Sunday, May 31, 2009

Globalization and Its Discontents

My review of Joseph Stiglitz's book, cross-posted from (See also.)

I'm a dope when it comes to economics, but my impression is that this book has been hugely influential among the anti-corporate globalization crowd. It came out shortly after the Seattle WTO protests and soon popped up on the bookshelves many of my development-minded friends.

It's easy to see why: Stiglitz is about as prestigious a development economist as you are likely to find--Nobel Prize winner, former chief economist at the World Bank, by some metrics the most cited economist working today. So if he says something has gone wrong with globalization, people listen.

His message here is very reform-minded--he thinks globalization is here to stay--but his arguments should resonate with anyone concerned about poverty in the developing world, or about jobs here in the U.S. His basic thesis is that the IMF has drifted from its Keynesian roots and been hijacked by a narrow economic orthodoxy that rabidly pursues privatization, market liberalization and low inflation to the detriment of all other social and economic goals. The attack of the market fundamentalists!

He notes that this prescription for economic growth, dubbed the 'Washington Consensus', is far from the consensus position among economists. Indeed, it seems as if the IMF's policies are designed for the benefit of the financial elite, rather than with the goal of achieving broadly-shared prosperity in the targeted countries. Hence the IMF's focus on inflation rather than unemployment, and their relentless drive to open up markets to foreign investors rather than fostering local entrepreneurship.

The results have been disastrous for developing nations from Russia to East Asia to Africa. Indeed, he makes the point that globalization has been a net loser for sub-Saharan Africa and that countries who have resisted the IMF have been more successful on average than those who didn't. (Interestingly, he mostly lets his former employers at the World Bank off the hook.)

If you are looking for a popular introduction to macroeconomics, look elsewhere. This is more like an extended, wide-ranging hallway conversation with an eminent professor. Still, I learned a ton about how these institutions work and how they might be made accountable to the billions of people impacted by their decisions. The general discussion about nurturing and building economies are also hugely relevant given the recent economic collapse.

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