Joseph Stiglitz on globalization

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Stiglitzbook_1 If it's possible for an economist to keep a roomful of people on the edge of their seats, Joseph Stiglitz came reasonably close yesterday. He presented his newest book, Making Globalization Work, to a packed house at the World Bank. (By packed, I mean that seats in the overflow room went so quickly that well over 100 people were standing in the back.)

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". Plenty has already been written about the book (see openDemocracy, Pienso, and Poverty and Growth Blog), so 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. (See discussion on the prize fund idea at Marginal Revolution.)
  • 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.

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