Review
Joseph E Stiglitz (2002) Globalization audits
Discontents. New York & London: WW
Norton
Bill Freund
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
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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 oi'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 i 997 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 created a severe threat to the prosperity of Korea.
   Stiglitz signifies briefly that he is aware that Mahathir's political credentials
   as a democrat are not perhaps all they should be. He writes warmly as well
   of the strategies of China, also not exactly amodel of transparent governance.
   He has clearly had a lot to do with the Chinese leadership. Underlying these
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enthusiasms lies skepticism that so-called good governance in the form
currently dictated by Western policy makers is the hallmark of economic
development.
     Meles Zenawi of Ethiopia and Yoweri Museveni of Uganda are amongst
his favourite African leaders. Stiglitz describes in some detail an episode
where he tried to support Zenawi against the thrust of IMF policies. And he
also realises that 'without the forgiveness of debt, many economies simply
cannot grow' (243), a point relevant to many poor countries on this
continent. On structural adjustment in Africa per se, Stiglitz says little. But
he considers conditionality in general a failure as a policy tool. Stiglitz
knows much less about Africa than other regions, although he began his
career as a development specialist working on Kenya, but his one important
comment on South Africa should not be left unrepeated. He points out
briefly that the scale and endemic nature of unemployment in this country
obviously points to something quite outside the effects of the conventional
business cycle and requires a response very different than 'trickle down'.
     In short, Stiglitz uses fairly blunt language to explain just what the
protest movements and the Left have said repeatedly, that globalisation is
being distorted in such a way as to benefit the rich, the West and particularly
the financial interests focussed on Wall Street and related boulevards. The
International Monetary Fund, in promoting endless rounds of economic
barrier reduction, is overwhelmingly interested in serving the interests of
financiers who are owed money, and of one country in particular, the USA.
Its writ has primarily tried to make the world safe for those who dominate
this organisation. There are some very interesting passages where Stiglitz
illustrates the case that the IMF typically supports special American
interests, for example, in his discussion of the aluminium cartel in the
context of apparently objective aid and advice given to Russia.
     The second appeal of the book, based partly on Stiglitz's remarkable
contributions to New Left Review, lies in the hope of revelations of what
really goes on in the corridors of power of international finance. But here
Stiglitz is very much more discreet and little new is revealed. He focusses
on conflict, within the American context, between the Treasury Department
and its antagonists - 'I enjoyed the political debate, winning some battles
and losing others' - and, outside, between the World Bank and the IMF.
Given the countless well-documented excoriations of the World Bank, it is
remarkable to read here that the bad guys are [virtually] all in the IMF and
that the Bank is almost a good guy. The role of the Bank, however, in
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actually formulating policy and giving the nod to policies that powerfully
influence those who can and do lend large sums of money, has been too
central for this to be entirely plausible. And if the Bank under James
Wolfensohn has moved away from neo-orthodoxy into pragmatism, from
'conditionally' to 'selectivity' (51), one wonders if its influence will not
diminish. None the less, readers will certainly want to grasp what nuggets
of the history of power politics that they can.
     Stiglitz can stir up the thinking of those concerned with South African
economic policy in the broadest sense. But it must also be remembered that
he tends to be a moderate rather than a guide to an alternative path. If
Stiglitz says that perhaps privatisation is not always necessary and should
not be forced under unfavourable circumstances, he does not question its
logic altogether. Here in South Africa the best aspects of delivery have
depended on the parastatals. Why should they be privatised at all - ever
(other than to benefit cronies of the ANC ruling circles on the grounds of
BEE)? Do we not cripple development efforts by leaving so much of the
financial sector in private hands and should we not nationalise part of the
banking sector? Why should South Africa and other peripheral countries
co-operate in upholding 'intellectual property rights' unless they are
drastically re-negotiated? Can South African 'black empowerment" be re-
directed so it does not stand in the way of broader development in the
 interests of the majority of the population? How can redistribution work so
 it benefits economic development? These are the real questions we are
 never encouraged to ask in the media but which a reading of Stiglitz may
 suggest.
     At a very different level, how can we re-structure international institutions
 away from the deeply 'antidemocratic' [Stiglitz's word] IMF and almost as
 dubious World Bank? 'We have a system that might be called global
 governance without global governance' (22). Stiglitz believes that
 globalisation is necessary and reformable. And he proposes institutional
 steps in his conclusion which would create the right basis for such a reform.
 This would acknowledge that markets operate and need to operate in very
 different historic and institutional settings and cannot be forced into one
 constrained policy mould. Nor are all global players' interests the same and
 again he stresses the need for change here. It is the governance of
 international institutions that needs to be altered. But can these be altered
  in the present international political climate dominated by far right wing
 economic liberals and a USA consumed by special interests who are able
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to buy up democratic institutions with relative ease? Stigiitz points out
himself that '...it is the trade unionists, students, environmentalists -
ordinary citizens - marching in the streets of Prague, Seattle, Washington,
and Genoa who have put the need for reform on the agenda of the developed
world' (9). A specialist is needed to review Stiglitz's proposals carefully
but we can all recognise that the necessary shift he proposes is not going
to happen outside of a suitable political context.
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