Ed McDonald

Joseph Stiglitz Making globalization work Penguin Allen Lane, London 2006, $35

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‘Globalization’ is a term that has acquired an almost clichéd significance, portrayed often as a sinister force penetrating the world and referring broadly to economics, politics and culture. Given that ‘globalization’ has acquired a life of its own, Joseph Stiglitz undertakes an ambitious argument in Making globalization work .

Stiglitz focuses on globalisation as an economic phenomenon: the process of interaction within international markets and the government policies that shape this interaction, as well as the policies of international economic organizations such as the World Bank, the International Monetary Fund (IMF) and the World Trade Organisation (WTO).

Despite popular antipathy to globalization, Stiglitz believes that economic globalization is universally beneficial in theory. Its failures are due to policy mismanagement, an over-reliance on the laissez faire free-market theory espoused in the Washington Consensus, corruption and self interest. Making globalization work is consequently ‘as much about how politics shape the economic system as it is about economics itself’ (xviii).

Making globalisation work is essentially a sequel to Stiglitz’s previous book, Globalization and its discontents, which outlined the failures of economic globalization as promulgated by the White House, the World Bank and the IMF. This book is an antithesis of the ‘Washington Consensus’: a ‘fundamentalist’ Stiglitz, Making globalisation work (41) free-market view of economics of ‘unfettered’ (27) markets without government regulation that largely protects American interests and is ‘antithetical to development’ (xiv). The failures of the Washington Consensus are presented explicitly, in human terms as well as economic, referring to the general regression of Africa, Latin America and post-communist Europe under IMF and Washington Consensus advice. This is contrasted with the story of East Asia, in which governments regulated economic growth and tempered capital investment with the infrastructure of development in education, communications and transport facilities. East Asia is used as evidence of Stiglitz’s neo-Keynesian (260) economic theory of government intervention.

The structure of Making globalisation work deals with a specific issue in each chapter, first outlining the problems or failures of this aspect of globalisation, and then finishing each chapter with the repetitious subtitle ‘Making Globalisation Work’, in which resolutions are proposed to these problems. From this foundation, Stiglitz’s argument expands to a series of reforms based not around free markets but fair markets. Trade barriers and tariffs are examined. He proposes the lifting of subsidies and tariffs within the first world, opening markets to the third world, while allowing third world countries to protect their own industries. Tilting the ‘rules of the game’ (9) in favour of the third world would allow a prospect of development and a fair global economy. This is reinforced by general reforms of the international economic organizations to reflect the interests of more than the United States and large corporate investors, and to break the effective political power of the IMF over the sovereignty and policies of the developing world. An aspect of this is making equitable and accountable the problems of debt and IMF policy, so that the interests of borrowers (poor countries) are given primacy over the interests of lenders. This argument is based on risk assessment – lenders are contracted to possible failure in giving the loan, and must also bear the cost.

Additionally, a fair global market economy involves reducing the ‘democratic deficit’ (280) in the IMF and the World Bank to allow developing countries more power in the global economic situation. The US government is criticized for serving corporate interests rather than its self-proclaimed status as the benevolent global leader. Multinationals are also questioned as global actors that reign unregulated, exploit developing countries and lobby US and IMF policy extensively. Stiglitz emphasizes the need for global laws and a system of arbitration, as well as a higher degree of corporate accountability and transparency, bringing ‘ethics back into business’ (xviii).

The need for global standards and regulations is also argued extensively. Stiglitz proposes a global reserve system which would weaken the dependence of countries on the US dollar and be able to make global contributions to global problems of climate and development. A similar approach is reflected in Stiglitz’s idea of a globally regulated patents system, to ensure competition in vital production such as medicine.

This case for making globalization work rests on two underlying assumptions: that globalization (under correct management) will profit all; and that the moral foundation of Stiglitz’s argument will persuade policy makers in the first world. The former assumption is viable, if idealistic: would it be in the rational (read: vote winning) interest of any American government to remove the subsidies protecting the sugar farmers? This assumption also implies an international system in which universal progress and profit are desired by all states, irrespective of desires to enforce status quos or bargain politically. The latter assumption implies that a system of economics within the capitalist framework could operate on ‘principles and values’ (xii). Stirring as this moral argument may be, this is an untenable expectation in an economic system that defines rationality as self-interest. Stiglitz also proposes a ‘global social contract’ (285), which seems unrealistic considering that many individuals and corporations avoid even a national social contract through tax evasion. Another problem with the moral argument is that the ‘principles and values’ Stiglitz encourages are founded entirely on American-Wilsonian liberalism.

Liberalism pervades Making globalisation work. Terms like ‘international law’, ‘accountability’, ‘democracy’, ‘arbitration’, ‘global social contracts’ and ‘global social justice’ systems guided by ‘principles and values’ imply a liberal perspective. Stiglitz even invokes Wilson for a case of transparent global policy discussions: ‘Open covenants openly arrived at’ (98). The persuasive power of the book, especially to the neo-conservatives in the White House, the IMF and the World Bank, is probably lessened by writing from a liberal perspective. Additionally, the Wilsonian perspective exhorted by Stiglitz is distinctively American in values and orientation. The emphasis on ‘democracy’ (for example, 136-137) resonates throughout the book, and Stiglitz asserts America’s position as the ‘moral leader’ (274) of the world. Additionally, the independent global reserve system Stiglitz proposes is named the ‘global greenback’ (260), signalling some form of American hegemony.

Making gobalisation work is not written for policy makers but for a broader popular audience. The audacity and ambition of its title and purpose preclude excruciating detail or in-depth economic analysis of every possible contingency. Stiglitz states he selects ‘general principles’ from a ‘myriad of global economic narratives’ (xii), and illustrates broader global trends with micro-narratives as evidence, rather than covering every case. This argumentative method, while not exhaustive, is appealing and illustrative. Evoking moral responsibility and justice, this book is intended to mobilise public opinion. It recognises that governments will respond to public opinion in policy formation, and thus exhorts a world view of individual and collective responsibility and justice, even buying into the popular climate-change paradigm (which escaped his previous book). Making globalisation work presents an accessible solution to global problems, and its messages make it an important book for all – regardless of whether the reforms will make globalisation work – or whether globalisation can work at all.

Bibliography

Stiglitz, Joseph Globalization and its discontents Penguin, London 2002

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