Nobel Laureate (Joseph Stiglitz)
Encourages Global Justice Movement
by Tim Shorrock
Inter Press Service, October 15,
Joseph Stiglitz, whose critiques of free
market fundamentalism cost him a senior job at the World Bank
in 1999 but won him the Nobel Prize for economics last week, has
succinct advice for the global justice movement: Keep it up .
''The recognition that the trade agreements
of the past have been unfair is one of the important lessons of
the anti-globalization movement,'' he says. ''I think it's something
that will stick with us. And if we go forward with another round
of trade talks, it will shape our discussions.''
Regardless of whether a new round of comprehensive
trade negotiations is launched next month at the World Trade Organization
ministerial meeting in Qatar, he says, the United States and other
rich countries should follow Europe's 'everything but arms' agreement
by opening their markets to the least developed countries (LDCs)
''and say, for the poorest countries, we aren't going to wait
for a round of trade. To show our good faith, we will commit ourselves
to the poorest countries, opening up our markets immediately.''
''It's not a question of negotiation.
The amount that it would hurt the developed countries is so small,''
he adds. ''It would provide an opportunity for them (the LDCs)
to produce something with a market.''
As for the International Monetary Fund
(IMF), which Stiglitz has rebuked for its myopic focus on ''old
problems'' like inflation, he proposes a new direction that would
return the institution to its post-World War II mission of addressing
real-world problems, such as the recession that has deepened since
the events of Sep. 11.
''It's time for the IMF to worry about
the global economic slowdown and provide the liquidity that would
allow for global expansion,'' Stiglitz says. He urges the IMF
to target the substantial funds it controls towards ''global economic
needs'' such as the ''fight against terrorism, the fight for a
better global environment, the fight for a more equal world that
would reduce the disparities between the haves and the have-nots.''
Stiglitz's advice and analysis will receive
more attention now that he, along with U.S. economists George
Akerlof and Michael Spence, has won the 2001 Nobel Prize for economics.
The award, announced Oct. 10 in Sweden, was made for their research
in the 1970s and 1980s showing that markets, when mixed with imperfect
information, fail to allocate resources fairly. Governments, they
concluded, have an obligation to address this problem by playing
a stronger role in the market system.
''Joseph Stiglitz's many contributions
have transformed the way economists think about the working of
markets,'' the Nobel committee said in making the award. Stiglitz
now is a professor of economics at Columbia University in New
During the Clinton administration, he
served as chairman of the Council of Economic Advisers and was
later appointed chief economist of the World Bank. There, he earned
the wrath of then Treasury Secretary Larry Summers, the administration's
chief proponent of the IMF, by publicly criticizing the fund for
bailing out rich investors and driving Asia into a depression
during the financial crisis of 1997 and 1998. The Bank fired him,
reportedly on Summers's orders, in 2000.
Stiglitz explains the relationship between
his theories and his analysis of the Asia crisis thus: The crisis
was sparked when banks refused to roll over loans in 1997 to South
Korea and Indonesia. ''That was a financial market imperfection
caused by information,'' he says. ''So the credit markets were
not working well. The economics of information provided an explanation
for why that was the case.''
Asked what he would say to Summers and
IMF and World Bank officials who disliked his critique of the
so-called ''Washington consensus'' on market liberalization, Stiglitz
chuckles at ''the irony'' of the situation.
''In the 1970s and 1980s, the period for
which I got the prize, there was an increasing recognition of
the problems of the market fundamentalist model,'' he says. ''The
Washington consensus, which was based on market fundamentalist
ideas, lived on as an institutional position and became solidified
. just when academia was saying these ideas do not provide a good
description of the economy.''
Stiglitz says the George W. Bush administration
has recognized that the IMF bailout policies did not work and
were, in effect, ''corporate welfare'' for investors funded ''by
taxpayers not in the United States but in Russia, Brazil and other
countries, who ended up paying the bills (for) the people doing
the bad lending.''
But recent actions by the Bush administration,
he adds, underscore that ''special interests do have a lot of
influence'' in Washington. Specifically, he criticizes the administration's
decision earlier this year to investigate whether imports have
injured the U.S. domestic steel industry, an action that is likely
to lead to import quotas on foreign steel.
''You can't help but raise questions when
someone says 'I believe in a market economy' and then announces
he wants to set up a global steel cartel,'' he says.
Stiglitz also is sharply critical of the
United States and Europe for subsidizing agriculture and refusing
to liberalize trade in certain industries, such as ocean shipping.
During the next trade round, he says,
''what I would like to see is redressing some of the imbalances
of the past and going forward with far more sensitivity to the
needs and concerns of the developing countries.''
Agriculture is one area where developing
countries hold a comparative advantage ''but they can't compete
into markets where there are these huge subsidies in the United
States and Europe.''
In the area of services, he notes that
wealthy countries like the United States have only agreed to open
financial services. ''Which country is the major exporter of financial
services? United States. What services were not opened up? Construction
services, maritime services, services of unskilled labor that
are of concern to the developing world. Those remain closed.''
This is why the issues raised by the anti-globalization
movement are so important, Stiglitz says. He points to the pharmaceutical
industry, which became the target of developing countries and
anti-globalization critics for selling life saving drugs at prices
that ordinary people and the poor could not afford. Agreements
proposed by the U.S. Trade Representative would have supported
the companies' pricing policies, he adds.
''The global outrage was so strong that
they (the companies) made an agreement to make them available,''
he told IPS. ''It was a global outrage, a civil society movement,
that stopped that.''
He says he first became aware of the imperfections
of markets while working as an economist in Kenya in the 1960s.
''The period that I spent in Kenya really
provided a lot of inspiration for the work that I did over the
subsequent years,'' he says. ''You cannot live or spend time in
a country like that without thinking a great deal about unemployment,
about how markets don't work. And it turned out that many of the
ideas that I developed in Kenya, when modified, applied as well
to developed countries.''