The Business School Buzz Has Worn Off a Bit...

I like to think I'm a free-market kinda gal. But I forget that along with free markets, there's globalization and all the attendant ills. The following are talking points made by Joseph Stiglitz, an economist (via Our Word is Our Weapon blog):

I really like the sound of Joseph Stiglitz’s new book (Making Globalization Work), at least from the description of his recent World Bank talk on it by Christine at PSDblog:

The theme was the ways in which globalization has contributed to rising inequality, both across and within countries, and what to do about it. Rather than a rising tide to lift all boats, globalization is better described as “a riptide that can destroy lots of small, unprepared boats” … I’ll just pull out a few of his comments:

* The global intellectual property regime is a matter of life and death for developing countries. Negotiators of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) “signed the death warrants for thousands of people in Sub-Saharan Africa”, by denying them access to lifesaving medicines. The current US-imposed regime is bad for US science, but even worse for the global practice of science and innovation. The book describes his suggested alternative to TRIPS, a global prize fund to compensate researchers based on the importance of the drugs they develop. Malaria will presumably rank higher than male pattern baldness. A competitive market would then become the distribution system.

* Water is indeed flowing uphill, as we watch money flow from poor to rich countries. We observe a proliferation of countries with overbearing debt problems, not just one or two profligate spenders. Despite sophisticated derivative markets, developing countries still bear a disproportionate share of global risk.

* Globalization does not benefit all of us, even if politicians don’t mind giving that impression. It is true that the welfare gains from globalization mean that the minority of winners receive more than enough surplus to compensate the majority of losers. Instead of watching this happen, however, we see globalization used as an excuse to remove social protections, from those who are already on the losing end.

* Domestic policy decisions are driven by efficiency and equity considerations, but international policy is not about fairness. (This drawn from his time as chairman of Council of Economic Advisers.) In trade policy, US negotiators always go for the best deal for the US (actually for campaign contributors, he added). The Uruguay round actually made the poorest countries worse off (in absolute, not relative terms), because of asymmetries in trade agreements, particularly in agriculture.

* On global efficiency grounds, policy makers would promote labor mobility, more than capital mobility. Even more so on equity grounds. But this isn’t what we see happening.

* We’ve seen generally disappointing results for those countries that have tried to follow the West’s advice on how to manage the economy. Latin America paid the most attention, and its growth has been about half of what it was before it started listening to Western experts. India and China are exceptional - they have not experienced a financial crisis in the last 3 decades - and it’s probably because they didn’t follow the standard wisdom.