International corporate organization
Globalisation and European Governance/Antalya 11'2010Prof. Dr. Ulrich Mückenberger
1. The summary of all themes studied within the course
globalisation and regionalisation. Theories on Governance "Old" and "new" European social governance. From Community method to OMC and Global Social Regulation: International – Comparative – Perspectives for Global Social 2. The goals and objectives of the course.
- clear knowledge of the terms and different concepts globalisation, decentration and - knowledge of the development of European social regulation - knowledge of social regimes and regulations beyond Europe and the OECD - Outlook on perspectives of a cosmopolitan social governance.
3. Detailed description of each theme mentioned in § 1
Theme 1: Theories on Risks and Chances of "glocalisation": globalisation and regionalisation.
With a view to the reader of Lechner & Ball (Akdeniz library) and the text of Stiglitz,
theoretical approaches to the terms globalisation and localisation/regionalisation will be
worked out. The ambivalence of the current changes will be in the focus – opposed to both
horror scenarios and appeasing approaches linked with globalisation. Governance and
"decentration": Based on the European Commission's documents and the texts of Landfried
and Mückenberger (BercEstl 2008), the different concepts of governance will be worked out,
with a particular view on EU. Decentration, as the author's proper concept, will be elaborated
as a linkage between European and extra-European, equally extra-OECD, developments.
Themes 1 and 2 focus on general concepts of globalization and governance. They are meant
to clarify the ground for the following themes – and are therefore limited in time. They consist
of lecture plus an underlying article read by everyone.
Theme 2: One of the two substantial fields of the course is social regulation in the EU – based
on EU documents, the text of Wallace (library), Hepple (library) and Mückenberger 2004 (in
Magnussen/Strath – library). "Old" and "new" European social governance means the
development from Community method to OMC and Social Dialogue (Hepple 2005 library),
in European social governance. After a historical view back, the regime of community method
(particularly from 1974 onwards) will be studied. Then, for the years 1991 onwards, a more
procedural, collective, and soft-law approach will be identified and assessed – linked with the
Open Method of Co-Ordination and the rise of the Social Dialogue(s). Perspectives will be
worked out as to the future of the European social model. The linkage to the following subject
will be an assessment of European foreign social policy, particularly with a view to the ACP
states (Lomé and Cotonou).
Theme 3: The second substantial field is social regulation beyond Europe – however including
Europe as a cosmopolitan actor. Basic references here will be the works of Hepple, Blanpain,
but also Dicken, Schuppert and Hall & Soskice (library). Global social regulation obviously
includes the sphere of states and international institutions and their international activity –
such as ILO, WTO (Goldstein/Steinberg), UN, unilateral, bilateral and (world-)regional
economic and social agreements. Comparisons will be made between EU states, China, India,
US, Japan – their internal social regimes as well as their external contractual relationships.
Last not least, transnational relationships will be studied which include "governance without
governments" as a cross-border activity of multinational enterprises, global Non-
Governmental Organisations etc.
The degree to which – and with which countries – comparison is made to a certain extent
depends on the students' choices.
Theme 4: Perspectives for Global Social Governance (Mückenberger 2008 TNN). This is not a
summary – although it includes it. On the contrary, the author will present here the research
initiative "Transnational Normbuilding networks" which is currently under way in Hamburg.
It is based on two assumptions: 1. In a world that is subject to decentration ("globalisation"),
the modi of universal norm-building and enforcement by politics (int. organisations) and
economy (MNK) increasingly reach their limits or are regarded with growing criticism due to
a number of reasons that are to be specified (state failure, market failure – a legitimacy
vacuum due to the separation of voice and entitlement etc.). 2. Due to various reasons (the
NGO's own agenda, acceptance-gaining strategies in politics and economy, extended
awareness, the overcoming of enforcement barriers/the need for the materialization of
universal norms into local rules and practices etc.) civil society actors and groups are gaining
significance worldwide with respect to the norm-building agenda and its formulation as well
as within the field of norm- materializing, norm-implementation and enforcement. The text of
Harry Arthurs belongs to this theme.
Themes 2, 3 and 4 are introduced by lecture and will then be mainly supported by oral
presentations of the students according to the list of topics.
4. Forms of Assessment
- Most of the students should make oral presentations of approx. 15 minutes' duration during the week in November plus a written elaboration (8 pages) - Exceptionally, with my permission, essays (« tezler ») of 12 pages are accepted to be delivered by end of 2010. This is why students have to specify, before the November course week, subjects for an oral presentation (plus elaboration) or an essay. I amend a list of topics which can be selected. I only list topics. Beyond that, each presentation/each essay has to contain a basic thesis of the presenter/writer to be verified/falsified by the author and a methodological reflexion how to verify/falsify the thesis. The hypotheses discussed in the presentation may stem from the author him/herself or from other scientific sources.
5. Sample examination questions
Students choose a theme (and develop a hypothesis which will be verified /falsified /modified
via the oral or written presentation and a methodology for that). The selection of topics and
presentations will take place in Antalya with the help of Tamer Ilbuga in October/early
November and will be communicated with me via email, before my stay in Antalya.
Possible examples: Social Policy and Competition Policy. (Thesis: The EU law has organised
social and competition policy in a way that neither of them is regarded as superior to the other
– both have to be recognised and reconciled) – or: European Governance in the Light of
Official Documents (Thesis: The main concern of the Commission's recent documents on
European governance is to gain more acceptance for the EU, less to develop a more stringent
and democratic polity).
The assessment and mark for the presentation depend heavily on whether or not the author's
hypothesis has been the real focus of the presentation and whether or not a serious
methodological deliberation on how to verify/falsify the hypothesis has been demonstrated.
6. Recommended reading
Globalisation
Carlsnaes, W. et al. (ed.s), 2002: Handbook of International Relations, London et al.: Sage
(one copy).
Lechner, F. & Boll, J. (ed.s), 2004: The Globalization Reader, 2nd ed., Malden/Oxford/
Carlton: Blackwell (5 copies).
Sassen, S., 2006: Territory – Authority – Rights. From Medieval to Global Assemblages,
Princeton/Oxford: PUP (one copy).
Dicken, P., 2007: The Global Shift. Mapping the Changing Contours of the World
Economy, 5th ed., London et al.: Sage (one copy).
Maddison, A., 2006: The World Economy, Paris: OECD Publ.
European Governance
Wallace & Wallace: Policy-Making in the European Union, 4th ed., Oxford: OUP 2005 (5
copies).
Magnussen, L., Strath, B. (ed.s), 2004: A European Social citizenship? Brussels: Peter
Lang (two copies)
Dufresne, A. et al. (ed.s), 2006: The European Sectoral Social Dialogue, Brussels: Peter
Lang (SALTSA series) (one copy).
B. Kohler-Koch/R Eising (eds.), 2002: The Transformation of Governance in the European
Union, London and New York: Routledge (one copy).
Széll, G. (ed.), 2001: European Labour Relations, 2 vol.s, Burlingston: Gower (one copy).
Telò, M. (ed.), 2001: European Union and New Regionalism, Aldershot et al.: Ashgate.
Liebert, U. (ed.), 2003: Gendering Europe, Brussles: Peter Lang (one copy).
Mückenberger, U. (ed.), 2001: Manifesto social Europe, Brussels: ETUI (5 copies).
Eichengreen, B., 2007: The European Economy since 1945. Coordinated Capitalism and
Beyond, Princeton and Oxford: PUP (one copy)
B. Kohler-Koch/R Eising (eds.), 2002: The Transformation of Governance in the
European Union, London and New York: Routledge (one copy).
Global Social Normbuilding
Hepple, B., 2005: Labour Laws and Global Trade, London: Hart (5 copies).
Moreau, M.-A., 2006: Normes socials, droit du travail et mondialisation, Paris: Dalloz (one
copy).
Craig, J. & Lynk, M. (eds.), Globalisation and the Future of Labour Law, Cambridge: CUP
(one copy).
Hall, P., Soskice, D. (ed.s), 2001: Varieties of Capitalism, Oxford: OUP (one copy).
Blanpain, R., et al., 2007: The Global workplace. International and Comparative
Employment Law - Cases and Materials, Cambridge: CUP (two copies).
Further Materials
European Commission, 2001: White paper on European governance, Brussels.
European Commission, 2004: Report on the European governance, Brussels.
European Commission, 2006: Green paper Modernising labour law and flexicurity.
Landfried Governance
Mückenberger Decentration
Prof. U. Mückenberger/Akdeniz Univerity Antalya
Oral Presentations winter 2010/11
II. Substantial Fields I: European Economic and Social Regulation
European Governance under Lisbon Treaty - Lisbon Treaty – A New Balance of Power in European Governance? –
- Fundamental Rights – Chance for Soc. Standard Setting? –
- Cross-Sector Social Dialogue: Experiences and Problems -
- Sectoral Social Dialogues: Experiences and Chances –
- Gendering Europe – A Case for Gender Equality? -
- NEW Regulation of Financial Markets – Useful? -
- Is there a European Social, Societal, and Economic Model? -
III. Substantial Fields II: Europe – OECD and non-OECD Worlds European Foreign Economic and Social Policy (ACP - Lomé; Cotonou) - ACP – EU-relations: Origin of the Lomé Treaties –
- Lomé and Cotonou as Developents Strategies: Critical Assessment –
- Development Partnership: With an Empirical Case-Study –
Theoretical Approaches: Varieties of Capitalism and Global Value Chains - Theories on Varieties of Capitalism and global value chains –
- Social and environmental dumping. Concepts, Examples, Critical Assessment –
International Economic and Social Regulation (UN, WTO, ILO, uni/bi/multilateral agreements) - The WTO mode of Global Norm-Building and Implementation –
- The ILO mode of Global Norm-Building and Implementation -
- The Effectiveness of Sanctions by the ILO and the WTO: Is There a Case for
social standards-setting by the WTO? -
Transnational Economic and Social Regulation (Codes of conduct, global value chains, Global Compact, guidelines) - Effectiveness of Social Standards in Codes of Conduct. Examples and Critical
Assessment –
- UN Global Compact as an Instrument of Soft Impact –
- ISO 26000 and the Effectiveness of (Corporate) Social Responsibility –
- The International Framework Agreements (IFAs): A more Effective Tool?
Comparison EU – NAFTA - NAALC: Origin and Objectives – Plus one Case-Study –
IV. Theoretical Perspectives Perspectives of a Cosmopolitan Europe - The Beck-Grande Position: Critical Review –
Civilisation of Globalisation? - Power of Global Transnational Norm-Building Networks? -
NEW YORK REVIEW OF BOOKS Globalization: Stiglitz's Case
by Joseph E. Stiglitz
Norton, 282 pp., $24.95
The most pressing economic problem of our time is that so many of what we usually call "developing economies" are, in fact, not developing. It is shocking to most citizens of the industrialized Western democracies to realize that in Uganda, or Ethiopia, or Malawi, neither men nor women can expect to live even to age forty-five. Or that in Sierra Leone 28 percent of all children die before reaching their fifth birthday. Or that in India more than half of all children are malnourished. Or that in Bangladesh just half of the adult men, and fewer than one fourth of adult women, can read and writ What is more troubling still, however, is to realize that many if not most of the world's poorest countries, where very low incomes and incompetent governments combine to create such appalling human tragedy, are making no progress—at least not on the economic front. Of the fifty countries where per capita incomes were lowest in 1990 (on average, just $1,450 per annum in today's US dollars, even after we allow for the huge differences in the cost of living in those countries and in the US), twenty-three had lower average incomes in 1999 than they did in 1990. And of the twenty-seven that managed to achieve at least some positive growth, the average rate of increase was only 2.7 percent per annum. At that rate it will take them another seventy-nine years to reach the income level now enjoyed by Greece, the poorest member of the European Uni This sorry situation stands in sharp contrast to the buoyant optimism, both economic and political, of the early postwar period. The economic historian Alexander Gerschenkron's classic essay "Economic Backwardness in Historical Perspective" suggested that countries that were far behind the technological frontier of their day enjoyed a great advantage: they could simply imitate what had already proved successful elsewhere, without having to assume either the costs or the risks of innovating on their own. The economist and Açıklama [M1]: Discuss this argument!
demographer Simon Kuznets, who went on to win a Nobel Prize, observed that economic inequalities often widen when a country first begins to industrialize, but argued that they then narrow again as development proceeds. Albert Hirschman, an economist and social Açıklama [M2]: Discuss this argument!
