Globalization and its Discontents (review)

For many South Africans who follow debates on economic policy with critical minds, Joseph Stiglitz's new book on globalisation is now sitting proudly on that office table or mantelpiece. His perspective has been articulated from time to time in articles or in public statements but the book packages it in a way that commands attention. There are two reasons for this, one of which this reviewer happily sustains while the other, about which he has a bit more skepticism, will be discussed only later in this review. The first lies in the value, given Stiglitz's eminence as an economist (he is a Nobel Prize winner) and his prestige as a valued policy maker (he moved from Bill Clinton's Council of Economic Advisers to a top post as chief economist in the World Bank and then to Columbia University when the Republicans came back in), of an alternative to the view that -there is no alternative.

Those who bought into the conventions of the Washington Consensus and pompously covered up their fears of the great unwashed with reactionary invective on 'macroeconomic spending' around 1994 could hardly do better than to read chapter three, 'Freedom to Choose'. This chapter makes the same points in reasoned language frequently associated here as views of a 'loony' or 'extreme' left -critiques of privatisation, of the questionable role of foreign investment, of the problems inherent in liberalising all trade barriers, of the nonsense of 'trickle down' economics.

Stiglitz can best be described as a moderate neo-Keynsian. He believes that the neo-orthodoxy that reigned in economics from the 1980s is as noxious as was the old orthodoxy, its pre-Depression predecessor -and for the same reasons. So long as one avoids getting too far in debt, there are many aspects of state economic involvement and protection which are necessary and laudable. The onset of stagflation in the 1970s, (the persistence of inflation coupled with low growth rates despite moderate tightening of the money sources) was used as an excuse by reactionaries to wage an all too successful assault on all the international advances of the post-World War II era. By contrast, Stiglitz makes the case for effective and efficient state management in many instances, in allowing for the importance of the developmental nature of the state and the value of protectionism in some times and places. He rightly points out the ludicrously inappropriate and inequitable new emphasis on so-called intellectual property rights, intended to benefit small circles of bloated corporate producers of technological knowledge. For those who need a new influential authority in making these points about our contemporary world, Stiglitz's book, written very much for the layman and in commonsense English, is a handy and convincing source.

In particular, Stiglitz is highly critical of the strong medicine approach used with regard to the ex-Soviet Union in the early 1990s and the disastrous consequences for the new Russia and other related countries. A striking aspect of these policies was the dramatic and unthinking form of privatisation pursued, which led to vast wealth accumulating in a few very dubious hands that now stand in the way of further development. He also rounds on the policies imposed on South-East Asian countries and Korea in 1997 to meet a liquidity crisis that emerged and was greatly exaggerated by the openness of these economies. Both of these stories are the subjects of individual chapters. In both cases, Stiglitz believed that victimised countries were forced to take bad advice that enormously intensified their problems with long-term bad results. And their problems were largely caused by the so-called liberalisation of capital markets, which rendered their economies vulnerable to drastic forms of manipulation by short-run profiteers. For the IMF, according to Stiglitz, these severe crises were simply a way to force an ideological agenda on countries in crisis.

And he praises dissidence. In the case for instance of Malaysia, the rejection of IMF policy by Mahathir saved the country from troubles which still beset Indonesia and...