Globalization and Its Discontents (Taschenbuch)

To position Stiglitz up-front: he is not against globalization - in his estimation it is quality-neutral as a conception and it is here to stay. The aim of his study is to show what lessons need to be learned and applied to make globalization live up to its potential for the majority of the world's populations. The red thread of the book is the examination of the primarily negative impact that globalization has had on many developing countries and the two billion or so poor who live on less than $2/per day. His reasoning why this has been the case and what is to be done to bring about positive change makes this book an important resource for the critics and the proponents of globalization alike.

Due to its vital role in global economics today, he focuses his criticism on the IMF, fundamentally disagreeing with major policies of the Fund as applied by its senior representatives. But GLOBALIZATION AND ITS DISCONTENTS is much more than a personal rebuke of his former colleagues and associates. Anybody who has worked in and with developing countries, local policy makers and civil societies, will find themselves in tune with many of Stiglitz' salient points. Several times he comments on new strategies being tried out on "powerless" countries like Ecuador and Romania, too weak to resist the IMF and resulting in the experiment's highly negative consequences for the countries. (p. 203) The East Asia crisis (1997 onwards) features prominently in Stiglitz' account. What went wrong and why didn't the prescribed (IMF) medicines bring the ailing economies back to health? Other major examples are the 'economies in transition' - in particular Russia and the former Soviet Bloc countries.

In a summary one cannot do justice to the wealth of information contained in GLOBALIZATION AND ITS DISCONTENTS. Stiglitz' analysis follows several major themes. At the core of his arguments stand the dealings of the powerful "Washington Consensus" - the combined economic and financial force of IMF, World Bank and the US Treasury deciding on the "right" policies for developing countries. (p. 16) One of his fundamental criticisms of the IMF is that it is no longer transparent in the pursuit of its objectives and that it moved away from its original mandate: "The IMF was founded on the belief that there was a need for collective action at the global level for economic stability." However over time, the Fund has taken to "champion market supremacy with ideological fervour" (p. 12). The IMF was designed to complement the World Bank, whose mandate was "reconstruction and development" following World War II, now the major international agency for the eradication of poverty. By the 1980s the Fund and the World Bank had become increasingly intertwined with each broadening their range of influence. As a result, while the IMF "does not claim expertise in development - yet it does not hesitate to weigh in". (p. 34). Within the Fund's primary focus for macro-economics, Stiglitz argues, "market fundamentalism" has been the economic philosophy of choice with the result that financial institutions and international lenders have usually been the primary winners from each of the major financial crises. Yet, he stresses that the IMF policies are "not conspiracy more a reflection of interest & ideology of western financial institutions". (p. 130)

Another criticism voiced throughout the book is that the IMF prescribed economic remedies tend to be identical whatever the economic and financial crisis encountered: one size fits all. There is hardly any choice for a government in crisis. This approach, combined with the admitted lack of knowledge of the broader development context, can in some cases plunge the country into further recession rather than stimulate recovery. High unemployment in countries without an adequate social safety net is habitually a harmful side effect of the austerity measures imposed on the government by the IMF. Another victim of these policies is the environment. The wider social and political context of a country or region is often overlooked, Stiglitz contends, resulting in social unrest and worse: IMF-inspired riots. (p.77) Recession and civil strife further set back the development agenda and Stiglitz refers to numerous World Bank studies that confirm his assertions.

Stiglitz describes alternative approaches, presenting the evidence based on his own vast experience. His proposals can be subsumed under the term "balance". For example, any privatization of industry and markets should be gradual and sequenced, and must be balanced with strong institutional and legal structures. Rather than using "shock therapy" and forcing rapid privatization of capital markets, the "gradualist" approach ensures better results in the short and longer term (Russia vs. Poland). In the same vein he recognizes the need for balance between market forces and governmental interventions. He reminds the reader that the advanced industrialized economies all went through growth periods when government regulated the markets and capital flows. He asks that developing countries be given a real and honest chance to sit in the driver's seat when developing locally adapted international economic models. (review: Friederike Knabe Ottawa Canada)

Stiglitz provides us with one practical example after the other of the instability of deregulated markets. That is the value of this book. The author could have begun better by explaining to us just who/what are the supra-national, bureaucratic powers known as the IMF, the World Bank, the World Trade Organization, how are they financed and who holds holds the power. This would have been useful, especially as Americans are now told that their democratically-elected (excepting the current occupant) government should adhere to the nondemocratically-imposed rules of the WTO. And ithe EU, the Agiculture Minister announces to us that EU agriculture policies are in violation of IMF rules. Stiglitz might also have explained to us what exactly is the EU, aside from being just one more globalizing, nondemocratic organization. Most Europeans, safe to say, haven't the faintest idea exactly what is the EU, and apparently the bureaucrats who run it want to keep it exactly that way.