thinker, put forward the hypothesis that, for a while, at the beginning of a country's economic development, the tolerance of its citizens for inequality increases, so that the temporary widening that troubled Kuznets need not be an insuperable obstacle. Throughout the countries that had been colonies of the great European empires, the view of the departing powers was that the newly installed democratic institutions and forms they were leaving behind would follow the path of the Western democracies. Political alliances, like Açıklama [M3]: Discuss this argument!
the myriad regional pacts established during the Eisenhower-Dulles era (SEATO, CENTO, and all the others), would help cement these gains in place. Not surprisingly, the contrast between that earlier heady optimism and today's grimmer reality has led to a serious (and increasingly acrimonious) debate over two closely related questions. What, in retrospect, has caused the failure of so many countries to achieve the advances confidently predicted for them a generation ago? And what should they, and those abroad who sympathize with their plight and seek to help, do now? Açıklama [M4]: Please write down a
couple of hypotheses which could provide
answers to these two questions! (You may
Perhaps not since the worldwide depression of the 1930s have so many thinkers attacked a thereby use arguments inherent to the problem from such different perspectives: Have the non-developing economies (to call questions of the following paragraph) them that) pursued the wrong domestic policies? Or have they been innocent victims of exploitation by the industrialized world? Is it futile to try to foster economic development without an appropriate social and political infrastructure, including what has come to be called the "rule of law" and perhaps also including political democracy as well? Or do these favorable institutional creations follow only after a sustained improvement in material standards of living is already underway? Would more foreign aid help? Or does direct assistance from abroad only create parallels on a national scale to the "welfare dependency" Açıklama [M5]: Explain!
sometimes alleged in the US, dulling the incentive for countries to undertake difficult but needed reforms? How much blame lies with corruption in the nondeveloping countries' governments, often including the outright theft by government officials of a large fraction of whatever aid is received? And then there is the most controversial question of all: Is the "culture" of these countries— specifically in contrast to Western culture—simply not conducive to economic success? One important concrete expression of the optimism with which thinking in the industrialized world addressed the challenge of economic development a generation and more ago, before these painful questions became prominent, was the creation of new multinational institutions to further various aspects of the broader development goal. The United Nations spawned a family of sub-units to this end, most prominently the UN Development Program and the UN Conference on Trade and Development. The Food and Agriculture Organization (founded in 1945, but separately from the UN) and the World Health Organization (1948) had more specific mandates. The International Bank for Reconstruction and Development (commonly called the World Bank), established in 1944 mostly to help rebuild war-torn Europe, soon shifted its attention to the developing world once that task was largely completed. The International Monetary Fund (the IMF, or sometimes just the Fund) was a latecomer to the development field. Established in tandem with the World Bank in 1944, the IMF's original mission was to preserve stability in international financial markets by helping countries both to make economic adjustments when they encountered an imbalance of international payments and to maintain the value of their currency in what everyone assumed would be a permanent regime of fixed exchange rates. By the early 1970s, however, the fixed exchange rate system proved untenable, and floating rates of one kind or another became the norm. Moreover, as the Western European economies gained strength while, at the same time, more and more developing countries entered the international trading and financial economy, it was increasingly the developing countries that ran into balance of payments problems or difficulties over their currencies and therefore turned to the IMF for assistance. As a result, over time the IMF became increasingly involved in the business of economic development. And as development has faltered in many countries—including many in which the IMF has played a significant part—the IMF's policies and actions have increasingly moved to the center of an ongoing, intense debate over who or what to blame for the failures of the past and what to do differently in the future. Joseph E. Stiglitz, in Globalization and Its Discontents, offers his views both of what has gone wrong and of what to do differently. But the main focus of his book is who to blame. Açıklama [M6]: Please compare your
According to Stiglitz, the story of failed development does have a villain, and the villain is hypotheses laid down in M4 a) with the answers given by Stiglitz truly detestable: the villain is the IMF. (according to this review) b) The answers of the author of this review! Joseph Stiglitz is a Nobel Prize–winning economist, and he deserves to be. Over a long career, he has made incisive and highly valued contributions to the explanation of an astonishingly broad range of economic phenomena, including taxes, interest rates, consumer behavior, corporate finance, and much else. Especially among economists who are still of active working age, he ranks as a titan of the field. In recent years Stiglitz has also been an active participant in economic policymaking, first as a member and then as chairman of the US Council of Economic Advisers (in the Clinton administration), and then, from 1997 to 2000, as chief economist of the World Bank. As the numerous examples and personal recollections in this book make clear, his information and his impressions are in many cases firsthand. In Globalization and Its Discontents Stiglitz bases his argument for different economic policies squarely on the themes that his decades of theoretical work have emphasized: namely, what happens when people lack the key information that bears on the decisions they have to make, or when markets for important kinds of transactions are inadequate or don't exist, or when other institutions that standard economic thinking takes for granted are absent or flawed. The implication of each of these absences or flaws is that free markets, left to their own devices, do not necessarily deliver the positive outcomes claimed for them by textbook economic reasoning that assumes that people have full information, can trade in complete and efficient markets, and can depend on satisfactory legal and other institutions. As Açıklama [M7]: Discuss the flaws of
Stiglitz nicely puts the point, "Recent advances in economic theory"—he is in part referring these three assumptions! to his own work—"have shown that whenever information is imperfect and markets incomplete, which is to say always, and especially in developing countries, then the invisible hand works most imperfectly." Açıklama [M8]: Explain!
As a result, Stiglitz continues, governments can improve the outcome by well-chosen interventions. (Whether any given government will actually choose its interventions well is another matter.) At the level of national economies, when families and firms seek to buy too little compared to what the economy can produce, governments can fight recessions and depressions by using expansionary monetary and fiscal policies to spur the demand for goods and services. At the microeconomic level, governments can regulate banks and other financial institutions to keep them sound. They can also use tax policy to steer investment into more productive industries and trade policies to allow new industries to mature to the point at which they can survive foreign competition. And governments can use a variety of devices, ranging from job creation to manpower training to welfare assistance, to put unemployed labor back to work and, at the same time, cushion the human hardship deriving from what— importantly, according to the theory of incomplete information, or markets, or institutions—is no one's fault. Açıklama [M9]: Identify the economic
policy-theory behind all suggestions of the
foregoing paragraph!
Stiglitz complains that the IMF has done great damage through the economic policies it has prescribed that countries must follow in order to qualify for IMF loans, or for loans from banks and other private-sector lenders that look to the IMF to indicate whether a borrower is creditworthy. The organization and its officials, he argues, have ignored the implications of incomplete information, inadequate markets, and unworkable institutions—all of which are especially characteristic of newly developing countries. As a result, Stiglitz argues, time and again the IMF has called for policies that conform to textbook economics but do not make sense for the countries to which the IMF is recommending them. Stiglitz seeks to show that the consequences of these misguided policies have been disastrous, not just according to abstract statistical measures but in real human suffering, in the countries that have followed them. Most of the specific policies that Stiglitz criticizes will be familiar to anyone who has paid even modest attention to the recent economic turmoil in the developing world (which for this purpose includes the former Soviet Union and the former Soviet satellite countries that are now unwinding their decades of Communist misrule): Fiscal austerity. The most traditional and perhaps best-known IMF policy recommendation is for a country to cut government spending or raise taxes, or both, to balance its budget and eliminate the need for government borrowing. The usual underlying presumption is that much government spending is wasteful anyway. Stiglitz charges that the IMF has reverted to Herbert Hoover's economics in imposing these policies on countries during deep recessions, when the deficit is mostly the result of an induced decline in revenues; he argues that cuts in spending or tax hikes only make the downturn worse. He also emphasizes the social cost of cutting back on various kinds of government programs—for example, eliminating food subsidies for the poor, which Indonesia did at the IMF's behest in 1998, only to be engulfed by food riots. High interest rates. Many countries come to the IMF because they are having trouble maintaining the exchange value of their currencies. A standard IMF recommendation is high interest rates, which make deposits and other assets denominated in the currency more attractive to hold. Rapidly increasing prices—sometimes at the hyperinflation level—are also a familiar problem in the developing world, and tight monetary policy, implemented mostly through high interest rates, is again the standard corrective. Stiglitz argues that the high interest rates imposed on many countries by the IMF have worsened their economic downturns. They are intended to fight inflation that was not a serious problem to begin with; and they have forced the bankruptcy of countless otherwise productive companies that could not meet the suddenly increased cost of servicing their debts. Trade liberalization. Everyone favors free trade—except many of the people who make things and sell them. Eliminating tariffs, quotas, subsidies, and other barriers to free trade usually has little to do directly with what has driven a country to seek an IMF loan; but the IMF usually recommends (in effect, requires) eliminating such barriers as a condition for receiving credit. The argument is the usual one, that in the long run free trade practiced by everyone benefits everyone: each country will arrive at the mixture of products that it can sell competitively by using its resources and skills efficiently. Stiglitz points out that today's industrialized countries did not practice free trade when they were first developing, and that even today they do so highly imperfectly. (Witness this year's increase in agricultural subsidies and new barriers to steel imports in the US.) He argues that forcing today's developing countries to liberalize their trade before they are ready mostly wipes out their domestic industry, which is not yet ready to compete. Liberalizing Capital Markets. Many developing countries have weak banking systems and few opportunities for their citizens to save in other ways. As one of the conditions for extending a loan, the IMF often requires that the country's financial markets be open to participation by foreign-owned institutions. The rationale is that foreign banks are sounder, and that they and other foreign investment firms will do a better job of mobilizing and allocating the country's savings. Stiglitz argues that the larger and more efficient foreign banks drive the local banks out of business; that the foreign institutions are much less interested in lending to the country's domestically owned businesses (except to the very largest of them); and that mobilizing savings is not a problem because many developing countries have the highest savings rates in the world anyway. Privatization. Selling off government- owned enterprises—telephone companies, railroads, steel producers, and many more—has been a major initiative of the last two decades both in industrialized countries and in some parts of the developing world. One reason for doing so is the expectation that private management will do a better job of running these activities. Another is that many of these public companies should not be running at all, and only the government's desire to provide welfare disguised as jobs, or worse yet the opportunity for graft, keeps them going. Especially when countries that come to the IMF have a budget deficit, a standard recommendation nowadays is to sell public-sector companies to private investors. Stiglitz argues that many of these countries do not yet have financial systems capable of handling such transactions, or regulatory systems capable of preventing harmful behavior once the firms are privatized, or systems of corporate governance capable of monitoring the new managements. Especially in Russia and other parts of the former Soviet Union, he says, the result of premature privatization has been to give away the nation's assets to what amounts to a new criminal class. Fear of default. A top priority of IMF policy, from the very beginning, has been to maintain wherever possible the fiction that countries do not default on their debts. As a formal matter, the IMF always gets repaid. And when banks can't collect what they're owed, they typically accept a "voluntary" restructuring of the country's debt. The problem with all this, Stiglitz argues, is that the new credit that the IMF extends, in order to avoid the appearance of default, often serves only to take off the hook the banks and other private lenders that have accepted high risk in exchange for a high return for lending to these countries in the first place. They want, he writes, to be rescued from the consequences of their own reckless credit policies. Stiglitz also argues that the end result is to saddle a developing country's taxpayers with the permanent burden of paying interest and principal on the new debts that pay off yesterday's mistakes. Stiglitz's indictment of the IMF and its policies is more than just an itemized bill of particulars. His theme is that there is a coherence to this set of individual policies, that the failings of which he accuses the IMF are not just random mistakes. In his view these policies—what he labels the "Washington consensus"—add up to something that is Açıklama [M10]: Explain this word!
