Making Globalization Work by Joseph Stiglitz
Wed, 2007-08-15 08:37
#1
Making Globalization Work by Joseph Stiglitz
Wed, 2007-08-15 08:37
#2
I have just finished this book by former World Bank VP Stiglitz and I'd like to say it's an excellent book and well worth reading. It's the "sequel" to "Globalization and its Discontents" which he wrote a few years back. For those not familiar, Stiglitz was a Clinton secretary and then a World Bank VP. He is a center-left macroeconomist with a theoretical background. He is very critical of the way globalization is being managed and in particular of the IMF.
Here is the amazon link with book reviews:
[url=http://www.amazon.ca/Making-Globalization-Work-Joseph-Stiglitz/dp/039306...
***
Now as to why I like this book.
It covers a lot of territory and makes good use of anecdotes and explanations without being technical. It discusses many of the recent significant events in international capitalism, such as the Yukos affair, the Argintenean default, and the recovery from the Asian financial crisis. He compares and contrasts the success stories in various parts of the world. Why is Bostwana doing better than other parts of Africa? Why is Malaysia doing rather well? In the latter case, he argues it's partly because they've nationalized their oil rather than sending the management positions and profits offshore.
The book gives a proper explanation and justification for a lot of the left-wing economic ideas I've seen on places such as babble. Now that I'm done reading this I'm pretty sure I'm now left on economic issues. The last time a book changed my thinking so much was Steven Pinker's Blank Slate four or five years ago.
The two most interesting parts of the book for me were the discussion of the Argintenean default and Big pharma. I'll talk a lot about the later. One issue I have learned about, is biopiracy. Pharmaceutical companies are apparently raiding traditional knowledge in isolated communities. If some tribe uses a herb to deal with something, it will often have a kernel of truth to it. And so they send out teams to find out what they're using, an then patent it. Apparently, one company tried to patent Basmati rice in the 1980s. The company arued the benefits of basmati rice had never been published in an American scientific journal, or something like that. Finally, a shopkeeper was able to prove he had been selling it for decades. I wonder how many such scams are available at the pharmacy.
Stiglitz details how pharmaceutical companies, through their lobbyists, seek to shape trade agreemants. Their industrial sector is apparently number 1 for number of lobbyists employed in Washington. Intellectual property protection seems to dominate Washington's agenda at trade meetings.
Aside: My prelimenary conclusion is that the American pharmaceutical industry has a terrific business model. It gets around 100% of its research subsidized, in addition to having their special interests take priority at trade discussion. It raids the third world for ideas. Then it gouges the customer at home and abroad, being the first or second most profitable industry in the United Sates. Revenue are split between executive compensation, marketting and profits. Marketting exceeds research funding by a 5:2 margin. Hurray for strawberry flavoured cough syrup. Perhaps we, as in most occidental countries, ought to reduce the length of IP protections. We should sell medicines to the third world at cost. And instead of giving subsidies for pharmaceutical research, we should set up nationalized firms. I even thought of the name of one, how about PharmaCan?
Back to the review: Another exploration I found interesting was when he wrote about the Argintenean debt default. I didn't know Argentina had defaulted, or didn't remember. Apparently, the IMF would refuse yes for an answer. They were seeking to make the process as dificult as possible, to discourage other countries from defaulting in the future. Argentina knew that the IMF prescription of high interest rates, high taxes and low spending would lead to failure. Stiglitz makes the convincing case that the money western governments give to the IMF is in fact a subsidy for western banks, and not for the poor nations.
One might ask, as I did, would it not make some sense to make it hard to default, that way it discourages defaulting which encourages lending? He argues no. When it is too difficult to default, it removes the responsibility on lending agencies to make careful choices. Money is cheap and available for everyone from Robert Mugabe to Saddam Hussein. The additional point he made are that those such as a nation's pensioners are just as much creditors as Chase Manhattan.
I highly recommend reading it. It was an easier read than Globalization and its Discontents, and a bit more recent in its examples and discussions.
Wed, 2007-08-15 10:07
#3
It sounds like a good book, 500 Apples. It seems to me that Stiglitz is down on the IMF and World Bank for tying specific kinds of development to emergency and long-term loans to poorest countries. The formula for Washington consensus in the 90's was to promote the clear-cutting of forests, mineral extraction and cash crops in those countries with the helping hand of big western transnationals. But very little money was allowed to be spent on health care, education and infrastructure - basically the same things which the U.S. needed shoring up from the 1930's to 1960's.
