Searchers, not Planners
- BuyMaking Globalisation Work: The Next Steps to Global Justice by Joseph Stiglitz
Allen Lane, 358 pp, £20.00, September 2006, ISBN 0 7139 9909 8
- BuyThe Next Great Globalisation: How Disadvantaged Nations Can Harness Their Financial Systems to Get Rich by Frederic Mishkin
Princeton, 310 pp, £17.95, October 2006, ISBN 0 691 12154 0
- BuyThe White Man’s Burden: Why the West’s Efforts to Aid the Rest Have Done So Much Ill and So Little Good by William Easterly
Oxford, 380 pp, £16.99, September 2006, ISBN 0 19 921082 9
Complaints about the impact of economic globalisation are not new. On 9 December 1719, in response to the growth in cotton imports from India, the merchants and traders of Bristol submitted a petition to the House of Commons claiming that ‘the visible decay of the Woollen Stuff Manufacture must be attributed to the almost general wearing of India Chints, Callicoes and Linen . . . whereby many Thousands that were employed, are ruined, and the Poor unemployed, which, if not timely prevented, will be most fatal to the Woollen Manufacture.’ Dozens of similar petitions eventually met with success: the 1721 Calico Act prohibited the importing of Indian cottons for domestic consumption. From Chinese cigarette manufacturers concerned by imports of Marlboros, to American computer technicians whose jobs are under threat from outsourcing to India, many firms and workers would like similar policies to be adopted today.
Part of the current system of global economic regulation is designed to frustrate such wishes, however. The World Trade Organisation aims to promote international trade and reduce barriers to the free movement of goods and services. The World Bank was established to support economic development and reconstruction, and the IMF’s original purpose was to oversee the smooth operation of the global financial system, though the division between the two institutions has recently blurred.
In Globalisation and Its Discontents (2002), Joseph Stiglitz found more to object to than to approve in this system, denouncing, for example, the IMF’s doctrinaire response to the financial crises that overwhelmed East Asian countries in the late 1990s. Now, in Making Globalisation Work, he proposes alternatives. He is in no doubt about his capacity to do so: his chapter titles include ‘Making Trade Fair’ and ‘Saving the Planet’. And he is certainly better qualified than most; as he frequently reminds us, he was awarded a Nobel Prize in 2001 and was for three years chief economist of the World Bank.
Commentators criticised the earlier book for containing too much by way of condemnation, and too few constructive proposals for reform. Here, Stiglitz provides too many proposals, without sufficiently considering the merits and flaws of each. He suggests five major reforms to the system under which developing countries can borrow, seven to the system of international trade, and five more to the ways in which multinational corporations operate. But they tend to lead nowhere. He demonstrates astutely how current international accounting conventions – the same conventions that support the use of private finance in public infrastructure projects in the UK – encourage poor, oil-rich countries to pump their oil as quickly as possible, and spend the proceeds immediately. But the policy recommendations that ensue from his criticisms of this policy are a long and familiar list of leftish desiderata, largely unsupported by argument.
Yet Stiglitz is an inventive and original thinker, and his scattergun approach finds its target often enough to be enlightening and provocative. For instance, under the Kyoto Protocol on climate change, each developed country is assigned a quota for the amount of greenhouse gases it is allowed to emit. But the correct quota for each country is very difficult to negotiate; should it be based on the historical level of emissions, on national wealth or on population? Politicians and industrialists find it easy to portray an externally imposed limit as both unjustified and undemocratic. Stiglitz instead develops the existing idea of a carbon tax, arguing that, if a tax rate is agreed internationally but then levied nationally, national governments will have reason to support environmental measures in order to raise their own revenues. Taxes could then be reduced on such valuable activities as saving, for example.
In the tradition of Adam Smith, this proposal relies more on national self-interest than on virtue, and would need relatively little international co-operation to function. But more often Stiglitz’s reforms ask for permanent international bureaucracies to be set up: a judicial body to determine whether trade barriers are legitimate; a global competition authority; a bankruptcy court to which states could apply for protection from creditors; a global reserve fund that would issue a new virtual currency (‘global greenbacks’) to member countries. The governance problems of existing international institutions are well documented, not least by Stiglitz himself: they are dominated by powerful countries, vulnerable to organised lobbies, and unable to accommodate different perspectives. It seems heroically optimistic to expect new institutions to avoid these problems. We may regret the failure of political globalisation to keep pace with economic globalisation, but political globalisation can’t be achieved by decree, and it would be more sensible to seek reforms that could increase well-being without requiring nations to sacrifice their self-interest.
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