unattractive, if not outright repugnant, in several different ways. And discuss the six components with for each -pros -and cons. First, Stiglitz repeatedly claims that the IMF's policies stem not from economic analysis and observation but from ideology—specifically, an ideological commitment to free markets and a concomitant antipathy to government. Again and again he accuses IMF officials of deliberately ignoring the "facts on the ground" in the countries to which they were offering recommendations. In part his complaint is that they did not understand, or at least did not take into account, his and other economists' theoretical work showing that unfettered markets do not necessarily deliver positive results when information or market structures or institutional infrastructure are incomplete. More specifically, he argues that the IMF ignores the need for proper "sequencing." Liberalizing a country's trade makes sense when its industries have matured sufficiently to reach a competitive level, but not before. Privatizing government-owned firms makes sense when adequate regulatory systems and corporate governance laws are in place, but not before. The IMF, he argues, deliberately ignores such factors, instead adopting a "cookie cutter" approach in which one set of policies is right for all countries regardless of their individual circumstances. But importantly, in his eyes, the underlying motivation is ideological: a belief in the superiority of free markets that he sees as, in effect, a form of religion, impervious to either counterarguments or counterevidence. A further implication of this belief in the efficacy of free markets, according to Stiglitz, is that the IMF has abandoned its original Keynesian mission of helping countries to maintain full employment while they make the adjustments they need in their balances of payments; instead the IMF recommends policies that result in steeper downturns and more widespread joblessness. He does not argue, of course, that the IMF prefers serious recessions or unemployment per se. Rather it simply acts on the belief—seriously mistaken in his view—that allowing free markets to do their work will automatically take care of such problems. By extension, he argues, the IMF also does not act to promote economic growth (which helps to produce full employment). Again the claim is not that the IMF dislikes growth per se, but that it believes free markets are all that is needed to make growth happen. As a further consequence of the misguided policies that follow from this "curious blend of ideology and bad economics," Stiglitz argues, the IMF itself is responsible for worsening—in some cases, for actually creating—the problems it claims to be fighting. By making countries maintain overvalued exchange rates that everyone knows will have to fall sooner or later, the IMF gives currency traders a one-way bet and therefore encourages market speculation. By forcing countries that are in trouble to slash their imports, the IMF encourages the contagion of an economic downturn from one country to its neighbors. By making countries adopt high interest rates that stifle investment and bankrupt companies, the IMF encourages low confidence on the part of foreign lenders. At the same time, by repeatedly coming to these lenders' rescue, the IMF encourages lax credit standards. Second, and more darkly, the IMF, in Stiglitz's view, systematically acts in the interest of creditors, and of rich elites more generally, in preference to that of workers, peasants, and other poor people. He sees it as no accident that the IMF regularly provides money that goes to pay off loans made by banks and bondholders who are eager to accept the high interest rates that go along with assuming risk—while preaching the virtues of free markets as they do so—although they are equally eager to be rescued by governments and the IMF when risk turns into reality. Stiglitz also thinks it is no coincidence that food subsidies and other ways of cushioning the hardships suffered by the poor are among the first programs that the IMF tells countries to cut when they need to balance their budgets. He observes that IMF officials tend to meet only with finance ministers and central bank governors, as well as with bankers and investment bankers; they never meet with poor peasants or unemployed workers. He also notes that many IMF officials come to the Fund from jobs in the private financial sector, while others, after working at the IMF, go on to take jobs at banks or other financial firms. Here again Stiglitz's point is that the IMF's mistakes are not random but the systematic consequence of its fundamental biases. His argument is as much about the policies the IMF doesn't recommend as the ones it does: Stabilization is on the agenda; job creation is off. Taxation, and its adverse effects, are on the agenda; land reform is off. There is money to bail out banks but not to pay for improved education and health services, let alone to bail out workers who are thrown out of their jobs as a result of the IMF's macroeconomic mismanagement. One specific example, land reform, sharply illustrates what he has in mind. As Stiglitz points out, in many developing countries a small group of families own much of the cultivated land. Agriculture is organized according to sharecropping, with tenant farmers keeping perhaps half, or less, of what they produce. Stiglitz argues, The sharecropping system weakens incentives—where they share equally with the landowners, the effects are the same as a 50 percent tax on poor farmers. The IMF rails against high tax rates that are imposed against the rich, pointing out how they destroy incentives, but nary a word is spoken about these hidden taxes. Land reform represents a fundamental change in the structure of society, one that those in the elite that populates the finance ministries, those with whom the international finance institutions interact, do not necessarily like. Stiglitz considers, and rejects, the view that these and other choices are the result of a conspiracy between the IMF and powerful interests in the richer countries—a view that is increasingly popular among the anti-globalization protesters who now appear at the IMF's (and the World Bank's) meetings. Stiglitz's view is that in recent decades the IMF "was not participating in a conspiracy, but it was reflecting the interests and ideology of the Western financial community." Finally, Stiglitz sees the IMF's systematic biases as a reflection of a deeper moral failing: The lack of concern about the poor was not just a matter of views of markets and government, views that said that markets would take care of everything and government would only make matters worse; it was also a matter of values. While misguidedly working to preserve what it saw as the sanctity of the credit contract, the IMF was willing to tear apart the even more important social contract. Throughout the book, the sense of moral outrage is evident. Do Stiglitz's criticisms hold up? To begin, it is easy enough to accuse Stiglitz of selective memory. From reading Globalization and Its Discontents, one would never know that the IMF had ever done anything useful. Or that Stiglitz, and his colleagues first at the Council of Economic Advisers and then at the World Bank, had ever gotten anything wrong. Or that those against whom he often argued in the US government—especially at the Treasury, which he continually portrays as complicit in the IMF's misdeeds, but at the Federal Reserve System too—had ever gotten a question right. (In the book's sole mention of Alan Greenspan, Açıklama [M11]: Who is that?
Stiglitz accuses him of being excessively concerned with inflation to the exclusion of a vigorous expansion that could have otherwise taken place in the US during the Clinton years.) One can also disagree with Stiglitz over the consequences of what the IMF plainly did, even including those policies it pursued that most people now agree proved counterproductive. By 2002 the Asian financial crisis of 1997–1998 is receding into the past. While some of the affected countries (most obviously Indonesia) still feel its effects, by now others have made solid recoveries. Stiglitz is right that they have not regained, and probably will not, the rates of growth they achieved before the crisis. But those rapid growth rates may well have been unsustainable in any case. Even in Russia, where per capita income remains well below what it was when the Soviet Union collapsed, and where the IMF pursued the policies toward which Stiglitz is the most scathing, the economic situation looks better today than it did when he was writing his book. A more fundamental problem, as Stiglitz readily acknowledges, is that we cannot reliably know whether the consequences of the IMF's policies were worse than whatever the alternative would have been. Many longtime observers of the developing world will notice that Stiglitz rarely mentions economic policy mistakes that poor countries make on their own initiative. Nor does he pay much attention to the large-scale corruption that is endemic in many developing economies—except in the case of corruption in Russia, where he argues that the privatization program pushed by the IMF opened the way for corruption on a historically unprecedented scale. He also never points out that the typical developing country spends far more on its military forces (to fight whom?) than it receives in foreign aid; yet it would seem necessary to take account of such wasteful expenditures, along with graft in all its forms, if one is to give a clear picture of why the nondeveloping economies are not succeeding. Açıklama [M12]: Discuss all arguments
merging in this paragraph!
It is surprising too, in light of his emphasis on the absence of adequate regulation and supervision of financial institutions in the developing world, that Stiglitz does not make more of the mistakes made by private-sector businesses. For example, what made Korea vulnerable to the 1997–1998 Asian turmoil was that the country's business conglomerates (the "chaebols") had borrowed too heavily, and that the country's banks had financed these loans by borrowing in US dollars and relending in Korean won. True, banks abroad that were lending in dollars to the Korean banks may have become excessively confident that the IMF would bail them out if anything went wrong. But surely much of the fault lay with Korea's own businessmen and bankers. And once they had built their house of cards, how much damage would its inevitable collapse have caused if the IMF had simply stayed away? Defenders of the IMF cannot claim that all went well after countries implemented the Fund's recommendations. But they would presumably argue that events would have turned out even worse on some alternative course. They would also presumably argue that of course they knew that information was imperfect, and markets incomplete, and institutions absent, in the countries that came to the IMF for assistance. The issue, to be argued on a case-by-case basis, is just what different set of actions might therefore have proved more beneficial. Interestingly, there is also disagreement today over just how prevalent dire poverty is in the developing world —and, what is more important, whether poverty is increasing or decreasing. Stiglitz echoes the standard view that the number of people around the world living on less than $1 per day, or $2 per day, has been increasing in recent years. By contrast, his own colleague in the Columbia Economics Department, Xavier Sala-i-Martin, has recently published a study arguing just the oppositSala-i-Martin's point is that for purposes of assessing whether someone is economically well off or miserable, what matters is not how many US dollars the person's income could buy in the foreign exchange market but what standard of living that income can support in the place where he or she lives. Açıklama [M13]: Discuss this
Because the currency values established in foreign exchange markets (and also the values controversial point and write down an own position! that governments set officially for currencies for which there is no market) often do not accurately reflect purchasing power, the difference between the two measures of income is sometimes large. In India, for example, the average person's income in rupees in 2000 translated into just $460 per year at the prevailing market exchange rate of 44 rupees per dollar. But because food, clothing, housing, and other consumer necessities are so much cheaper in India than in the US, the same amount of rupees was equivalent to an American income of nearly $2,400. Similarly, the average Chinese income in 2000 was $840 at the official yuan–dollar market exchange rate, but more than $3,900 if measured on a purchasing power equivalent basi Even if we allow for these differences in the cost of living, the number of people in the world who live on the equivalent of $1 per day, or $2 per day, is still depressingly large: according to Sala-i-Martin's estimate, nearly 300 million, and not quite 1 billion, respectively. But this is far below the 1.2 billion and 2.8 billion figures that have become familiar in public discussion and are used by Stiglitz. More important, Stiglitz follows the more familiar view in saying that these totals are increasing, but Sala-i-Martin estimates that they are declining despite the rapid growth in world population. As a result, he finds, the proportion of people living on what amounts to $1 per day has fallen from 20 percent of the world's population a quarter-century ago to just 5 percent today, while the $2-per-day poverty rate has fallen from 44 percent to 19 percent. Much empirical research will have to be done and much analytical debate will have to take place before anyone can confidently decide which of these contrasting measurements is the more accurate. But it is worth pointing out that the major source of the decline in poverty over the last quarter-century, according to Sala-i-Martin's calculation, is the dramatic reduction in poverty in China, the world's most populous country—and Stiglitz, too, praises China's performance as one of the developing world's great recent economic success stories. (In keeping with his central theme, he argues that China succeeded in reforming its economy and reducing its poverty because it ignored the IMF's advice to liberalize and privatize abruptly, and instead followed the gradualist approach, adapted to its own situation, which he favors.) To be sure, the plight of many developing countries, especially in sub-Saharan Africa, remains dire, as Sala-i-Martin also points out, and it may well be deteriorating. But if attention is centered on people rather than countries, the great advances made in China, and to a lesser extent in India—which together account for nearly 38 percent of the world's population—necessarily represent a very significant improvement. Açıklama [M14]: Discuss this
controversy!
Stiglitz's attack on the IMF raises not just factual (and counterfactual) questions but substantive issues as well, particularly his argument that the IMF acts on behalf of banks and bondholders, and rich countries more generally, and therefore against the interests of the poor. To what extent is the IMF supposed to act as lending institutions ordinarily act? Stiglitz complains at length, and with many specific cases to cite, that the IMF violates countries' economic sovereignty when it requires them to carry out its policy recommendations as a condition for its granting credit. But don't responsible lenders normally impose such conditions on borrowers? Stiglitz never acknowledges that today the Açıklama [M15]: Discuss this
IMF faces serious criticism from many economists and politicians in the West on the ground that it makes loans with too few conditions, so that the borrowing countries often simply end up wasting the money Or should the IMF think of itself not as a lending institution, acting as responsible lenders normally do, but instead as an institution charged solely with promoting the welfare of the borrowing countries, with waste of some credits to be expected? Some parts of Stiglitz's complaint are not so much about the IMF per se as about the absence of some form of international authority capable of imposing on citizens who are already relatively well off the burden of assisting their less fortunate fellow human beings elsewhere. To be sure, the world's rich countries could simply agree among themselves to devote a much greater share of their own incomes to foreign aid (a frequently suggested standard is 1 percent of GDP), either out of a sense of moral obligation or in recognition that raising Açıklama [M16]: Give reasons for such
the incomes of poor countries would create benefits spilling over to the industrialized world an attitude (if it where dominant!)! as well. But in fact there is no such agreement. The foreign aid that most rich countries give is shrinking compared to their GDP, and the efficacy of such aid is increasingly being challenged anyway. Even within countries with firmly established democratic governments, there is always debate about how generous such assistance should be and what form it should take. But a large part of what troubles Stiglitz and many others who share his views of inequality among countries is that there is not only no such agreement but also no effective mechanism—what he calls "systems of global governance"—for even choosing a policy in Açıklama [M17]: Explain the concept!
this important area and then making it stick. The earnest desire in some quarters for a more formal approach to international burden-sharing, together with the equally sincere resistance to the idea among others, is nothing new. But it is worth recognizing explicitly that it is central to the question of inequality. Moreover, the matter at issue is deeper than simply whether there should or should not be functioning institutions empowered to act, in effect, as a world government. What obligations the citizens of one country owe to citizens of another is a question that goes to the heart of what is involved in being a nation-state and in acting as a responsible human being. Is it morally legitimate for US citizens to pay taxes to provide fellow Americans with a minimum standard of health care under Medicaid, or a minimum standard of nutrition through food stamps, that is far above what the average Angolan receives—and not at the same time be willing to pay the costs of bringing Angola, and the rest of the world's low-income countries, up to that standard? Most Americans will readily answer yes. But as philosophers like John Rawls and Thomas Pogge have argued, wholly apart from the practical benefits that we might gain from alleviating human misery abroad, justifying in moral terms why we owe more to strangers who are close at hand than we owe to strangers who are far away turns out to be complicated and, in the end, extremely difficult. Açıklama [M18]: Discuss the whole
paragraph seriously! What would be your
position?