Essentially it was New Deal socialism that picked America off its economic knees after the collapse of laissez-faire. So why doesn't Washington consensus recommend similar fixes for the capitalist third world ?.
Wed, 2007-08-15 10:58
#4
quote:
Originally posted by Fidel:
[b]It sounds like a good book, 500 Apples. It seems to me that Stiglitz is down on the IMF and World Bank for tying specific kinds of development to emergency and long-term loans to poorest countries. The formula for Washington consensus in the 90's was to promote the clear-cutting of forests, mineral extraction and cash crops in those countries with the helping hand of big western transnationals. But very little money was allowed to be spent on health care, education and infrastructure - basically the same things which the U.S. needed shoring up from the 1930's to 1960's.Essentially it was New Deal socialism that picked America off its economic knees after the collapse of laissez-faire. So why doesn't Washington consensus recommend similar fixes for the capitalist third world ?.[/b]
He wasn't as critical of the World Bank. He's much more defensive of the WB and the WTO relative to what he writes of the IMF.
I think the answer to your question is false history. You state that the New Deal helped America lift itself up. It does seem obvious to me that the depression was due to Coolidge and Hoover, and that the social programs of the 1930s helped the middle class achieve its incredible rises in the 40s, 50s and 60s (and then this rise stopped). Unfortunately, plenty are writing and have written that FDR in fact made the depression worse. I might be more inclined to believe the monetarist position if it were purely theoretical. But it's not. It's been tested in the real world many times and it has succeeded in failing repeatedly. It's failed in asia, in mexico, in africa, and I hear there are current grumblings against the European Central Bank.
My reading as of right now, and I'll read more eventually though it might take years at my snail's pace, is that there is no hope of Washington coming around in the near future. The forces are simply too strong. There are lobbyists, there is a brainwashed public, and an entire pseudointellectual infrastructure. The hope is from third world countries saying "no, go fuck yourself." That hope manifested itself with Argentina defaulting on its debt a couple years back. The asian countries are now pursuing their own economic policies, building reserves. There has been talk of founding an Asian Development Bank as a local competitor to the IMF.
Wed, 2007-08-15 11:04
#5
quote:
Originally posted by 500_Apples:
[b]Back to the review: Another exploration I found interesting was when he wrote about the Argintenean debt default. I didn't know Argentina had defaulted, or didn't remember. Apparently, the IMF would refuse yes for an answer.
[/b]
So I like your review, I'll have to pick it up. But when it comes to Argentina I've been able to piece together some of the story (anyone who knows better feel free to correct me), but it seems that what happened was, a number of Wealthy States sent loads of money to the IMF for the Agentinians, how they implement that is to 'secure' the loans from local banks to the governments, meaning the banks are at 0% risk. Due to our lax laws, the Canadian Banks were able to do just about anything they want outside of Canada and set up shop in many South American countries including Argentina. The Canadian government, along with others hands the IMF money to guarantee, they hand the money to the Canadian Banks, and then they loan it out to the Argentinian Government. Not surprisingly, the Canadian Banks help give loans back to the Canadian Government, so essentially they were funnelling their own loans through the IMF to secure their money.
So they had a stranglehold on the Canadian and the Argentinian money and decided to put more pressure on Argentina, who was unwilling to sell off their government run healthcare, oil, mineral and infrastructure to private interests, and the banks started asking for increased payments back. The pressure built, Argentina, knowing they were caught in this wonderful trap, instead of bowing to business interests told the IMF to kindly Go F%^$ themsleves, and the bank tried to 'foreclose'.
I wouldn't really be too concerned about the IMF/World Bank, as much as I am the people giving them the money to survive.
Wed, 2007-08-15 11:38
#6
quote:
Originally posted by 500_Apples:
[b]
Unfortunately, plenty are writing and have written that FDR in fact made the depression worse.[/b]
Mmm, okay. And only because I have a feeling you know what you're talking about with reference to something you've read. I've read that essentially there were several causes for the depression. And the Republicans said years later that Hoover was essentially injecting Keynesian stimulus wrt tax cuts, except they were tax cuts for the rich and levying taxes on those who could least afford them at the time.
