Globalization and its Discontents

It’s that time of year again: the G8 is meeting, this time in

Kananaskis, Canada, and the protestors are out. “Their one overriding

message:” as Jon Stewart said on the Daily Show last night, “we

don’t have an overriding message”.

The protestors say that the mainstream news media doesn’t take

them seriously, and saddles them with labels like “anarchists”

which only serve to marginalise them further. This is probably true,

but the fact is that it’s hard to sum up any given protestor’s

opinion in a simple-to-understand slogan, and there are in any case

nearly as many opinions as there are protestors. That’s why CNN,

say, will bring on a right-wing isolationist like Pat Buchanan to represent

opposition to the G8/WTO/whatever: he’s not representative, but

at least he’s engaged in conventional political debate.

What this means in practice is that the educated public remains decidedly

unclear as to exactly who the goodies and the baddies are. They might

not trust the politicians, but they certainly don’t like Pat Buchanan,

and a lot of the protestors seem a lot like the hippies of the 60s and

70s: haven’t we outgrown that?

After all, while the crusties and the trade unionists make lots of

noise outside, the educated men in suits seem to be trying to come up

with the best way to avert and/or resolve financial crises. They speak

the language of the middle classes: fiscal prudence, financial market

liberalisation, wanting to ensure that their money is well spent.

And every so often the WTO or IMF will seem to make some kind of concession

to the protestors: more transparency here, an official mandate to bring

down poverty there. So they’re listening, right?

Wrong. For the first time, we’ve been given a book

which lays out in the clearest and most authoritative of terms just

how misguided and destructive these multilateral institutions can be.

Globalization and its Discontents is the biggest challenge to

date of the IMF’s hegemony, and is required reading for anybody interested

in international development, emerging markets or free trade. The author,

Joe Stiglitz, needs no introduction from me: one of the world’s greatest

living economists (he won the Nobel Prize for his work on information

asymmetries; he also wrote the standard economics undergraduate textbook),

Stiglitz also had the perfect vantage point from which to observe the

IMF’s response to the Asian and Russian crises of 1997-8: he was chief

economist of the World Bank.

Stiglitz grew increasingly frustrated at the Fund’s arrogant and willful

refusal to listen to basic economic common sense, and eventually, rather

than shut up, resigned from the Bank. He penned an explosive article

for The New Republic, which formed the basis of the new book; the difference

is that the book has a lot more weight behind it, and is if anything

even more powerful now for refusing to pull any of the earlier punches

despite the passage of a couple of years.

I think the title of the book is a mistake: Stiglitz himself makes

it very clear that he’s not against globalization per se, just the selfish

version of it propagated by G7 trade and finance ministers. He is an

economist, after all, so he’s perfectly happy extolling the virtues

of free trade or privatisation, so long as they happen in the right

place in the economic development of a country. But he makes a very

strong case that in an imperfect world, acts like tariff reduction and

market liberalisation have to be considered means to an end, and that

often they’re more destructive than constructive.

Yet still we get the likes of Stiglitz’s Columbia University colleague,

Jagdish Bhagwati, writing

in the accursed Economist that it’s a "misconception"

to say that the rich countries have wickedly held on to their trade

barriers against poor countries, while using the Bretton Woods institutions

to force down the poor countries’ own trade barriers. Here he is defending

his case:

In fact, asymmetry of trade barriers goes the other

way. Take industrial tariffs. As of today, rich-country tariffs average

3%; poor countries’ tariffs average 13%. Nor do peaks in tariffs—concentrated

in textiles and clothing, fisheries and footwear, and clearly directed

at the poor countries—change the picture much: the United Nations

Council for Trade, Aid and Development (UNCTAD) has estimated that they

apply to only a third of poor-country exports.