Many of the more practical economic elements of Stiglitz's argument are also issues of long standing. He makes a strong case for policies that favor gradualism over "shock therapy"; that put the emphasis not on what developing countries have in common but on how each is different; that place the concerns of the poor above those of creditors; that give maintaining full employment a higher priority than reducing inflation (at least when inflation is less than 20 percent a year); and that fight poverty and promote economic growth directly, rather than merely establish conditions under which economies will be likely to grow, and poverty to decline, on their own. There is serious debate over each element in this program. Stiglitz provides a powerful logical case, together with much by way of both broad-based evidence and firsthand specifics, to support his side on each of these issues. But his objective is not to give a balanced assessment of the debate. Stiglitz has presented, as effectively as it is possible to imagine anyone making it, his side of the argument, including the substantive case for the kind of economic development policies he favors as well as his more specific indictment of what the IMF has done and why. His book stands as a challenge. It is now important that someone else—if possible, someone who thinks and writes as clearly as Stiglitz does, and who understands the underlying economic theory as well as he does, and who has a firsthand command of the facts of recent experience comparable to his—take up this challenge by writing the best possible book laying out the other sides of the argument. What is needed is not just an attempt to answer Stiglitz's specific criticisms of the IMF but a book setting out the substantive case both for the specific policies and also for the general policy approach that the IMF has advocated. Who might write such a book? The most obvious candidate is the former MIT economist Stanley Fischer, who throughout the years that Stiglitz's analysis covers was the IMF's first deputy managing director—that is, the Fund's second-highest ranking official, but for most observers, the person who, far more than anyone else, actually set the direction of the organization's policies. Another is my Harvard colleague (now president of the university) Lawrence Summers, who served as the US deputy treasury secretary, and then secretary, during these years. Supporters of the IMF in the academic world, like MIT's Rudiger Dornbusch, may lack the firsthand "who said what to whom" knowledge that comes from high-level public service, but they are clear-thinking economists and powerful advocates nonetheless. In the absence of such an answer, however, Stiglitz's book will surely claim a large place on the public stage. It certainly stands as the most forceful argument that has yet been made against the IMF and its policies. The IMF, the World Bank and the Bretton Woods international system were put in place at Açıklama [M19]: Explain!
the close of the Second World War according to a plan drawn up by, among others, John Maynard Keynes. The whole idea was to avoid the Thirties-style beggar-my-neighbour policies, which individual governments would be likely to follow. For three decades the Açıklama [M20]: Explain!
system helped to sustain an extraordinary boom, while the breakdown of this system in the early Seventies ushered in three decades of slowdown and multiplying problems. According to Joseph Stiglitz, chief economist to the World Bank from 1997 to 2000, the would-be financial regulators lost their way when they forsook their mandate and instead became enforcers of the "Washington Consensus", a doctrine formulated by the US Treasury and the IMF. This consensus upheld the free movement of capital, fiscal austerity and market liberalisation. In a readable and gripping narrative, Stiglitz explains how these policies have set the scene for a sequence of disasters that bear comparison with the wrenching dislocations of the Great Depression: notably the Asian financial meltdown of 1997-8, the failed transition to market economy in Russia and many former Soviet-bloc Açıklama [M21]: The Asian financial
states, and the current "deregulation crisis". crisis involves four basic problems or issues: (1) a shortage of foreign exchange that has caused the value of currencies and Stiglitz was awarded the Nobel prize for economics last year, but manages to convey his equities in Thailand, Indonesia, South Korea and other Asian countries to fall ideas without recourse to equations or baffling technical terms. It helps that he was present dramatically, (2) inadequately developed at key events in the unfolding story. As a participant in the 1997 annual meeting of the IMF financial sectors and mechanisms for allocating capital in the troubled Asian and World Bank, held in Hong Kong, he had a ringside seat as the rug was pulled from economies, (3) effects of the crisis on both underneath the tiger economies. the United States and the world, and (4) the role, operations, and replenishment of funds of the International Monetary Fund. He sought to avert the disaster, and suggested concerted actions to the ministers of the (cf. CRS Report 1998) south-east Asian countries: "If they all imposed capital controls – controls intended to prevent the damage as the speculative money rushed out of their countries – in a coordinated way, they might be able to withstand the pressures that would undoubtedly be brought down upon them by the international community." But the ministers did not act quickly enough, and must anyway have been puzzled at this advice so much at odds with the Washington Consensus. Stiglitz was, after all, "chief economist", appointed to assess the coherence of the policies pursued by the Bank and the Fund. The IMF response to crisis was to offer loans only to countries prepared to adopt a harsh "beggar thyself" programme to cut government Açıklama [M22]: Explain (s. above
expenditure and boost trade surpluses – the same package that inflicted misery on Latin America during most of the Eighties and Nineties. Interest rates were to be raised in the hope of tempting back foreign capital and boosting the exchange rate. In south-east Asia, the Washington package provoked instant disaster rather than prolonged agony because conditions differed from Latin America. In Asia, governments were already running a budget and trade surplus at the time of crisis, but companies were heavily indebted. The combination of sky-high rates and government retrenchment bankrupted many local corporations. In countries with little social insurance, millions were thrown out of work. Meanwhile, Western investors picked up assets from distressed companies in the largest ever fire sale. These proceedings, so contrary to the principles of economic management in the US, shocked Stiglitz. As a former adviser to Clinton, he knew well that the US Treasury was ultra careful about raising interest rates half a per cent, let alone ten or 15. He was well aware that much financial aid offered to Asian countries ended up with speculators, or else went to indemnify Western concerns against the consequences of their own earlier contributions to a financial bubble. Stiglitz finds it curious that the IMF, preaching market disciplines to poorer countries, scrambles to assemble bail outs when the going gets rough for investors from the rich countries (a pattern which has come to be known as "socialism for bankers"). The fact that Açıklama [M23]: Explain!
large Western institutions knew they had the backing of the IMF in making loans encouraged them to be irresponsible. It exposed Asian borrowers to risks which the lenders would otherwise have carefully considered. The Asian crisis helped to precipitate the Russian financial collapse of 1998 and the subsequent wider roller coaster, enmeshing the US itself. In Russia, the IMF and other Western advisers had also been preaching its "one size fits all" package of fiscal austerity, high interest rates and the avoidance of devaluation, with even more disastrous results. The Russian economy was already hugely weakened by "shock therapy". Stiglitz points to a striking contrast between the dire condition of post-Communist Russia, the patient which had all the Western medicines administered to it, and the buoyant state of China, with its strict capital controls, state banks and semi-collectivist enterprises. Stiglitz won his Nobel prize for work on how unequal access to information corrupts or destroys market rationality. His conclusions on the antisocial results of insider systems apply equally to the Russian privatisation or corporate governance at Enron. Indeed, the Washington establishment, having winked at the "loans for shares" scams in the Russian rush to privatise, now displays mock indignation at the news that its tycoons have been practicing similar shenanigans. While Stiglitz offers a withering assessment of the intellectual justifications of the Washington Consensus, he finds that its tenets are exactly those one might expect if the material interests it served were those of Wall Street. And just as the consensus insisted on deregulation abroad, so it (albeit more cautiously) pressed for deregulation at home, with all the consequences we now see. Açıklama [M24]: Try to re-formulate
your hypotheses required in M4? Do you
feel them verified, falsified, or to be
Stiglitz concludes this landmark book with a raft of proposals which show him to be a worthy successor to Keynes. His programme would restore the IMF and World Bank to their original purpose, to act as global regulators and protect even the largest governments from pursuing an illusory short-term interest at the expense of global welfare. For those Açıklama [M25]: How do you assess
who wish to follow up the argument, there are even informative – but not overly copious – this overall assessments, by the reviewer? Is it consistent with his criticism? from the 1999/2000 World Development Report, Table 2. are my calculations based on data in the 2001 World Development Indicators; 1999 is the latest year for which full data are available. Some countries that are presumably poor enough to be in the "lowest-income fifty"—for example, Afghanistan—are excluded because per capita income data are not available for them. Disturbing 'Rise' of Global Income Inequality," National Bureau of Economic Research Working Paper No. w8904, April 2002. the 2002 World Development Report, Table 1. Stiglitz is not consistent in his own treatment of the question of what conditions are appropriate for loans. He repeatedly castigates the IMF for imposing its officials' views over those of government officials in debtor countries. But he boasts about how the World Bank, where he worked, forced Russia to accept stringent conditions in order to receive a loan. Gloomy About Globalization
by Joseph E. Stiglitz Norton, 358 pp., $26.95; $15.95 (paper) 1.
Making Globalization Work is the third of Joseph Stiglitz's popular, and populist, booksLike Jeffrey
Sachs, Stiglitz is an economist turned preacher, one of a new breed of secular evangelists produced by the
fall of communism. Stiglitz wants to stop rich countries from exploiting poor countries without damaging
the springs of wealth-creation. In that sense he is a classic social democrat. His missionary fervor, though,
is very American. "Saving the Planet," one of this new book's chapter headings, could have been its title.
Açıklama [M1]: How do you assess the
introduction of person of Stiglitz, by the
author of the review?
Stiglitz is in favor of globalization—which he defines as "the closer economic integration of the countries of the world." He criticizes the ways it has been done. The "rules of the game," he writes, have been largely set by US corporate interests. Trade agreements have made the poorest worse off and condemned thousands to death through AIDS. Multinational corporations have stripped poor countries of their natural resources and left environmental devastation. Western banks have burdened poor countries with unsustainable debt. Much of this is well said. Although it is not new, it bears repeating. But the main problem at present is not how to make globalization fairer for poor countries. It is how to make it less volatile; and to remove the threat it poses for poor and middle-income people in rich countries—those voters who have the power to derail it. Anti-globalization sentiment is a rich-country phenomenon. It is rather bizarre, therefore, to write a book about making globalization work that pays so little attention to the concerns of people in rich countries. Açıklama [M2]: Please summarise the
possible concerns about globalisation
a) by poor country citizens
This is the more regrettable because Stiglitz's technical work, for which he got a Nobel Prize in economics, b) by rich country citizens. is about market failures typical of developed economies. The "Shapiro-Stiglitz" model explains why wages cannot be sufficiently flexible to maintain continuous full employment—an insight that could have been profitably applied to the effects of low-wage competition from East Asia. But, as in his other writings on globalization, Stiglitz has been primarily influenced by his experience as chief economist of the World Bank in the 1990s. This convinced him that Washington-inspired policies to promote economic development in poor countries were, in fact, hindering it. He was particularly outraged by the response of the International Monetary Fund during the East Asian meltdown in 1997–1998, which, he said, through its poorly conceived bailout efforts, turned slowdowns into recessions, and recessions into depressions. His public criticisms are said to have led to his removal from the World Bank in 2000 at the behest of then US Treasury Secretary Lawrence Summers. This book expands on his earlier criticism of Western development policies and proposes social-democratic alternatives. In Stiglitz's view, postwar trade regimes—GATT, WTO, NAFTA—have been heavily weighted in favor of the rich countries—by which he means primarily the United States, Europe, and Japan. These countries have used their greater knowledge and economic power to out-bargain poor countries. The rich countries have forced liberalization of trade—first in industrial goods, then in skilled services—on poor countries, while retaining their own agricultural subsidies, and non-tariff barriers (in the form of environmental standards) that punish poor-country exporters. There is no lack of evidence for these claims. Açıklama [M3]: Try to explain this
paragraph and give concrete examples!
