Joseph Stiglitz – Notes on his book-chat at The New School Univ. (NYC)

This is not a book review. I have not read Joseph Stiglitz’s book "Making Globalization Work." 

That being said… last night (12/05/06) Nobel Prize winning economist Joseph Stiglitz spoke at the John Tishman auditorium at The New School University (NYC) to a crowd of about 500. He shared some highlights from his new book "Making Globalization Work." I jotted down some notes from his lecture. If you are further interested in his thinking or in the book I suggest you pursue such interest on your own. This is not an extensive analysis. This is just a transfer of my notes. I apologize for disjointedness that may occur, but you will get the overall idea. 

 "Globalization is not working," but there is hope…

What are some examples of why globalization is not working?

–         There are growing disparities between economies and individuals.

–         Stiglitz debunks Thomas Friedman’s “world is flat” hypothesis saying that in essence the world is becoming less flat.

–         Re: Africa – poverty is increased by several hundred million people over the last 20 years (the opposite has happened in India and China). Africa has neither the technology or education that India and China now have.

–         The Uruguay rounds (economic talks) made poorer countries poorer – results were asymmetric

–         Re: Latin America – They listened more closely to the IMF/World Bank (i.e. Washington Consensus) in the 1990’s

o                               growth is half of what it was from the ’60-’80s

o                               Brazil has doubled its exports but halved their GDP growth

–         There have been hundred of financial crises in the developing world in the past 30 years

–         Money is going from the poor to the rich (like water running uphill – it’s just not right)

–         Re: Moldova – After the fall of the USSR – 75% of GDP was used to pay debt; there was a 70% decrease in overall GDP; debt increased sixfold because it was pegged to the rouble; the country was seen as in a state of “de-development”

Overarching Reasons for globalization not working:

1. Economic globalization has outpaced political globalization

      – we do not have the institutions to globalize democratically and efficiently

      – Trade agreements aren’t “fair trade” agreements

– one need only look at TRIPS and drug companies preventing generic drugs from making it to the marketplace. As an example it costs $10,000/yr for brand name AIDS treatments whereas generic versions only cost $130/yr.

2. Asymmetry in Globalization

            – We have liberalized capital instead of liberalizing labor (it is an issue of mobility

– imagine if labor could get up and leave as easily as capital does)

–         this has a significant effect on the distribution of income (in favor of capital)

3. End of the Cold War

            – During the Cold War we HAD to compete for the hearts and minds of the “third

world;” we could not afford to ignore them (the enemy of my enemy is my friend mentality)

–         now we pursue only interests that bear economic benefits

Reforms of globalization (only a couple of examples discussed)

2 themes –        1. market failures – (too much of one thing over another) (e.g. pollution over life saving medicine or innovations)

                        2. democratizing globalization – (a democratic deficit) (undermining the ability of the nation/state to provide social protection)

One example of how to make globalization work:

–         Fix Intellectual Property Rights (patent laws)

o       Why? IPR is a US export to developing countries (US regime)

o       Creates inefficiency (restriction of knowledge even though there is a zero margin of cost for others to use this knowledge)

o       Creates a monopoly (which is the worst form of inefficiency in a free-market… but monopoly profits)

Question and Answer session:

On Chinese-African relations: “The era of limited competition for resources is over.” This is most visible in the fact that China is now a major player in Africa.

On the global monetary system: “Dollars used to be a good store for value.” That’s no longer true because the exchange rate is so volatile. The US dollar is “unstable” because the US borrows $3 billion/day, which equates to a waning confidence in the dollar. Failure may be inevitable.

On single world currency: No. Instead create a global reserve currency ( a new one, not the Euro or dollar).

On role of the US citizen pressing the IMF and other public institutions: Nobody in the US knows about the IMF, nor cares about it. The opposite is true in developing countries. Those who have no voice are the most affected, whereas those with the most voice in the IMF are not affected. This needs to change.