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Joseph Stiglitz : The subtle truth about globalization
He is the hero of the anti-globalization movement and the nemesis of market fundamentalists. “Joe” Stiglitz, the controversial winner of the Nobel Prize.
In your latest book Globalization and its Discontents you affirm that globalization doesn’t work. Why?
Because globalization doesn’t work for the benefit of everybody, even if some people and, in certain parts of the world, many people, have benefited from it. China and many other Asian countries have increased their exports. But in Latin America the reforms of the 1990s have resulted in instability. In many cases growth has been very limited and the benefits have gone disproportionately to the rich.
Do you think the crisis affecting financial markets in rich countries is linked to a dysfunctioning of globalization?
Yes and no. The problem is not globalization itself but the international economic institutions, particularly the IMF that pushed a set of ideas, like market fundamentalism, a particular view of capitalism seen as the best possible economic system, the only economic system. The troubles and recent scandals in the United States and elsewhere have shown that there are some very serious problems with American-style capitalism. Secondly, it illustrates the link between politics and economics. And this political link can be a problem even in the US and industrialized countries. When I was on the Council of Economic Advisers in the White House, we supported initiatives to change the accounting standards for executives’ stock options. But Treasury, the financial community, the corporations resisted and succeeded in postponing the reforms for another eight years at great cost to the American economy.
Which specific interests does liberalization serve in the West?
It does not serve only the interests of some people in the West but special interests within the Northern and Southern countries. For example, globalization of the capital market serves the interests of speculators and people who are interested in pushing short-term securities. Some of the unbalanced trade rules, such as the intellectual property regime, are pushed by drug companies and the entertainment industry over the interests of the broader scientific community, over those who are concerned by the health and care of the very poor.
But you don’t believe in the “conspiracy theory” that is popular in Asia and in Russia. Why?
Conspiracy suggests that people get together, conspire and actively co-ordinate working together. I think that’s wrong. What I do think is that there are certain ways of thinking and certain political processes. The market fundamentalists’ ideology is a very strong force, the political interest in campaign contributions of the financial community is a very strong force. The problem is with the political process, which is in many ways undemocratic. It’s not transparent and the voices of particular countries and of particular groups are more valuable than others.
What is the impact of globalization in the fields of education, culture and knowledge sharing?
New technologies can support cultural diversity by making it easier for communities to express themselves. But globalization has sometimes been pushed too fast and in an inappropriate way, threatening the stability of existing cultures. Many societies have traditional ways of handling social support, but sometimes international institutions have come in with assistance programmes that undermine those local systems.
In your book, you insist on the tremendous impact that a good education policy can have on development.
I would distinguish very strongly between the position of the World Bank and the position of the IMF. The World Bank actually supports educational projects in many countries around the world. I saw some very successful education programmes first hand for instance in Colombia, where they developed a curriculum that facilitated migrant workers’ children. In Ethiopia they were thinking very hard how to redesign a curriculum to reflect the needs of people in that country. On the other hand, quite often, the austerity measures imposed as part of the IMF programmes, undermine education. The question is: are the austerity programmes excessively austere? From what I saw in Ethiopia I can say very clearly that they were. Educational expenditures are investments in a country’s future, so they need to be given special priority. But one has to look at how they spend the money.
What do you think of the increasing trend towards the privatisation of educational services?
In general, it can represent a very dangerous trend. In the US it often serves to enhance segregation, not so much racial segregation today but social segregation. The private schools often have better results because in many cases their students come from better backgrounds, with better home education and so forth.
There’s a general belief in the power of ICTs to reduce the economic gap between rich and poor? What do you think?
The new technologies have the power to reduce the gap between the rich and the poor when the poor are rich enough to avail themselves of these new technologies. In countries like China it is almost sure that they will shorten the gap. But in Africa, where there is almost no access to NT, it would have the effect of increasing the gap.
Is it in the economic interest of the poor countries to develop their own intellectual property laws to protect their assets (their biodiversity for example) or is it better for them to let the piracy of western products grow as it is doing now?