Supply siders later said that manufacturers and industries weren't producing enough for people to buy leading up to and during the depression.
Keynesians said, among other things, that the rich had too much money while the middle class and poor had too little. I think Milton Friedman attributed it all to a shortfall in the money supply but for different reasons and blamed Federal Reserve practice of the times. It's interesting to note that Nazi Germany also borrowed heavily and spent liberally in the 1930's and reduced higher levels of unemployment more rapidly in the same amount of time.
Sun, 2007-08-26 13:40
#7
A better example would be Sweden, as evidenced by the timeline [url=http://www.huppi.com/kangaroo/Timeline.htm]here[/url]
quote:
Sweden's success owed everything to its liberal government. In 1932, Labor returned to power. The Swedish Finance Minister was heavily influenced by a group of economists led by Gunnar Myrdal, who had been advocating Keynesian-like solutions for years. The Labor government promptly ran large deficits, and within two years had spent itself out of the Depression.
The link also notes that Sweden was the first country to recover pre-Depression levels of output and employment.
[ 26 August 2007: Message edited by: DrConway ]
Tue, 2007-08-28 01:11
#8
quote:
Unfortunately, plenty are writing and have written that FDR in fact made the depression worse.
I haven't studied the economics behind the depression in great detail, but the only thing I'm aware of that lengthened the depression was the Federal Reserve inadevertenly raised bank reserve ratios in 1937, thereby reducing the quantity of money in circulation.
Most of the critisisms I'm aware of regarding FDR are that he didn't go far enough in deficit spending.
I am aware there are several books on the right that blame the government for the depression. I have a hard time taking these books seriously given the general lack of concern for intellectual honesty most on the right seem to have at this time (especially in the USA).
These books essentially have an agenda, obviously to bash government, and do not have a sincere attempt to analyze evidence. One of the main lies of these books is that 'no learning is possible'. Essentially since the Federal Reserve made a mistake in 1937 it can't ever learn from its mistake and can never be trusted again. We see this same argument over and over again on the right.
The funniest example I see of this is that when it's science and private enterprise, the right throws out the example of Thomas Edison who made something like 2,000 attempts to make the light bulb work before finally succeeding. So, private enterprise scientists can only learn from their mistakes.
When it's government and sciene, these same people trot out that climate scientists back in 1975 claimed the world was going into an ice age (which is actually a lie, as well as not very relevant to what climate scientists now believe). So, government scientists (or university scientists) can never learn from their (alleged) mistakes.
[ 28 August 2007: Message edited by: Adam T ]
Tue, 2007-08-28 18:08
#9
Speaking of globalization and 'free enterprise', global corporations still haven't quit using [url=http://www.reclaimdemocracy.org/articles/2006/transfer_pricing_tax_dodge... pricing[/url] to make a mockery of the basic theory behind 'free trade', and in the process cheat governments out of tax revenue. (Hint for the economists - I doubt that 'free trade' is really free trade if it involves corporations 'selling' things to themselves at manipulated prices to cheat governments out of taxes)
[url=http://reclaimdemocracy.org/articles_2004/corporate_tax_evasion_offshore... on transfer pricing[/url]
[ 28 August 2007: Message edited by: DrConway ]
Tue, 2007-08-28 18:29
#10
Why no they haven't, thanks for reminding us of that decades old problem, but then even our antiquated doctrine of 'free markets' can be conveniently forgotten when it comes to globe spanning corporations. According to Saul, they employ as much as point two percent of the world's labour market now but twenty five percent of our goods. I suppose they'd call that efficiency now.
Here's another educated skeptic that keeps being ignored by the orthodoxy:
[url=http://www.davidkorten.org/index.htm]http://www.davidkorten.org/index.ht...
Wed, 2007-08-29 12:07
#11
Right on with the transfer pricing. Billions of dollars in untaxed corporate profits are carted away from Canada every year. It's illegal, and the fed's answer to that is to understaff RevCanada and hampering their ability to investigate complex corporate tax evasion schemes like transfer pricing.
If taxes are too high in Canada, then why have foreign-based transnationals used Canada's big six banks to fund 12, 000 takeovers of crown assets and corporations in Canada since Brian Baloney and the Shawinigan Strangler after him?.