What are the concrete mechanisms in
Stiglitz proposes a new principle for international trade agreements: reciprocity among equals, but GATT, WTO and NAFTA which lead to differentiation between countries in different stages of development. Rich countries, he argues, should open advantages of the US, Europe and Japan at the cost of third world countries? up their markets to poor ones without demanding reciprocal access to poor countries and without imposing their own labor or environmental standards on those countries. Poor countries should be allowed to keep tariffs. Rich countries, whether in Europe or North America, should phase out agricultural subsidies. They should encourage the immigration of unskilled labor. They should refrain from making bilateral trade agreements, which allow special interests to operate in the dark. True enough, he concedes, all this might lead to job losses in rich countries, but these should be compensated by "better adjustment assistance, stronger safety nets, and better macro-economic management" as well as "more investment in technology and education." In view of the political obstacles to such a compensatory program, this is a remarkably Açıklama [M4]: Discuss each of these
cavalier treatment of the biggest worry facing rich-country workers, to which I shall return. quoted proposals: a) Are they justified? b) Would they lead, if implemented, to a Stiglitz vigorously attacks TRIPs—"trade-related aspects of intellectual property rights." TRIPs, he argues, more civilised globalisation? c) Can they be enforced? have "imposed on the entire world the dominant intellectual property regime in the United States and Açıklama [M5]: Look up TRIPS in the
Europe, as it is today." New drugs could save millions of lives in poor countries, but they are unaffordable internet and explain how it functions! because they are protected by patents that allow the drug companies to charge monopoly prices for a period of twenty years or more. By including patent protection in the World Trade Organization, he writes, American and European negotiators signed a "death warrant for thousands of people in the poorest countries of the world." Pharmaceutical companies should be forced to sell life-preserving drugs to poor countries at near cost—or face compulsory licensing of generic drugs that can be produced by, and traded between, developing countries. Stiglitz also wants to give poor countries reverse protection against what he calls drug companies' "bio-piracy"—exploitation of the traditional plant-based medicines of poor countries Açıklama [M6]: Explain what it is and
without paying for them. Stiglitz raises the interesting question of whether, or how much, patent protection is needed as a spur to innovation, and in what fields. There is a case for arguing that such protection rewards trivial innovations, and slows down more fundamental ones by erecting barriers to entry into the market. It is also true that AIDS has shrunk life expectancy in southern African countries like Botswana, Kenya, Zimbabwe, Malawi, and South Africa. However, Stiglitz is wrong to single out TRIPs as the main obstacle to the use of antiretroviral drugs. As he recognizes, Brazil, another AIDS-ravaged country, simply disregarded the TRIPs regime and started manufacturing antiretroviral drugs on its own. In South Africa, by contrast, Health Minister Manto Tshabalala-Msimang denounced the drug nevirapine—used to prevent the transmission of HIV from mother to child—as "poison" to South Africa's wome Stiglitz claims that rich countries also rob the poor of their natural resources. Resource exploitation is the quickest way for a country to grow, provided the resources aren't stolen. However, natural resources are exhaustible, so unless an economy expands beyond its natural resource base, its capital runs down even as its income grows. Governments can mitigate this outcome by various technical devices such as the establishment of "sovereign wealth funds" that "save" part of the resources for future generations. But such remedies, Stiglitz argues, are made more difficult because multinational companies combine with corrupt domestic dictators to rob the populations of resource-rich countries of the wealth that could be theirs. The cluster of remedies Stiglitz proposes—many of them familiar—are designed to ensure that poor countries with abundant natural resources get "full value" for the resources extracted. He advocates, among Açıklama [M7]: Discuss the thesis:
„Rich natural resources are an evil for poor
other reforms, "green" accounting methods that allow for depletion and environmental "externalities" (such countries". Hoe do you assess Stiglitz' strategy? as pollution of the air and water), full disclosure of royalty payments, and certification of origin to prevent trade in resources like diamonds from Sierra Leone from being used to finance violent domestic conflicts. Foreign aid to poor countries should be reduced by the amount of the internal "theft" of resources by governments or foreign corporations. These measures recognize the importance of changing the incentives of home governments in their dealings with multinational corporations. Stiglitz ignores, however, the problem of the incentives faced by such governments in dealing with their own populations. What method of choosing rulers minimizes the tendency to corruption? Stiglitz's preferred mechanism for slowing down CO2 emissions is a carbon tax. All countries should impose a tax on carbon emissions at rates reflecting the emissions they generate. The tax would be set high enough to yield the reductions envisaged by the Kyoto agreement of 1997, without having to set national targets. This is sensible enough, given the premise that climate change is mainly the result of CO2 emissions. The chapter on debt is the best in the book. Stiglitz writes: Açıklama [M8]: Summarise the
discussion of debt with two perspectives:
a)How do these high debt burdens emerge"
Developing countries borrow too much—or are lent too much—and in ways which force them to bear most b) How can the debt problem be dealt with? or all of the risk of subsequent increases in interest rates, fluctuations in the exchange rate, or decreases in income. As a result developing countries are often burdened with debt they can't service. Stiglitz's solution is in two parts: these countries "should borrow less—much less—than they have in the past"; and the world has to agree on an "orderly way of restructuring and reducing debt." Stiglitz's approach to debt reform has become mainstream wisdom, though action lags some way behind. There is widespread agreement that assistance to poor countries should mainly be in the form of grants, not loans, since loans are unlikely to be repaid; that highly indebted poor countries should borrow very conservatively in their own currencies; that taxes and restrictions may need to be placed on the short-term capital flows by which foreign investors seek quick returns and may equally quickly pull out their money. As of July 2005, twenty-eight highly indebted poor countries had been given $56 billion in debt relief. At Gleneagles in June 2005, the G8 agreed to offer 100 percent relief for the poorest eighteen countries, fourteen in Africa. There is increasing agreement that countries should not be made to repay "odious debt"—debt incurred by previously corrupt or repressive rulers which generally went straight into their bank accounts—and growing support for debt restructuring by means of a "super Chapter 11," or international bankruptcy code. What rightly gives conservatives pause is the new international bureaucracies required to administer these rules. Stiglitz proposes the establishment of an "International Credit Court" to decide how much "odious debt" countries need to repay as well as an International Bankruptcy Agency to restructure sovereign debt. For someone so alert to the possibility that producers will capture governmental institutions, Stiglitz is surprisingly optimistic about the potential of these bodies to right the wrongs he describes. Stiglitz next turns to the global monetary system. Here the big problem has been accumulation of foreign exchange reserves—mainly dollars—by developing countries. Between 2001 and 2005, Japan, China, South Korea, Singapore, Malaysia, Thailand, Indonesia, and the Philippines doubled their total reserves from $1 trillion to $2.3 trillion, with China as the superstar. China's per capita income is less than $1,500 a year, of which the equivalent of $799 is held in reserves. For developing countries as a whole, foreign exchange reserves rose from 6–8 percent of GDP during the 1970s and 1980s to 30 percent of GDP by 2004. By the end of 2006, developing country reserves were expected to reach $3.35 trillion. Developing countries hold such high reserves of foreign exchange to insure themselves against destabilizing runs on their domestic currencies and to avoid the intrusive IMF supervision that befell the countries caught in the East Asian crisis of 1997–1998. East Asian countries also keep their own currencies undervalued to promote their countries' exports. Countries use their reserves to buy American Treasury bills. This enables the US to consume more than it produces, to the tune of nearly 7 percent of its GDP. However, accumulation of reserves earns less interest income for central banks than alternative uses of such funds, and exposes them to large capital losses should the reserve currency depreciate against the home currency—as has been the case with the US dollar. Stiglitz rightly emphasizes the staggering "opportunity costs"—the alternative opportunities foregone—to developing countries of maintaining such high reserves. US Treasury bills earn only 1–2 percent as against the 10–15 percent that could be earned in high-return domestic projects. To overcome these flaws, Stiglitz reworks a proposal put forward in the 1960s for the IMF to issue a new international reserve currency called "special drawing rights" (SDR), which he calls "global greenbacks." The creation of a special reserve currency, he argues, would make it less necessary for countries to accumulate dollar reserves, and "would do more to make globalization work than any other [initiative]." It is not obvious why this should be so. It may help the heavily indebted sub-Saharan African countries—though at the risk of making them SDR addicts—but it would do nothing to prevent excessive reserve accumulation by countries like China, Japan, and Russia. Although Stiglitz also mentions with approval John Maynard Keynes's 1941 proposal to penalize excessive reserve accumulation, he does not follow it up. Keynes's proposed Clearing Bank would have required countries whose trading accounts were persistently in surplus to revalue their currencies as well as to pay interest on their "excess" deposits. The object of these measures was to give incentives to creditor countries to spend their surpluses, not hoard theThis suggestion, which was never adopted, cuts more directly at the root of excessive reserve accumulation than simply expanding the volume of "global greenbacks." Açıklama [M9]: Discuss the
-Pro's and
-Cons
The book concludes with hints of new solutions. Stiglitz wants to "minimize the damage" corporations do of both proposals! to society and "maximize their net contribution," and to this end he proposes five measures: strengthen corporate social responsibility, prevent monopolies or cartels, increase the scope of liability for environmental damage, make possible class action suits at a global level, and create WTO rules against unfair competition and bribery. Açıklama [M10]: Discuss each of the
five measures nd give concrete examples!
Beyond this, all global institutions need to be democratized. In rich countries (although not recently in the US) governments have intervened to redress inequality of power and wealth; but these same countries have unleashed an almost unregulated free market on the rest of the world. Stiglitz recognizes that poor government in poor countries is partly responsible for keeping them poor; but he also argues that corporate interests are largely to blame for poor government. By weakening the nation-state, they weaken the ability of governments to respond to the problems they create. What is needed, Stiglitz argues, is democratic global institutions analogous to those that exist in national jurisdictions. "Governance—problems in the way decisions get made in the international arena—are at the heart of the failures of globalization." Açıklama [M11]: What does Stiglitz
find global democracy necessary?
Stiglitz proposes ten procedural and ten substantive commandments to be the basis of a new "global contract." The first ten are aimed at increasing the representation and power of poor and small countries in global organizations. The next ten would enshrine a great many commitments by developed countries to developing ones, including support for democracy: Açıklama [M12]: Ist hat a serious
account, by the reviewer?
I remain hopeful that the world will sooner or later—and hopefully sooner—turn to the task of creating a fairer, pro-development trade regime. Demands for this by those in the developing world will only grow louder with time.The conscience and self-interest of the developed world will eventually respond. What view is one to take of these arguments? I have pointed out some of Stiglitz's useful analyses and proposals; the mystery to me is how such a fine economist could write such an unsatisfying book. Its main flaws seem to me to be the following: Açıklama [M13]: Summarise what the
reviewer sees as the main flaws! Discuss
these counter-arguments!
