Globalization and Its Discontents
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Globalization and Its Discontents is a book written by the 2001 Nobel laureate Joseph E. Stiglitz. It was published in W.W. Norton & Company in June 2002 with ISBN 0393051242.
According to James M. Rossi, Globalization and Its Discontents is a concise, devastating, and relentless indictment of the global economic policies of the International Monetary Fund, World Trade Organization, and World Bank. Stiglitz singles out the IMF for most of the blame: flawed economic theories, lack of transparency and accountability to the public, and the pursuit of special corporate interests. The book draws on Stiglitz's personal experience as chairman of the Council of Economic Advisers under Bill Clinton from 1993 and chief economist at the World Bank from 1997. During this period Stiglitz became disillusioned with the IMF and other international institutions, which he came to believe acted against the interests of impoverished developing countries [1]. Stiglitz argues that the policies pursued by the IMF are based on neoliberal assumptions that are fundamentally unsound:
- Behind the free market ideology there is a model, often attributed to Adam Smith, which argues that market forces--the profit motive--drive the economy to efficient outcomes as if by an invisible hand. One of the great achievements of modern economics is to show the sense in which, and the conditions under which, Smith's conclusion is correct. It turns out that these conditions are highly restrictive. Indeed, more recent advances in economic theory --ironically occurring precisely during the period of the most relentless pursuit of the Washington Consensus policies--have shown that whenever information is imperfect and markets incomplete, which is to say always, and especially in developing countries, then the invisible hand works most imperfectly. Significantly, there are desirable government interventions which, in principle, can improve upon the efficiency of the market. These restrictions on the conditions under which markets result in efficiency are important--many of the key activities of government can be understood as responses to the resulting market failures. [2]
Stiglitz argues that IMF policies contributed to bringing about financial crisis in East Asia and Argentina, the failure of Russia's conversion to a market economy, low levels of development in sub-Saharan Africa. Specific policies criticised by Stiglitz include fiscal austerity, high interest rates, trade liberalization, the liberalization of capital markets and insistence on the privatization of state assets.
Criticism of Discontents
Although Globalization and Its Discontents has earned high praise from numerous respected reviewers [3], its methodology and key findings have been criticised by some. Writing in the Journal of Libertarian Studies, N. Stephan Kinsella claims that Stiglitz, whilst purporting not to challenge market principles and globalization in general, in fact consistently advocates the Keynesian remedies of money printing and deficit spending. Further, he argues that Stiglitz never really defines 'globalization' and fails to develop his thesis within a consistent framework, preferring instead to recount numerous specific examples of bad policy-making in practice. Kinsella contrasts the view he attributes to Stiglitz, that the alternative to mainstream economics is enlightened and expanded governance structures, with Ludwig von Mises' view that the alternative is "freedom to choose and discard".
Daniel T. Grizwald of the Cato Institute labels the book a "score-settling exercise distorted by the author's own political prejudices and personal animus." Grizwald takes issue with Stiglitz's assumption "that protectionism enriches those nations that practice it" and notes that "while he is not questioning free trade, Stiglitz is disparaging the free flow of capital. The book blames the East Asian Financial Crisis almost entirely on one factor: capital account liberalization." Stiglitz demonstrates this belief by "prais[ing] Malaysia for spurring IMF advice ... by imposing capital controls to stem the flight of short term flows." Grizwald also states that Stiglitz provided no evidence to support his belief that Malaysia was rewarded for their efforts. He counters that Malaysia's GDP had fallen much farther than the other countries listed by Stiglitz, down to 6.7% and "recovered less rapidly in 1999 and 2000 even though [others] did not resort to capital controls Stiglitz champions." Grizwald concludes by arguing that Stiglitz "distorts the history of the East Asian Miracle", with Russian privatization he "ignores the fact that Russia's initial reforms were timid and half baked" and that the IMF with its beliefs in bail outs and non-market exchange rates is not the "great symbol of market fundamentalism".[4][5]
References
- Review by James M. Rossi
- Review by N. Stephan Kinsella in the Journal of Libertarian Studies
- Review from a Marxist perspective
- Review by Daniel Grizwald in the Cato Journal
de:Die Schatten der Globalisierung