Globalization and its Discontents (review)

Reviewed by: Globalization and its Discontents Robert M. Pike Joseph Stiglitz , Globalization and its Discontents. New York: W. W. Norton and Co., 2002, 282 pp. Joseph Stiglitz is currently professor of economics at Columbia. He was chairman of the Council of Economic Advisors in the Clinton administration between 1993 and 1997, and senior vice-president and chief economist of the World Bank between 1997 and 2000. In 2001, he shared the 2001 Nobel Prize for Economic Science. On the surface then, he has all the credentials of an American establishment-figure in the sphere of global economic policy. However, he was recently spokesman for several hundred economists who collectively condemned the Bush administration's latest tax cuts. And, as this event — and this book — indicate, his vast experience with the economics of globalization has cultivated a strong sympathy for the world's economically distressed nations and peoples. His radicalization is fairly recent, and in sharp contrast to the fundamental doctrines which underlie the current policies of the international economic agencies, notably the International Monetary Fund which, along with the World Bank, which originated in the Bretton Woods conference in 1944. It follows that this book is devoted largely to a condemnation of the ideologies and policies of the IMF since the 1980's, and also, in some measure, of the World Bank and the World Trade Organization (WTO) which was created in 1995 to govern international financial relations. Stiglitz notes that the original purpose of the IMF was to prevent another global depression, but that the goals of all these institutions became coopted during the 1980's by free market economics. They became "missionary institutions," part of a new "Washington Consensus" between the IMF, World Bank and US Treasury about the "right" policies for developing countries, and countries in economic crisis. [End Page 321] The Consensus included a focus on privatization, sometimes justified in Stiglitz's view, but often dominated by ideological premises; liberalization which meant the removal of government interference in financial markets, capital markets and barriers to trade, and finally a focus on foreign investment which the privatization and liberalization were supposed to stimulate. Case studies in the book are devoted to the functioning of these economic policies during the East Asia Crisis of 1997, to the economic restructuring of Russia following the fall of communism, and to a very critical view of western, and notably US, trade protection policies. Stiglitz is clear that the US Treasury, as the IMF's largest shareholder and the only one with veto power, has usually called the tune on that institution's economic policies. But of even more concern is that all these international agencies reflect the interests of the wealthiest industrial countries, and their governance represents the interests of these countries' business communities. The representatives to the IMF are finance ministers and central bank governors. At the WTO, it is the trade ministers. Generally, what they and their constituencies want is market protection and subsidies at home, and open markets elsewhere. Repeatedly, Stiglitz argues that the IMF and World Bank have linked loans to policies which have proved devastating to populations in developing countries — for example, supporting government austerity programs which led to cuts in food subsidies and charges for primary schooling — and how the IMF loan policy has primarily benefitted both western investment interests and Mafia-style capitalism in Russia. In the East Asia crisis, when the IMF's liberal foreign investment policies led to huge outflows of capital from the affected countries, Stiglitz suggests that it was those countries in the region — notably Malaysia, China and India — which refused to implement IMF policies and introduced temporary control measures on the flow of capital, which best weathered the storm. In all fairness, he does not entirely blame the international agencies for the crisis — inadequate financial regulatory systems in many countries also played a big part. Likewise, Stiglitz recognizes the partial responsibility of Yeltsin and his cronies for the economic chaos which overtook Russia when that country, supported by the IMF, galloped towards privatization and liberalization on the back of a totally inadequate set of economic institutions. Stiglitz's chapter on Russia — appropriately titled "Who Lost Russia?"— is the most...

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