The following paper is a summary of the book “Globalization and its Discontents” by the Noble Laureate Joseph E. Stiglitz. This book talks about how globalization has failed to achieve the economic equality it was meant to produce, enumerating the faults in the working of the International Monetary Fund, the World Bank and the World Trade Organization and what steps they must take to put reformed policies in place such that both developing and developed nations can benefit from their respective economies and free markets
Keywords: International Monetary Fund, finance, economy, free markets, World Bank
The world is far more connected now than it was ever. Information sharing, technological aide and financial helping is at its peak. All these have become possible through Globalization. It was though that Globalization would help nations all over the world to join and increase standards of living, governance, finances, heath care etc. amongst themselves. More is expected from the impact of Globalization from the economic front. However, Globalization has not been able to deliver to the expectations of the people. Large reserves of finances still remain with a limited number of individuals mostly residing in developed countries Health care is low, natural calamities and wars still pose threat to the whole world. Noble Laureate Joseph E. Stiglitz writes about his personal experiences with financial organizations and how they have failed to achieve Globalization through his book “Globalization and its Discontent” published in the year 2002. He is a renowned economist who has worked as a member of Council of Economic Adviser under President Clinton and has been a part of the World Bank later. The following paper is a brief summary of “Globalization and its Discontents”.
Stiglitz draws his conclusions from his career in economics through his days in the Council of Economic Adviser and the World Bank and criticizes the way in which economic policies have been drawn to adversely undermine the positive effects of globalization. The book is about the criticism of imperative practices in the International Monetary Fund, World Bank and the World Trade Organization and how globalization stands today instead of what it was expected to do. However, the book is not against Globalization and Stiglitz hopes to make people aware of the positive impacts of Globalization if achieved in the right sense of the word.
Stiglitz points out that the major flaw lies in the policy making of the International Monetary Fund, and how its policies seek to diminish the role of the government in regulating their economies and free markets. The International Monetary Fund also believes in the phenomenon of trickle down economy which propounds that funds eventually reach the people after going through different channels of the system. Stiglitz rejects this idea calling it a combination of bad science and ideology. He alludes to the work by Adam Smith that works as model for the “Washington Consensus” policy followed by the World Trade Organization, International Monetary Fund and World Bank. This model suggests that market motives would eventually drive an organizational economy to desirable outcomes efficiently. Stiglitz provides evidence that such a model is not an efficient model to assess growth in economies with uncertainties for example markets in the developing nations.
Stiglitz criticizes the International Monetary Fund, WORLD TRADE ORGANIZATION and World Bank’s working as non-transparent and driven in a non-accountable fashion. These organizations do not seek public opinion and court appellate to settle discrepancies related to environmental, labor and capital laws. Instead, these organizations take decisions in closed tribunals with the least possible interaction of law makers and economists for whom the decisions are being taken. Stiglitz explains the fault in the working of International Monetary Fund by pointing out the conflicting factor in its objectives. The International Monetary Fund’s main objective is to help developing economies all over the world to flourish and develop into full-fledged markets that can reach sustainability. However, the discrepancy in these objectives is that the International Monetary Fund also supports the interests of financial organizations. According to Stiglitz these interests counter the general idea of economic growth and therefore the International Monetary Fund is under constant conflict in its policies.
Stiglitz recounts examples of the failures of International Monetary Fund, World Trade Organization and World Bank in cases of implementing economic growth and reform in South Asia and China. The International Monetary Fund’s main focus lies on the upheaval of economic and financial institutions like banks and not towards social rectifications like economic reforms like educational aid and help towards unemployed workers. Stiglitz comments this approach points towards an overall mismanagement in the macroeconomic scenario as he says “Ordinary people as well as many government officials and business people continue to refer to the economic and social storm that hit their nations simply as 'the IMF' -- the way one would say 'the plague' or 'the Great Depression” (80-81, 97). These markets openly reject proposals for aid from the International Monetary Fund, although these markets emerge as powerful prospective markets for the coming years.
Stiglitz lays emphasis on the fact that working policies in the World Trade Organization and the International Monetary Fund need to be rethought and their working requires reforms. These reforms must come in a way such that economies are benefitted at a level such that they may grow and achieve sustainability. He prompts the use of “gradual, sequential and selective” approaches to implement growth in institutions and The IMF must promote government interactions all over the world so that each government may complement its own economic policy with that of the interacting governments and strike equilibrium with its own public interests. There should also be implementation of provisions like debt forgiveness, socio-economic liberalization, land reforms, employee safety nets etc. These organizations must reform their policies keeping in mind the increasing global threats of medical emergencies, ecological damages and other threats like terrorism and selfish consumerism. For these reasons Stiglitz believes that the reforms in the financial policy making he calls for must be oriented in a way that economic democracy can be achieved both at local as well as global level.
Stiglitz lays more stress on the working of IMF rather than focusing on all the three world economic organizations and terms the American economy as a model for economies elsewhere in the world. However, he does hint at the need of reform in the American reform as well, with the growing trends in economic disparity all over the globe including the United States and the failing economic policies in America. He puts a lot of emphasis on the Gross Domestic Product (GDP) as a working reference and indicator of growth of economies in countries all over the world and asks for reforms that may complement this growth. He recognizes that it may be hard to quantify the growth through this index, however, this index must be considered as a significant indicator never the less.
“Globalization and its Discontents” is a highly informative commentary that forces the reader to think beyond the picture painted by the International Monetary Fund, World Bank and World Trade Organization about the economic growth and its outcomes on a global perspective and draws out evidence that globalization has failed to achieve growth and stability in developing and economically weaker countries. The book calls for a certain amount of reforms in the working of these organizations to help effect change in the way Globalization works and help markets all over the world reap economic benefits while economies grow to compliment the profits from such markets. The working culture of these organizations must be transparent and open to public opinion and should carry counter measures responsibly, before implementing financial policies that may have direct impact on the economies all over the world.
Stiglitz, J.E. (2002). Globalization and its Discontents. W.W. Norton & Co., May 2002. 282pp