Globalization and Its Discontents - Stiglitz

Bilgisayarımdaki eski dosyaları karıştırırken, üniversite yıllarımdaki kalkınma iktisadı dersinde Joseph Stiglitz'in "Globalization and Its Discontents" (Küreselleşme Büyük Hayal Kırıklığı) adlı kitabı için yazdığım değerlendirme yazısı karşıma çıktı. Orada kalmasın, belki üç beş kişi okur da faydalanır diye düşünerek burada yayınlamaya karar verdim. Yazı İngilizce ama Google Translate ya da Chrome tarayıcısının çeviri özelliğiyle Türkçe'ye de çevrilebilir. Ayrıca, 2007'de daha önce Ekşi Sözlük'teki yazılarımı taşıyarak bu blogu başlattığımda, kitapla ilgili kısa bir eleştirel yorum (linki şurada) eklemiştim. Fakat aşağıdaki yazı hem daha kapsamlı, hem de daha dengeli. 

Book review of "Globalization and Its Discontents" by Joseph Stiglitz

May 14, 2003

“Globalization and Its Discontents”, the controversial book by Nobel laureate Joseph Stiglitz, was first published at a time when globalization emerged as a hot topic at the world stage. After the riots during the WTO meeting at Seattle, each step towards a closer integration has been associated with furious masses condemning globalization as a new form of exploitation of the poor. However, as rioters at Seattle, Prag, and Genoa appeared at the front pages, more moderate majority has sought intellectual support to initiate a rational political process to remove inequalities of the world system. Emergence of Stiglitz as the voice of the sensitive and rational majority is very crucial for this purpose.

Stiglitz does not argue for reversing the globalization. He believes that “globalization - the removal of barriers to free trade and the closer integration of national economies - can be a force for good and that it has the potential to enrich everyone in the world, particularly the poor.” According to him, international trade agreements and the policies imposed by international organizations are the main obstacles to actualization of potential benefits of a proper functioning global system.

The institutions that are subject to Stiglitz’s criticisms include IMF, World Bank, World Trade Organization, and US treasury. However, among these institutions, IMF receives considerable portion of his criticisms, for its central role in the economic events for the last 20 years, including financial crises and transformation of the former socialist economies. Indeed, Stiglitz never objects the theory behind the policies IMF typically supports. He argues that liberalization, privatization, and stabilization policies, if implemented with proper sequencing and pacing, are necessary steps to avoid inefficiencies in an economy. At the beginning of the Chapter 3, he explains the rationale behind these policies with reference to the problems in Latin America.

Stiglitz criticizes IMF for failing to take sequencing and pacing into consideration in the implementation of these policies. If national monopolies are privatized without establishing legal framework to ensure competition and job creation, privatization leads to either creation of private monopolies that are more eager to exploit their monopoly power, or selling of valuable assets of privatized firms. If liberalization takes place without taking measures to protect domestic infant industries, it leads to destruction of domestic industries by foreign competition. Stiglitz accuses IMF of looking these issues from a point of view, what he calls “Market Fundamentalism”. For IMF, rapid implementation of these policies has more importance than all. Once the reforms are made, inefficiencies will remove and proper functioning of the market will overcome the initial problems quickly. However, Stiglitz argues that this view, market fundamentalism, is non-sense. Forming a well-functioning market before establishing necessary institutions and legal framework is impossible. Even if such a well-functioning market is formed, it is no easy to create new jobs instead of the destroyed ones. Therefore, for Stiglitz, these reforms should be made in a cautious and well-timed way that they ensure creation of new jobs.

Stiglitz puts the greatest weigh on job creation and economic growth. From this perspective, he severely criticizes the stabilization programs of IMF. According to Stiglitz, fiscal austerity measures that IMF insists on exacerbate economic downturns, rather than reversing them. When an economy experiences a recession, increasing government expenditures can revert it by boosting aggregate demand. This simple policy prescription offered by Keynes was indeed the reason for the foundation of IMF. Since national economies are integrated together with trade relations, collapse of one economy also affects the others. Therefore, implementation of fiscal policy to foster economic growth is vital for both home country and the others. According to Stiglitz, IMF was founded to provide liquidity to the countries facing an economic downturn. Thus, a global recession could be averted. However, today IMF does just the opposite.  It imposes austerity policies to the countries in recession.

For Stiglitz, IMF has a misplaced and myopic focus on implementation of the policies. Although the ultimate goal is high economic growth, IMF focuses too much on the tools to reach this goal. This is true for both stabilization and structural adjustment policies.  For instance, although Argentina managed to keep its inflation low and its budget balanced, it suffered from a deep recession. Similarly, Czech Republic received greater appraisal from IMF than Poland, for it abode by the IMF measures in transformation from socialism to market economy. However, Poland attained a better growth rate than Czech Republic.  According to Stiglitz, IMF’s focus on policies caused poor economic performance in Argentina and Czech Republic.

Indeed, behind all these mistakes lies the belief that we have encountered before, market fundamentalism. Throughout his book, Stiglitz frequently emphasizes that markets operate properly under very restrictive conditions, and IMF’s reluctance to accept this creates very serious problems. He devotes two separate chapters for each Asian and Russian Crises. During these chapters, he extensively accounts for implications of IMF policies in these two regions, and blames IMF for the depth of the crises.

In my opinion, among Stiglitz’s criticisms, the one about the undemocratic environment of the international organizations, and particularly IMF, deserves special attention. It deserves special attention, since it is useful in understanding how standard IMF policies fail at a particular economy. One can examine the democracy problem in international institutions in two dimensions. First one is the absence of a debate platform that would involve whole parties related to the policies. Second one is the absence of transparency and accountability of these institutions.

Absence of a debate platform captures why a policy package designed by IMF may fail at a national economy. Each country has a unique social and institutional structure, and its own people have the best knowledge about this structure. Since the success of the program requires its adaptation to specific conditions of that country, presence of the local economists in designing the policies is very crucial. However, according to Stiglitz, IMF has an intention to neither consult to local economists, nor discuss any alternative policy at all. This creates a weird situation: The countries that are affected most by the policies are the ones that have the least influence on them. The result is the policies that lead to high unemployment rate and distort social cohesion. It is clear that creating a debate environment will not only promote democracy in international institutions, but also increase chances of policies to success.

The second dimension of the democracy problem in international organizations is the absence of transparency and accountability. Stiglitz argues that the most important decisions to affect people’s lives are taken behind closed doors. He accuses these institutions of protecting the interests of developed countries and financial companies.

Although Stiglitz makes a powerful critique of IMF, his comments and criticisms on the other actors in the globalization process are less compelling. Also, many important issues related to globalization, such as labor standards, environment, intellectual property, and migration are either excluded, or mentioned in a few paragraphs. Indeed, one expects a more balanced approach to the problems associated with globalization, when he sees the title, Globalization and Its Discontents. In my opinion, it would be better if Stiglitz wrote two distinct books, one solely dedicated to IMF and the other dedicated to all other issues.

Hypocrisy of developed countries in trade liberalization, adverse effects of intellectual property rights on the poor, and the widening income gap between the rich and the poor are only few of the many issues that could be examined more deeply. Even though comments on these issues are limited, they are very meaningful for they are mentioned by a respectful economist. Stiglitz’s position on these issues makes a significant contribution to the movements aiming at overcoming inequalities in globalization.