It is very important for them to develop their own legal framework to protect themselves against bio-piracy. The problem right now is that it is an unfair game because the developing countries do not have the legal resources to combat the expensive American lawyers who work for the firms engaged in this kind of activity. It is critical for developing countries to get together to have a concerted effort and to use Doha, the new round of trade negotiations, to say “we have to revise the intellectual property regime”.
You are convinced that globalization could be a force for the good of the poor. What kind of changes are needed to meet this goal?
There has to be recognition, particularly in the North, of the nature of the inequities and of the nature of the problems. I think the majority of people in the North believe in principles of equity and fairness. If they become aware of some of these issues they will begin to put political pressures on their governments to do something. That’s the explanation for the Jubilee 2000 movement for debt forgiveness.
But there have to be longer-term institutional reforms in international economic institutions.
What reforms would you introduce?
I would change the voting distribution because when one country, that is the US, has a veto power it is inevitable that the IMF is going to reflect the interests of the US. And when the US is represented by the US treasury it is inevitable that interests within the financial market are going to be heard more loudly. I would also change the representation. If the IMF was only engaged in technical matters like insurance, nobody would care that it is done by the financial community. But IMF policy is about education, health, every aspect of society. And those people who are affected have no voice, absolutely no voice.
What would you do now in Argentina for example?
First, I would change from focusing on trying to get foreign money, which just goes into paying foreign debts, and ask: “what can I do inside the country? What is the problem?” The problem is that human resources, for example, are not being used. How to get them to be used? What you need is a market, demand and working capital for the firms, to get the system going again instead of paying foreign creditors. I would try to cultivate a special arrangement on a temporary basis with all of my trading partners so that they would take more of my goods and that they would provide firms with working capital. It is all about restarting the engine.
(Photo No 1 © Anderson/Gamma, Paris).
(Photo No 2 © Chris Stowers/Panos Pictures, Londres).
An intractable witness
“I hope my book will spark debate.” Loaded with degrees, honors and awards, including the 2001 Nobel Prize for economics, Joseph Stiglitz has once again achieved his goal. His book Globalization and Its Discontents (published by W.W. Norton, 2002) has sparked often passionate reactions the world over. It has also provoked some ferocious attacks from supporters of his bete noire: the International Monetary Fund (IMF). This neo-Keynsian has not stopped denouncing the “market fundamentalists” of the IMF. The man who penetrated the circle of global decision-makers dared to speak out against their “grand hypocrisy.” In short, he betrayed them.
Born in 1943 in Gary (Indiana), Stiglitz is considered to be one of the most brilliant economists of his generation. During his university studies at Yale, Princeton, Oxford and Stanford, where he now teaches, he helped to create a new discipline: the economy of information. In 1993 he joined the ultra-exclusive Council of Economic Advisers of the White House, where he became Bill Clinton’s principal economic councillor. In 1997, he moved on to the World Bank as chief economist and vice president.
But “Joe” Stiglitz hit the first bump in his career in 2000. In January, he caused an uproar by resigning, because he considered that the IMF did not give him enough elbow room to make the World Bank slogan - “Our dream is a world without poverty” -a reality. |
Excerpts from Globalization and Its Discontents
“As I moved to the international arena, I discovered that […] the decisions were made on the basis of what seemed a curious blend of ideology and bad economics, dogma that sometimes seemed to be thinly veiling special interests.”
“Today, few defend the hypocrisy of pretending to help developing countries by forcing them to open up their markets to the goods of the advanced industrial countries while keeping their own markets protected, policies that make the rich richer and the poor more impoverished – and increasingly angry.”
Speaking of the IMF: “The change in mandate and objectives, while it may have been quiet, was hardly subtle: from serving global economic interests to serving the interests of the global finance.”
“The colonial mentality – the certainty of knowing better than developing countries what is best for them - persisted.”
“Globalization today is not working for many of the world’s poor. It is not working for much of the environment. It is not working for the stability of the global economy.” |
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Author(s) |
Interview by Sophie Boukhari
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The New Courier No 1
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