he indicates repeatedly that the IMF officials thought that the market was wrong and they knew better than anyone else how to plan production pp 24, , He also admits that the IMFs exchange rate policy ran counter to free market thinking p He also claims that IMF economists believe that markets can exhibit excessive pessimism p Professor Stiglitz recounts an experience where the IMF insisted on bank closures p He also mentions p that the IMF interfered with nuts-and-bolts decisions: what the firm should produce, how it should produce its output, and how it should be organized.
Globalization and its Discontents
He also complains that the IMF forced bank restructuring on Indonesia p These examples hardly indicate free market ideological fervor. They directly contradict his claim on p that IMF economists believed in Darwinian competition.
They instead indicate a conceit on the part of IMF officials that they were knowledgeable enough to engage in such detailed regulation3. The author derides claims that privatization failed because it did not go far enough.
He points out that the Czech government opened the door to corruption by privatizing corporations while leaving banks in state hands p Is this not an example of insufficient privatization?
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It would seem that the problem here is that the state should have privatized banks as well. Given the scenario he describes, it would at least seem possible that privatization should have gone further.
Professor Stiglitz then claims no country has succeeded in privatizing everything overnight. The well-known example of German deregulation in the summer of contradicts this claim.
Rather than failure and discontent, this resulted in the German economic miracle Wallich Yet he also complains p about how many Russians adopted the religion of free markets.
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Are we to blame the idea of free market capitalism for IMF policies that promoted a different form of this system? In passages reminiscent of The Great Transformation Professor Stiglitz argues that rapid privatization and liberalization led to discontent because these measures lacked a sound institutional basis for newly emerging markets4.
He, like Polanyi, sees liberalization as causing economic failure and as not accounting for cultural values. This triggers social unrest and hostility towards globalization. Stiglitz claims that gradual and limited privatization, implemented in the right sequence and accounting for local concerns, can lead to the realization of benefits from globalization.
Thus, he favors prioritization over privatization. The priorities that the author favors are public policies aimed towards maintaining employment, rather than preventing inflation.
He also prefers debt restructuring and financial reorganization to liquidation p He disdains fiscal austerity and bailouts, but instead wants fiscal policy to stimulate the economy through broad based subsidies. He also favors capital controls and some protective tariffs. The charge that Stiglitz levels against IMF officials that they wrongly assumed to know best how to manage economies throughout the world is fitting and correct.
However, Stiglitz himself commits the same kind of error. His preference for prioritization over privatization depends upon his knowing how best to implement reforms.
He claims to know both which reforms are best and the right sequence for implementing them. This is an immodest claim, one that assumes on his part tremendous knowledge of local economic conditions the world over.
Why should we believe that he is any better at outguessing markets than officials at the IMF? Professor Stiglitz also ignores problems with special interests that he himself identifies.Citizens regard these as rights, not favors conferred by the government.
In fact, Stiglitz does not address most of the real issues in globalization; besides the lack of analysis into multinationals there are no data on world income inequality, trade and development, the causes of economic growth, etc. Government leaders knew this and took the cue: Lett with no alternatives, no way to express their concern, to press tor change, people riot. Learn how we and our ad partner Google, collect and use data. The IMF had insisted on tiruncial market liberalization, believing that competition.
Although the missions of the two institutions rcmained distinct, it was at this time that their activities becamc incrca. Opening up the Jamaican milk market to U. Google Scholar Copyright information.
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