First, Stiglitz greatly underestimates the extent to which globalization, imperfect as it is, is helping people in poor countries. Already, it has lifted hundreds of millions of people out of poverty. Stiglitz finds a world "replete with failures." Typical is his remark that although 250 million Indians have improved their standard of living "immensely" in the last two decades, 800 million haven't—a good example of his failure to give progress its due. Or: "The sad truth…is that outside of China, poverty in the developing world has increased over the past two decades." The World Bank puts it differently: "By the frugal $1 a day standard we find that there were 1.1 billion poor in 2001—about 400m fewer than 20 years previously." Stiglitz believes that the increase in poverty outside China qualifies the progress made in poverty reduction. But 400 million fewer people living in extreme poverty is a happy, not a sad, truth, whether it happens in China or anywhere else. He also underplays the gain achieved outside China. It is true that the number of very poor outside China rose slightly. Stiglitz cites the figure of 877 million in the developing world in 2001 living on less than $1 a day, an increase of 3 percent over 1981. What he fails to mention is that the total population of these countries increased by 20 percent over this period, so that while there is a slightly higher number of very poor people in the developing world today, they represent, proportionally, a decline from 32 percent to 21 percent of the overall population. Stiglitz also ignores the fact that the number of those living on between $1 and $2 a day rose about as much as the number of people living on under $1 a day fell. Nor does he mention the World Bank estimate that if global poverty continues to fall at the rate it did between 1981 and 2001, the reduction will almost certainly be sufficient to meet the UN Millennium Development Goal of halving the proportion of people living on less than $1 a day by 201A different observer might see the glass half full rather than half empty. Where Stiglitz accepts that progress has happened, he denies that it can be attributed to the current way globalization is occurring. His method is to show that countries that rejected the free-market mantra known as the "Washington consensus" did better than countries that followed it. For example, East Asian governments, such as Japan, Taiwan, and South Korea, invested in industries with high growth potential, encouraged their populations to save, limited imports that undercut their agriculture and manufacturing, and (in the case of China and India) restricted short-term capital flows. Such interventions may or may not have contributed to their "miracles." But surely much more important were the acts of domestic liberalization of the economy: for China the decollectivization of agriculture and introduction of the "household responsibility system" in the late 1970s; for India, the deregulation of much production, investment, and foreign trade in the 1990s. Above all, the "export-led growth" of East Asia depended crucially on the opening up of foreign, especially Western, markets through bilateral deals and successive rounds of tariff reductions. Globalization, however imperfect, does often work for the poor. Despite its universal message, Stiglitz's book is mainly about making it work for sub-Saharan Africa, where the problem is in large part endemically bad government. As we have recently seen, even "successful" African states like Kenya and Nigeria can collapse into chaos at a moment's notice. Second, Stiglitz underestimates the extent to which poor countries are responsible for sustaining their own poverty. He shirks the key question: Why, over time, did some countries get rich and others stay poor? His implicit, quasi-Marxist answer is that it was because the rich exploited the poor. An alternative, and to my mind superior, approach, pioneered by Douglass North, is that countries now rich developed institutions superior to those of countries that stayed poor, and that the gap in economic development between different parts of the world had already emerged by the eighteenth centur As North tells it, economic growth requires the equalization of the private and social rate of return—entrepreneurs have to be able to receive the benefit which their enterprise confers on society if enterprise is to take place. This requires governments to create and maintain private-property rights. The establishment of a robust private-property regime was the outstanding institutional contribution to the West's economic development. Stiglitz wants to do the reverse for poor countries. The emphasis of his book is on the damage multinational corporations do, and he wants them to reduce this damage by forcing them to pay for it, that is, by limiting their property rights in poor countries. This is a defensible position if one believes that the social value of entrepreneurship has declined. This may be the case in already developed countries, though if one looks at the revolutionary effects wrought by the development of cell phones and Internet corporations like Google, one may doubt it. But the one place it is surely not true is in the developing world, which requires more entrepreneurship, not less. Although Stiglitz recognizes the importance of good domestic institutions for economic success, the focus of his book is too resolutely on the external sources of failure. This fuels the natural tendency of the unsuccessful to claim they are victims of the successful. Third, Stiglitz ignores the harm globalization does to developed countries. This is, above all, a threat to the jobs and wages of their workers, so far largely to the unskilled, but spreading to the skilled as well. Average real wages in America have been stagnant for twenty or more years, even as the economy has boomed. Stiglitz recognizes that globalization is pulling up unskilled wages in China and depressing them in the US and that the depressing effect is faster than the pulling-up effect. He rejects protectionism, but, as we have seen, all he can offer is continued retraining and improvements in skills to fit American workers for life in a competitive global economy. But this is an inadequate answer. Practically all kinds of employment that do not require physical presence can now be offshored. According to Alan Blinder, this amounts to 22–29 percent of all US jThere can be too much competition. Fourth, Stiglitz underestimates the danger of financial instability. We are currently living through a graphic demonstration of the volatility of an economic system dominated by financial markets. Globalization both increases the likelihood of financial crises and reduces the ability of governments to deal with them. Following the East Asian crisis of 1997– 1998 and the Argentinian default of 2002, it became conventional to say that financial shocks were confined to developing countries with their "immature" financial markets, but that in the West we had discovered the secret of markets that don't crash. This so-called wisdom is now being turned on its head. Lawrence Summers is one of a growing number of economists who believe that the sub-prime credit crisis is more likely than not to drag America—and much of the rest of the world, which depends on American consumption—into recessioFinancial instability has a good claim to be the chief flaw in the system of global capitalism, and far more potentially destructive of it than most of the dangers highlighted in Stiglitz's book. Finally, Stiglitz ignores the malign nexus between global current account imbalances—as exemplified by the huge American trade deficit—free capital movements, and the loss of American jobs. It is not just a matter of free trade exposing American companies to the healthy blast of competition from lower-paid labor in East Asia. It is the fact that today's exchange-rate arrangements allow huge current account imbalances to persist. This creates a problem of "super-competitiveness"—competition driven by wages kept artificially low, as in China today—by an undervalued exchange rate. This could not have happened in the past. Under the classic gold-standard regime, a deficit country like the United States would have been forced to curtail its living standard in order to regain competitiveness. In the present nonsystem, it can live for years beyond its means, at the sacrifice of its competitiveness. This is because the dollar is the world's main reserve currency. America is in the happy position of being able to write IOUs for purchases of goods and services that destroy American jobs. The system suits both sides. Americans get to consume hundreds of millions of dollars more a year than they earn, while East Asian workers supply them with $700 billion worth of goods and services they would otherwise have produced themselves. Since this irrational arrangement is the only means human wisdom has so far devised to avoid a global depression, it is understandable that there should be a conspiracy of policymakers to keep it going. But it cannot go on and on. First, there is the same flaw that brought down the Bretton Woods system in 1971, namely that the growing indebtedness of the reserve currency country causes the holders of that currency to lose confidence in it. This has started to happen. Since 2000 the dollar has depreciated by 70 percent against a trade-weighted basket of currencies. "Managed" depreciation could easily become a collapse. Second, there is bound to be a protectionist backlash as soon as Ross Perot's "sucking sound" of outsourcing becomes too deafening. If trade is to be left safely free, there has to be an agreement on exchange-rate rules between the dominant powers, including rules about capital movements. If that agreement is absent, it will not be allowed to stay free. The lack of attention to these interlinked problems in a book on how to make globalization work is its most palpable flaw. It is hard to say how far Stiglitz was diverted from this line of inquiry by his theoretical commitments, since most of the theoretical action takes place off-page. Stiglitz's Nobel Prize was for work on the economics of risk and information. Markets subject to "asymmetric information"—a situation in which information is unequally distributed between parties to a transaction—and other imperfections do not function as perfect competition models suggest, and need to be "corrected." However valid in its own terms, this is the perspective of a microeconomist, whereas the main problems of globalization, I suggest, lie in its uncontrolled macroeconomy. I find more congenial, and more relevant, Açıklama [M14]: Assess this judgment!
the relatively permissive attitude with regard to the so-called market failures displayed by the great twentieth-century economists Keynes and Friedrich Hayek and their greater concern with the problem of securing macroeconomic stability, differently though they set about it. They understood that uncertainty and the disappointment of expectation were inherent, not contingent, features of economic life. In Keynes's economics, a loss of confidence, whatever its causes, leads to an increase in "liquidity preference," or flight from investment into money. As Keynes put it, the price of parting with money goes up. This is happening today. The credit crunch in the United States and the excess accumulation of reserves in East Asia are signs of an increase in liquidity preference. The need is not to search for new and ingenious ways to make markets marginally more efficient, but to provide a macroeconomic environment that reduces the chances of the financial shocks that cause the flight into money. Açıklama [M15]: Ist his argument valid
– and is it correctly addressed against
Stiglitz?
A year ago, few outside a small circle of experts had even heard of the collateralized debt instruments (CDIs) or the structured investment vehicles (SIVs) whose defaults have recently been dragging down the American economy. It is a perfect example of how a financial storm can suddenly come up out of nowhere, destroying all those sophisticated, pseudo-scientific techniques of "averaging" risk by which rational people try to convince themselves that the world is more predictable than it can ever be. My final criticism is that Stiglitz's book is carelessly written. Stiglitz was—and perhaps still is—an outstanding economic theorist. But he has been producing big, loosely argued books. The laudable aim behind them is to inform a broader audience about economic policies that could make the world a better place, certainly with better lives for the poor, and such advocacy has its place in moving people to action. But he lacks the eloquence, urgency, and passion of the preacher, while he has too often abandoned the rigor of the scientist. In my view, he has not yet found a style suitable to the popular exposition of his economic ideas. The reader should be aware of my own biases. I am so allergic to the muddling of analysis and preaching that I find it hard to do a book like this justice. So let me say that it has many good qualities, and much forceful argument. And there is a certain moral grandeur in someone who seeks to cure the world of "its sick, its lame, and its halt," however halting his own prose. The two previous ones were Globalization and Its Discontents (Norton, 2002) reviewed in these pages by Benjamin M. Friedman, August 15, 2002; and The Roaring Nineties (Norton, 2003), reviewed in these pages by William D. Nordhaus, January 15, 2004 Stephen Lewis, UN Special Envoy for HIV/AIDS in Africa, said on August 18, 2006, that "South Africa is the unkindest cut of all. It is the only country in Africa.whose government is still obtuse, dilatory and negligent about rolling out treatment. It is the only country in Africa whose government continues to propound theories more worthy of a lunatic fringe than of a concerned and compassionate state." See For a stimulating contemporary version of Keynes's ideas on interna-tional financial architecture, see Paul Davidson, John Maynard Keynes (Palgrave Macmillan, For the best discussion of these issues, see Shaohua Chen and Martin Ravallion, "How Have the World's Poorest Fared Since the Early 1980s?," The World Bank Research Observer, Vol. 19, No. 2 (Fall 2004), pp. 141–16 See Douglass C. North and Robert P. Thomas, The Rise of the Western World: A New Economic History (Cambridge University Press, 1973) Alan S. Blinder, "How Many US Jobs Might be Offshorable?," Working Paper No. 142 (March 2007), Center for Economic Policy Studies, Princeton University. Vladimir Masch has produced a plan for "compensated free trade" to "control globalization, save American jobs, prevent trade wars, stop predatory trading, and impose financial discipline on our Micawberish country." See "A Radical Plan to Man-age Globalization," www.businessweek .com, February 14, 2007 Lawrence Summers, "Wake Up to the Dangers of a Deepening Crisis," Financial Times, November 25, 2007. Stiglitz's views on the current US crisis can be found in "How to Stop the Downturn," Op-Ed in The New York Times, January 23, 2008 Gloomy About Globalization
by Joseph E. Stiglitz Norton, 358 pp., $26.95; $15.95 (paper) 1.
Making Globalization Work is the third of Joseph Stiglitz's popular, and populist, booksLike Jeffrey
Sachs, Stiglitz is an economist turned preacher, one of a new breed of secular evangelists produced by the
fall of communism. Stiglitz wants to stop rich countries from exploiting poor countries without damaging
the springs of wealth-creation. In that sense he is a classic social democrat. His missionary fervor, though,
is very American. "Saving the Planet," one of this new book's chapter headings, could have been its title.
