Making Globalization Work

Making Globalization Work
Buy this book at Barnes & Noble

Fighting The Good Fight
Many economists and world leaders agree that globalization is supposed to create higher living standards, increased access to foreign markets, more foreign investment and open borders. But former World Bank Chief Economist and Nobel Prize winner Joseph Stiglitz argues in his latest book, Making Globalization Work (a self-described sequel to his 2002 book, Globalization and Its Discontents), that globalization is desperately failing the 80 percent of the world's population that lives in developing countries and the 40 percent that lives in poverty.

The Problems
Stiglitz's overall objection is not to globalization itself; it's to how globalization is managed. He argues that the institutions tasked with managing globalization - the International Monetary Fund (IMF), the World Bank and the World Trade Organization (WTO) - help developed nations more than poor nations and place profit ahead of environmental health and better standards of living.

One reason for this, Stiglitz argues, is the United States' excessive influence on the system. The IMF, for example, assigns votes according to economic size, giving the United States effective veto power. Further, the U.S. president appoints the head of the World Bank. This concentration of power has led to what Stiglitz calls "the Washington Consensus," his term for the lock-step policies shared by the IMF, the World Bank and the U.S. Treasury. The result is that these institutions are only really accountable to wealthy countries rather than the poor countries they are tasked with helping.

What's worse, Stiglitz writes, is that when poor countries seek aid, the Washington Consensus attaches economic policies and lending conditions that are often counterproductive and even undermine the sovereignty of those nations. Its requirements often include massive privatization, spending cuts, lower import tariffs and exposure to volatile foreign capital - four things Stiglitz explains are precisely what developing countries don't need when they're in dire straits. Consequently, Stiglitz argues, countries that have followed the advice of this powerful block have failed almost 100 percent of the time to maintain economic stability.

The Solutions
Stiglitz offers a litany of specific reforms to the globalization management system, but, ultimately, they all rest on the (some might say provocative) idea that the regulatory power of government, rather than unfettered capitalism, makes free markets work. Absent this oversight, he writes, markets dissolve into chaos, dishonesty and secrecy.

One of Stiglitz's biggest proposed reforms is to the global reserve system's dependence on Treasury securities, which he argues is actually a mechanism for funding U.S. overconsumption habits. Stiglitz calls for a new, global reserve currency (called "global greenbacks") system that would stabilize the worldwide yin-yang effect of trade surpluses and deficits.

Stiglitz also proposes global regulation that would restrict activities and political instabilities that harm the environment, and would provide recourse when one nation's environmental actions harm other countries. Stiglitz further argues that poor countries are entitled to compensation for maintaining their biodiversity, especially those with rainforests that spawn drugs and sequester carbon dioxide.

Western banks and multinational corporations are also on Stiglitz's list of institutions needing global oversight. He argues that today's thick corporate veil regrettably tends to relieve employees of moral responsibility. Part of the solution to this, he writes, is more leeway regarding global class-action suits and more enforcement of intellectual property laws so that, for example, AIDS drugs become more accessible rather than more profitable.

Ultimately, Stiglitz concedes, the solution to many of the problems of globalization management lies at the feet of poor countries, which must break the bribery cycle between their governments and international companies, sell their natural resources for a fair price, spend - and save - their money wisely and learn to manage currency fluctuations.

Despite all the protest, Stiglitz is clearly still a cautiously optimistic supporter of globalization. But he is confident that the United States cannot continue to control the world's major economic aid institutions without producing results for the poor countries of the world.

Why We Like This Book
Making Globalization Work
explores the problems surrounding the management of globalization. It contributes considerably to the political discourse about the role of governments in the free market through its nuts-and-bolts appraisals of NAFTA, the WTO, the Kyoto Protocol and many other elements of today's globalization debate. But the heart of the book is about finding better ways to make globalization work for the hundreds of millions of people who live in developing countries and in poverty. Copyright (c) 2007 Soundview Executive Book Summaries