Time for a reality check
C. T. KURIEN
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In this book Stiglitz offers suggestions to steer globalisation in desirable directions
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MAKING GLOBALIZATION WORK — The Next Steps to Global Justice: Joseph E. Stiglitz; Allen Lane, an imprint of Penguin Books Ltd., London, 11, Community Centre, Panchsheel Park, New Delhi-110011. Rs. 595.
Globalisation has passed its initial high-pitched `for' and `against' stage. Some two decades after it appeared the arguments still continue, but it is now possible to subject them to a reality check. And the evidence is mixed. The U.S., once the loudest champion of globalisation, has begun to have doubts about it because employment of its workforce is being taken away by countries situated far away from its shores, its once `almighty' dollar is losing its strength and shine, and its global economic supremacy is being challenged. It would appear that China, once a tightly closed economy has emerged as the greatest beneficiary of opening up to the rest of the world, especially to its one-time bitter enemy. In India it is claimed that globalisation has resulted in high rates of growth, unprecedented prosperity, and, above all, a sense of optimism about the future shared by its citizens and many other countries. Within and across nations inequalities have been growing leading to social and political tensions.
Globalisation desirable
This is the background to Josph Stiglitz's second book on globalisation. In his earlier work, Globalization and Its Discontents (2002) Stiglitz sharply criticised the manner in which the IMF and Western countries were pushing globalisation. In the present volume he takes the line that globalisation, the greater economic integration of national economies through the market process, is a desirable thing. He takes this position not because he is a believer in the miracle of the market. He makes it clear that without appropriate government regulation and intervention, markets do not lead even to economic efficiency, and that left to itself the market tends to "create rich countries and poor people." Stiglitz is also unambiguous about his economic philosophy: "Development is about transforming the lives of people, not just transforming economies."
The author has strong credentials to make pronouncements about the global economy. He received the Nobel Prize in economics in 2001 for his theoretical work on economics of information that led to the understanding of many of the inadequacies of the market as a social institution and to the recognition that values beyond profits and growth are necessary to ensure social welfare. As a member of the Council of Economic Advisers of President Clinton he had the opportunity to watch at close quarters how national and international decisions are made, and to realise that politics and economics are intricately interwoven. His role as a top official of the World Bank enabled him to understand how national governments, multinational corporations and international institutions actually function.
A global account
I strongly recommend the book to all who are eager to become familiar with the way globalisation has been impacting national economies and different sections of society in many parts of the world. The book is, indeed, a global account of globalisation. He is highly critical of the manner in which globalisation has been proceeding. But he believes that its failures are largely because the rules of the game that govern it are unfair as they are specifically designed to benefit the advanced industrial countries. He believes that these rules can be and should be changed. He shares the message proclaimed by the World Social Forum held in Mumbai in 2004: "Another World is Possible."
The specific themes that Stiglitz deals with are, making international trade fair; shaping the patents regime to go beyond profits and to benefit people; administering global resources, especially energy resources; saving the planet; disciplining multinational corporations; reducing the burden of debt of poor countries; reforming the Global Reserve System; and democratising globalisation. In each one of these themes Stiglitz presents a well-documented account of what has been happening in the past and of the present position. Then he moves on to suggest how the distortions can be corrected and what changes in institutional structures and decision-making procedures are necessary to steer globalisation in desirable directions.
Reserve system
The treatment of the global reserve system is particularly noteworthy. The advantages that the U.S. has had because its dollar had become the universal currency, the growing strength of other economies and currencies, the long-term untenability of the present system, and the possibility of global recession and crisis that its failure presages are all dealt with in a manner that even non-economists will be able to follow. To replace the present unstable system Stiglitz proposes a `global greenbacks' arrangement - similar to the `bancor' proposal that Keynes had made towards the end of the Second World War. A global reserve fund of national currencies contributed by each country will replace the present single-currency reserve system with each country getting greenbacks in return, which it can use to purchase from the reserve fund any other currency when the need arises. Some problems will still remain, especially the determination of the relative prices of the currencies, but the dangers associated with dependence on a single national currency will be eliminated.
Stiglitz's diagnoses and suggested remedies deserve serious consideration. However, there is a tricky problem relating to the remedies. Practically all remedial measures depend crucially on getting the advanced countries, which now lay down the rules and control the rule-making arrangements, to accept changes that will adversely affect them in the short run. What will lead them to make such changes? The situation is similar to suggesting that a democratic alternative is possible in a country where someone now exercises dictatorial powers provided he can be convinced that democracy is better than dictatorship!
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