Stiglitz is in favor of globalization—which he defines as "the closer economic integration of the countries of the world." He criticizes the ways it has been done. The "rules of the game," he writes, have been largely set by US corporate interests. Trade agreements have made the poorest worse off and condemned thousands to death through AIDS. Multinational corporations have stripped poor countries of their natural resources and left environmental devastation. Western banks have burdened poor countries with unsustainable debt. Much of this is well said. Although it is not new, it bears repeating. But the main problem at present is not how to make globalization fairer for poor countries. It is how to make it less volatile; and to remove the threat it poses for poor and middle-income people in rich countries—those voters who have the power to derail it. Anti-globalization sentiment is a rich-country phenomenon. It is rather bizarre, therefore, to write a book about making globalization work that pays so little attention to the concerns of people in rich countries. This is the more regrettable because Stiglitz's technical work, for which he got a Nobel Prize in economics, is about market failures typical of developed economies. The "Shapiro-Stiglitz" model explains why wages cannot be sufficiently flexible to maintain continuous full employment—an insight that could have been profitably applied to the effects of low-wage competition from East Asia. But, as in his other writings on globalization, Stiglitz has been primarily influenced by his experience as chief economist of the World Bank in the 1990s. This convinced him that Washington-inspired policies to promote economic development in poor countries were, in fact, hindering it. He was particularly outraged by the response of the International Monetary Fund during the East Asian meltdown in 1997–1998, which, he said, through its poorly conceived bailout efforts, turned slowdowns into recessions, and recessions into depressions. His public criticisms are said to have led to his removal from the World Bank in 2000 at the behest of then US Treasury Secretary Lawrence Summers. This book expands on his earlier criticism of Western development policies and proposes social-democratic alternatives. In Stiglitz's view, postwar trade regimes—GATT, WTO, NAFTA—have been heavily weighted in favor of the rich countries—by which he means primarily the United States, Europe, and Japan. These countries have used their greater knowledge and economic power to out-bargain poor countries. The rich countries have forced liberalization of trade—first in industrial goods, then in skilled services—on poor countries, while retaining their own agricultural subsidies, and non-tariff barriers (in the form of environmental standards) that punish poor-country exporters. There is no lack of evidence for these claims. Stiglitz proposes a new principle for international trade agreements: reciprocity among equals, but differentiation between countries in different stages of development. Rich countries, he argues, should open up their markets to poor ones without demanding reciprocal access to poor countries and without imposing their own labor or environmental standards on those countries. Poor countries should be allowed to keep tariffs. Rich countries, whether in Europe or North America, should phase out agricultural subsidies. They should encourage the immigration of unskilled labor. They should refrain from making bilateral trade agreements, which allow special interests to operate in the dark. True enough, he concedes, all this might lead to job losses in rich countries, but these should be compensated by "better adjustment assistance, stronger safety nets, and better macro-economic management" as well as "more investment in technology and education." In view of the political obstacles to such a compensatory program, this is a remarkably cavalier treatment of the biggest worry facing rich-country workers, to which I shall return. Stiglitz vigorously attacks TRIPs—"trade-related aspects of intellectual property rights." TRIPs, he argues, have "imposed on the entire world the dominant intellectual property regime in the United States and Europe, as it is today." New drugs could save millions of lives in poor countries, but they are unaffordable because they are protected by patents that allow the drug companies to charge monopoly prices for a period of twenty years or more. By including patent protection in the World Trade Organization, he writes, American and European negotiators signed a "death warrant for thousands of people in the poorest countries of the world." Pharmaceutical companies should be forced to sell life-preserving drugs to poor countries at near cost—or face compulsory licensing of generic drugs that can be produced by, and traded between, developing countries. Stiglitz also wants to give poor countries reverse protection against what he calls drug companies' "bio-piracy"—exploitation of the traditional plant-based medicines of poor countries without paying for them. Stiglitz raises the interesting question of whether, or how much, patent protection is needed as a spur to innovation, and in what fields. There is a case for arguing that such protection rewards trivial innovations, and slows down more fundamental ones by erecting barriers to entry into the market. It is also true that AIDS has shrunk life expectancy in southern African countries like Botswana, Kenya, Zimbabwe, Malawi, and South Africa. However, Stiglitz is wrong to single out TRIPs as the main obstacle to the use of antiretroviral drugs. As he recognizes, Brazil, another AIDS-ravaged country, simply disregarded the TRIPs regime and started manufacturing antiretroviral drugs on its own. In South Africa, by contrast, Health Minister Manto Tshabalala-Msimang denounced the drug nevirapine—used to prevent the transmission of HIV from mother to child—as "poison" to South Africa's wome Stiglitz claims that rich countries also rob the poor of their natural resources. Resource exploitation is the quickest way for a country to grow, provided the resources aren't stolen. However, natural resources are exhaustible, so unless an economy expands beyond its natural resource base, its capital runs down even as its income grows. Governments can mitigate this outcome by various technical devices such as the establishment of "sovereign wealth funds" that "save" part of the resources for future generations. But such remedies, Stiglitz argues, are made more difficult because multinational companies combine with corrupt domestic dictators to rob the populations of resource-rich countries of the wealth that could be theirs. The cluster of remedies Stiglitz proposes—many of them familiar—are designed to ensure that poor countries with abundant natural resources get "full value" for the resources extracted. He advocates, among other reforms, "green" accounting methods that allow for depletion and environmental "externalities" (such as pollution of the air and water), full disclosure of royalty payments, and certification of origin to prevent trade in resources like diamonds from Sierra Leone from being used to finance violent domestic conflicts. Foreign aid to poor countries should be reduced by the amount of the internal "theft" of resources by governments or foreign corporations. These measures recognize the importance of changing the incentives of home governments in their dealings with multinational corporations. Stiglitz ignores, however, the problem of the incentives faced by such governments in dealing with their own populations. What method of choosing rulers minimizes the tendency to corruption? Stiglitz's preferred mechanism for slowing down CO2 emissions is a carbon tax. All countries should impose a tax on carbon emissions at rates reflecting the emissions they generate. The tax would be set high enough to yield the reductions envisaged by the Kyoto agreement of 1997, without having to set national targets. This is sensible enough, given the premise that climate change is mainly the result of CO2 emissions. The chapter on debt is the best in the book. Stiglitz writes: Developing countries borrow too much—or are lent too much—and in ways which force them to bear most or all of the risk of subsequent increases in interest rates, fluctuations in the exchange rate, or decreases in income. As a result developing countries are often burdened with debt they can't service. Stiglitz's solution is in two parts: these countries "should borrow less—much less—than they have in the past"; and the world has to agree on an "orderly way of restructuring and reducing debt." Stiglitz's approach to debt reform has become mainstream wisdom, though action lags some way behind. There is widespread agreement that assistance to poor countries should mainly be in the form of grants, not loans, since loans are unlikely to be repaid; that highly indebted poor countries should borrow very conservatively in their own currencies; that taxes and restrictions may need to be placed on the short-term capital flows by which foreign investors seek quick returns and may equally quickly pull out their money. As of July 2005, twenty-eight highly indebted poor countries had been given $56 billion in debt relief. At Gleneagles in June 2005, the G8 agreed to offer 100 percent relief for the poorest eighteen countries, fourteen in Africa. There is increasing agreement that countries should not be made to repay "odious debt"—debt incurred by previously corrupt or repressive rulers which generally went straight into their bank accounts—and growing support for debt restructuring by means of a "super Chapter 11," or international bankruptcy code. What rightly gives conservatives pause is the new international bureaucracies required to administer these rules. Stiglitz proposes the establishment of an "International Credit Court" to decide how much "odious debt" countries need to repay as well as an International Bankruptcy Agency to restructure sovereign debt. For someone so alert to the possibility that producers will capture governmental institutions, Stiglitz is surprisingly optimistic about the potential of these bodies to right the wrongs he describes. Stiglitz next turns to the global monetary system. Here the big problem has been accumulation of foreign exchange reserves—mainly dollars—by developing countries. Between 2001 and 2005, Japan, China, South Korea, Singapore, Malaysia, Thailand, Indonesia, and the Philippines doubled their total reserves from $1 trillion to $2.3 trillion, with China as the superstar. China's per capita income is less than $1,500 a year, of which the equivalent of $799 is held in reserves. For developing countries as a whole, foreign exchange reserves rose from 6–8 percent of GDP during the 1970s and 1980s to 30 percent of GDP by 2004. By the end of 2006, developing country reserves were expected to reach $3.35 trillion. Developing countries hold such high reserves of foreign exchange to insure themselves against destabilizing runs on their domestic currencies and to avoid the intrusive IMF supervision that befell the countries caught in the East Asian crisis of 1997–1998. East Asian countries also keep their own currencies undervalued to promote their countries' exports. Countries use their reserves to buy American Treasury bills. This enables the US to consume more than it produces, to the tune of nearly 7 percent of its GDP. However, accumulation of reserves earns less interest income for central banks than alternative uses of such funds, and exposes them to large capital losses should the reserve currency depreciate against the home currency—as has been the case with the US dollar. Stiglitz rightly emphasizes the staggering "opportunity costs"—the alternative opportunities foregone—to developing countries of maintaining such high reserves. US Treasury bills earn only 1–2 percent as against the 10–15 percent that could be earned in high-return domestic projects. To overcome these flaws, Stiglitz reworks a proposal put forward in the 1960s for the IMF to issue a new international reserve currency called "special drawing rights" (SDR), which he calls "global greenbacks." The creation of a special reserve currency, he argues, would make it less necessary for countries to accumulate dollar reserves, and "would do more to make globalization work than any other [initiative]." It is not obvious why this should be so. It may help the heavily indebted sub-Saharan African countries—though at the risk of making them SDR addicts—but it would do nothing to prevent excessive reserve accumulation by countries like China, Japan, and Russia. Although Stiglitz also mentions with approval John Maynard Keynes's 1941 proposal to penalize excessive reserve accumulation, he does not follow it up. Keynes's proposed Clearing Bank would have required countries whose trading accounts were persistently in surplus to revalue their currencies as well as to pay interest on their "excess" deposits. The object of these measures was to give incentives to creditor countries to spend their surpluses, not hoard themThis suggestion, which was never adopted, cuts more directly at the root of excessive reserve accumulation than simply expanding the volume of "global greenbacks." The book concludes with hints of new solutions. Stiglitz wants to "minimize the damage" corporations do to society and "maximize their net contribution," and to this end he proposes five measures: strengthen corporate social responsibility, prevent monopolies or cartels, increase the scope of liability for environmental damage, make possible class action suits at a global level, and create WTO rules against unfair competition and bribery. Beyond this, all global institutions need to be democratized. In rich countries (although not recently in the US) governments have intervened to redress inequality of power and wealth; but these same countries have unleashed an almost unregulated free market on the rest of the world. Stiglitz recognizes that poor government in poor countries is partly responsible for keeping them poor; but he also argues that corporate interests are largely to blame for poor government. By weakening the nation-state, they weaken the ability of governments to respond to the problems they create. What is needed, Stiglitz argues, is democratic global institutions analogous to those that exist in national jurisdictions. "Governance—problems in the way decisions get made in the international arena—are at the heart of the failures of globalization." Stiglitz proposes ten procedural and ten substantive commandments to be the basis of a new "global contract." The first ten are aimed at increasing the representation and power of poor and small countries in global organizations. The next ten would enshrine a great many commitments by developed countries to developing ones, including support for democracy: I remain hopeful that the world will sooner or later—and hopefully sooner—turn to the task of creating a fairer, pro-development trade regime. Demands for this by those in the developing world will only grow louder with time.The conscience and self-interest of the developed world will eventually respond. What view is one to take of these arguments? I have pointed out some of Stiglitz's useful analyses and proposals; the mystery to me is how such a fine economist could write such an unsatisfying book. Its main flaws seem to me to be the following: First, Stiglitz greatly underestimates the extent to which globalization, imperfect as it is, is helping people in poor countries. Already, it has lifted hundreds of millions of people out of poverty. Stiglitz finds a world "replete with failures." Typical is his remark that although 250 million Indians have improved their standard of living "immensely" in the last two decades, 800 million haven't—a good example of his failure to give progress its due. Or: "The sad truth…is that outside of China, poverty in the developing world has increased over the past two decades." The World Bank puts it differently: "By the frugal $1 a day standard we find that there were 1.1 billion poor in 2001—about 400m fewer than 20 years previously." Stiglitz believes that the increase in poverty outside China qualifies the progress made in poverty reduction. But 400 million fewer people living in extreme poverty is a happy, not a sad, truth, whether it happens in China or anywhere else. He also underplays the gain achieved outside China. It is true that the number of very poor outside China rose slightly. Stiglitz cites the figure of 877 million in the developing world in 2001 living on less than $1 a day, an increase of 3 percent over 1981. What he fails to mention is that the total population of these countries increased by 20 percent over this period, so that while there is a slightly higher number of very poor people in the developing world today, they represent, proportionally, a decline from 32 percent to 21 percent of the overall population. Stiglitz also ignores the fact that the number of those living on between $1 and $2 a day rose about as much as the number of people living on under $1 a day fell. Nor does he mention the World Bank estimate that if global poverty continues to fall at the rate it did between 1981 and 2001, the reduction will almost certainly be sufficient to meet the UN Millennium Development Goal of halving the proportion of people living on less than $1 a day byA different observer might see the glass half full rather than half empty. Where Stiglitz accepts that progress has happened, he denies that it can be attributed to the current way globalization is occurring. His method is to show that countries that rejected the free-market mantra known as the "Washington consensus" did better than countries that followed it. For example, East Asian governments, such as Japan, Taiwan, and South Korea, invested in industries with high growth potential, encouraged their populations to save, limited imports that undercut their agriculture and manufacturing, and (in the case of China and India) restricted short-term capital flows. Such interventions may or may not have contributed to their "miracles." But surely much more important were the acts of domestic liberalization of the economy: for China the decollectivization of agriculture and introduction of the "household responsibility system" in the late 1970s; for India, the deregulation of much production, investment, and foreign trade in the 1990s. Above all, the "export-led growth" of East Asia depended crucially on the opening up of foreign, especially Western, markets through bilateral deals and successive rounds of tariff reductions. Globalization, however imperfect, does often work for the poor. Despite its universal message, Stiglitz's book is mainly about making it work for sub-Saharan Africa, where the problem is in large part endemically bad government. As we have recently seen, even "successful" African states like Kenya and Nigeria can collapse into chaos at a moment's notice. Second, Stiglitz underestimates the extent to which poor countries are responsible for sustaining their own poverty. He shirks the key question: Why, over time, did some countries get rich and others stay poor? His implicit, quasi-Marxist answer is that it was because the rich exploited the poor. An alternative, and to my mind superior, approach, pioneered by Douglass North, is that countries now rich developed institutions superior to those of countries that stayed poor, and that the gap in economic development between different parts of the world had already emerged by the eighteenth century As North tells it, economic growth requires the equalization of the private and social rate of return—entrepreneurs have to be able to receive the benefit which their enterprise confers on society if enterprise is to take place. This requires governments to create and maintain private-property rights. The establishment of a robust private-property regime was the outstanding institutional contribution to the West's economic development. Stiglitz wants to do the reverse for poor countries. The emphasis of his book is on the damage multinational corporations do, and he wants them to reduce this damage by forcing them to pay for it, that is, by limiting their property rights in poor countries. This is a defensible position if one believes that the social value of entrepreneurship has declined. This may be the case in already developed countries, though if one looks at the revolutionary effects wrought by the development of cell phones and Internet corporations like Google, one may doubt it. But the one place it is surely not true is in the developing world, which requires more entrepreneurship, not less. Although Stiglitz recognizes the importance of good domestic institutions for economic success, the focus of his book is too resolutely on the external sources of failure. This fuels the natural tendency of the unsuccessful to claim they are victims of the successful. Third, Stiglitz ignores the harm globalization does to developed countries. This is, above all, a threat to the jobs and wages of their workers, so far largely to the unskilled, but spreading to the skilled as well. Average real wages in America have been stagnant for twenty or more years, even as the economy has boomed. Stiglitz recognizes that globalization is pulling up unskilled wages in China and depressing them in the US and that the depressing effect is faster than the pulling-up effect. He rejects protectionism, but, as we have seen, all he can offer is continued retraining and improvements in skills to fit American workers for life in a competitive global economy. But this is an inadequate answer. Practically all kinds of employment that do not require physical presence can now be offshored. According to Alan Blinder, this amounts to 22–29 percent of all US jobsThere can be too much competition. Fourth, Stiglitz underestimates the danger of financial instability. We are currently living through a graphic demonstration of the volatility of an economic system dominated by financial markets. Globalization both increases the likelihood of financial crises and reduces the ability of governments to deal with them. Following the East Asian crisis of 1997– 1998 and the Argentinian default of 2002, it became conventional to say that financial shocks were confined to developing countries with their "immature" financial markets, but that in the West we had discovered the secret of markets that don't crash. This so-called wisdom is now being turned on its head. Lawrence Summers is one of a growing number of economists who believe that the sub-prime credit crisis is more likely than not to drag America—and much of the rest of the world, which depends on American consumption—into recessiFinancial instability has a good claim to be the chief flaw in the system of global capitalism, and far more potentially destructive of it than most of the dangers highlighted in Stiglitz's book. inally, Stiglitz ignores the malign nexus between global current account imbalances—as exemplified by the huge American trade deficit—free capital movements, and the loss of American jobs. It is not just a matter of free trade exposing American companies to the healthy blast of competition from lower-paid labor in East Asia. It is the fact that today's exchange-rate arrangements allow huge current account imbalances to persist. This creates a problem of "super-competitiveness"—competition driven by wages kept artificially low, as in China today—by an undervalued exchange rate. This could not have happened in the past. Under the classic gold-standard regime, a deficit country like the United States would have been forced to curtail its living standard in order to regain competitiveness. In the present nonsystem, it can live for years beyond its means, at the sacrifice of its competitiveness. This is because the dollar is the world's main reserve currency. America is in the happy position of being able to write IOUs for purchases of goods and services that destroy American jobs. The system suits both sides. Americans get to consume hundreds of millions of dollars more a year than they earn, while East Asian workers supply them with $700 billion worth of goods and services they would otherwise have produced themselves. Since this irrational arrangement is the only means human wisdom has so far devised to avoid a global depression, it is understandable that there should be a conspiracy of policymakers to keep it going. But it cannot go on and on. First, there is the same flaw that brought down the Bretton Woods system in 1971, namely that the growing indebtedness of the reserve currency country causes the holders of that currency to lose confidence in it. This has started to happen. Since 2000 the dollar has depreciated by 70 percent against a trade-weighted basket of currencies. "Managed" depreciation could easily become a collapse. Second, there is bound to be a protectionist backlash as soon as Ross Perot's "sucking sound" of outsourcing becomes too deafening. If trade is to be left safely free, there has to be an agreement on exchange-rate rules between the dominant powers, including rules about capital movements. If that agreement is absent, it will not be allowed to stay free. The lack of attention to these interlinked problems in a book on how to make globalization work is its most palpable flaw. It is hard to say how far Stiglitz was diverted from this line of inquiry by his theoretical commitments, since most of the theoretical action takes place off-page. Stiglitz's Nobel Prize was for work on the economics of risk and information. Markets subject to "asymmetric information"—a situation in which information is unequally distributed between parties to a transaction—and other imperfections do not function as perfect competition models suggest, and need to be "corrected." However valid in its own terms, this is the perspective of a microeconomist, whereas the main problems of globalization, I suggest, lie in its uncontrolled macroeconomy. I find more congenial, and more relevant, the relatively permissive attitude with regard to the so-called market failures displayed by the great twentieth-century economists Keynes and Friedrich Hayek and their greater concern with the problem of securing macroeconomic stability, differently though they set about it. They understood that uncertainty and the disappointment of expectation were inherent, not contingent, features of economic life. In Keynes's economics, a loss of confidence, whatever its causes, leads to an increase in "liquidity preference," or flight from investment into money. As Keynes put it, the price of parting with money goes up. This is happening today. The credit crunch in the United States and the excess accumulation of reserves in East Asia are signs of an increase in liquidity preference. The need is not to search for new and ingenious ways to make markets marginally more efficient, but to provide a macroeconomic environment that reduces the chances of the financial shocks that cause the flight into money. A year ago, few outside a small circle of experts had even heard of the collateralized debt instruments (CDIs) or the structured investment vehicles (SIVs) whose defaults have recently been dragging down the American economy. It is a perfect example of how a financial storm can suddenly come up out of nowhere, destroying all those sophisticated, pseudo-scientific techniques of "averaging" risk by which rational people try to convince themselves that the world is more predictable than it can ever be. My final criticism is that Stiglitz's book is carelessly written. Stiglitz was—and perhaps still is—an outstanding economic theorist. But he has been producing big, loosely argued books. The laudable aim behind them is to inform a broader audience about economic policies that could make the world a better place, certainly with better lives for the poor, and such advocacy has its place in moving people to action. But he lacks the eloquence, urgency, and passion of the preacher, while he has too often abandoned the rigor of the scientist. In my view, he has not yet found a style suitable to the popular exposition of his economic ideas. The reader should be aware of my own biases. I am so allergic to the muddling of analysis and preaching that I find it hard to do a book like this justice. So let me say that it has many good qualities, and much forceful argument. And there is a certain moral grandeur in someone who seeks to cure the world of "its sick, its lame, and its halt," however halting his own prose. The two previous ones were Globalization and Its Discontents (Norton, 2002) reviewed in these pages by Benjamin M. Friedman, August 15, 2002; and The Roaring Nineties (Norton, 2003), reviewed in these pages by William D. Nordhaus, January Stephen Lewis, UN Special Envoy for HIV/AIDS in Africa, said on August 18, 2006, that "South Africa is the unkindest cut of all. It is the only country in Africa.whose government is still obtuse, dilatory and negligent about rolling out treatment. It is the only country in Africa whose government continues to propound theories more worthy of a lunatic fringe than of a concerned and compassionate state." See For a stimulating contemporary version of Keynes's ideas on interna-tional financial architecture, see Paul Davidson, John Maynard Keynes (Palgrave Macmillan, 2007) For the best discussion of these issues, see Shaohua Chen and Martin Ravallion, "How Have the World's Poorest Fared Since the Early 1980s?," The World Bank Research Observer, Vol. 19, No. 2 (Fall 2004), pp. 141–16 See Douglass C. North and Robert P. Thomas, The Rise of the Western World: A New Economic History (Cambridge University Press Alan S. Blinder, "How Many US Jobs Might be Offshorable?," Working Paper No. 142 (March 2007), Center for Economic Policy Studies, Princeton University. Vladimir Masch has produced a plan for "compensated free trade" to "control globalization, save American jobs, prevent trade wars, stop predatory trading, and impose financial discipline on our Micawberish country." See "A Radical Plan to Man-age Globalization," www.businessweek .com, February Lawrence Summers, "Wake Up to the Dangers of a Deepening Crisis," Financial Times, November 25, 2007. Stiglitz's views on the current US crisis can be found in "How to Stop the Downturn," Op-Ed in The New York Times, January Beate Kohler-Koch
THE EVOLUTION AND TRANSFORMATION OF EUROPEAN GOVERNANCE <SUMMARY>
Why talk about European Governance?
What does "governance" mean?
Define the three notions: "polity", "policy" and "politics"
European: a "sui generis" polity …why?
What does that mean: The EC is both a compound and a political unit?
"Understanding a particular governance system requires the reconstruction of meanings and
interpretations that support their institutionalisation" (20)
Discuss the four governance principles:
- "majority rule" - "consociation" - "common good" - "individual interests" What do mean the four modes of governance? - "statism"
- "corporatism"
- "pluralism"
- "network governance"
Discuss table 2.1 on p 21 and give European examples for them!
Let us assume: within the EC the type of network governance is likely to emerge! Which
impact on the established governance systems in the member states??
Developing governance systems is a contested process of introducing organisation and order
into an unstable discursive environment, it tends …
(quote Gottweis, p. 29: .to incorporate.)
By and large this process means building a "hegemonic discourse" (Antonio Gramsci) – that
means:
• Who is defining the legitimate objectives and appropriate ways and means of sector
• Who wins the gate-keeping powers to control the supply and demands of concepts?
• and by doing this, limiting the scope of the policy under discussion (e.g. manipulating
the arena in which concepts will be taken up for discussion and defining the policy issue in a particular way so that the policy arena will be closed or open to particular kinds of actors!)?
The text is eleven years old. What is still valid – what should be assessed differently –
and why?
Source: http://euromaster.akdeniz.edu.tr/_library/dosyaYonetimi/indir.php?id=176
ims.u-tokyo.ac.jp
Research HospitalDepartment of Medicine (Department of Hematology-Oncology) Our department has been challenging to cure a variety of fatalhematological disorders with currently available methods. Themainstay to achieve our goal is, nowadays, hematopoietic stemcells (HSC) including bone marrow, peripheral blood and um-bilical cord blood cells, transplantation and cytokine therapy.These projects have been under way at the HSCT and Hematol-ogy wards with the excellent assistance of nurses andcomedical staffs. We annually take care of more than 40 pa-tients with autologous or allogeneic HSCT. In an attempt toexpand therapeutic benefits of HSCT, we are actively participat-ing to the nation-wide project of unrelated bone marrowtransplantation as the largest HSCT center in Japan. In 1998,we furthermore have established Tokyo cord blood bank ser-vices in our hospital. Cord blood cell transplantation hasbecome strong weapon for patients sufferred from hematolog-ical malignancy without any related or unrelated stem celldonors. We have already treated more than 25 adult patientsuntil the end of March, 2001. Also since 1998, we had startedclinical gene therapy for stage IV renal cancer patients as col-laboration with other clinical departments in our hospital aswell as other hospitals including Juntendo University Hospital,Tsukuba University Hospital, and National Cancer Center.
digitalimaginggroup.ca
Eur Radiol (2012) 22:39–50DOI 10.1007/s00330-011-2260-x Non-invasive assessment of functionally relevant coronaryartery stenoses with quantitative CT perfusion: preliminaryclinical experiences Aaron So & Gerald Wisenberg & Ali Islam & Justin Amann & Walter Romano &James Brown & Dennis Humen & George Jablonsky & Jian-Ying Li & Jiang Hsieh &Ting-Yim Lee Received: 4 April 2011 / Revised: 23 August 2011 / Accepted: 25 August 2011 / Published online: 21 September 2011