Globalization and Its Discontents, by Joseph Stiglitz (review)

Listener: 16 August, 2002

Keywords: Globalisation & Trade;

Joseph Stiglitz may be the most important economist outside government in today’s world. He first came to notice as the editor of the collected works of Paul Samuelson, the second most important economist of the 20th century. Stiglitz went on to innovate in economic theory (receiving a Nobel Prize in 2001 in the economics of information), write a number of major textbooks and hold positions in many major universities. From 1993 he served on Clinton’s Council of Economic Advisers, going on to work in the World Bank in 1997. In 2000 he was forced out by a US administration who found his criticisms of them and the International Monetary Fund uncomfortable.

Stiglitz is deeply committed to the objectives of the World Bank to relieve poverty, and believes that globalisation – which he defines as closer integration of national economies – “can be a force for good and has the potential to enrich everyone in the world”. But his time as a policy adviser taught him that often this process was not well managed.

Globalisation and Its Discontents is Stiglitz’s account of his experiences in the policy world, which provides an insight to what went wrong and why he did not last long there. It was a cause celebre especially when the IMF attacked it vigorously. Penguin has brought out a soft cover (and hence cheaper) edition of the book, which includes a seven-page afterword, describing some of the conflict, as well as summarising his argument. It expands on his concerns over the intimate relationship between the fund and private financiers, but now regrets naming a particular person to illustrate them.

The book tells of Stiglitz’s time at the World Bank, where he was constantly appalled with the decisions being taken by the IMF (with the US Treasury), and the way that they damaged the poor of those countries they were trying to help. The theories to which Stiglitz has devoted his professional life were being misused, in ways that almost always favoured the rich, big business and finance.

Although the World Bank is often popularly equated with the IMF, its focus has been more pragmatic and pro-poor in recent years, in part because of a redirection that took place during Stiglitz’s watch. Providing the reader is aware of this refocusing, this insider’s account –– with many country instances: Botswana, Brazil, China, Ethiopia, Indonesia, Korea, Malaysia, Poland, Russia, Thailand, Vietnam –– is as revealing as it is fascinating. The disclosures are not about sleaze and corruption, but about an institution that thinks it is acting for the best interests (of whom?), but may not be. Nor, despite being a public institution, is it publicly accountable.

Stiglitz is not alone with such concerns. (Among his colleagues is New Zealander Robert Wade, professor of development economics at the London School of Economics.) But he writes so clearly and yet with a marvellous grasp of economic theory and lots of practical experience that he is surely their leader. Now a professor at Columbia University, he writes occasional weighty critiques of the world economy. A selection of his speeches has recently been published as The Rebel Within: Joseph Stiglitz and the World Bank. His The Roaring Nineties: The Seeds of Disaster is to be published soon. Its attack on the “misplaced faith in free market ideology” and his setting out of “a blueprint for the future: for the role of the state and European Social Democrats” promise another cerebral bestseller.

Perhaps Globalisation and Its Discontents is an entrée before this main. But it is a satisfying meal in its own right.