After riots in Seattle and protests in Prague, the debate over globalization has settled into a tiresome standoff between insiders and outsiders.
The outsiders are environmentalists, labor leaders, students, anarchists. They stand at the barricades, chucking bricks at McDonald's and heresy at the International Monetary Fund. The insiders are elite economists and financial technocrats. They look down from their offices and defend the orthodoxy, insisting that markets deliver efficiency and that trade creates wealth.
Then along comes Joseph Stiglitz -- a dangerous man, an insider who defected.
Stiglitz, an owlish intellectual who reminds audiences of Richard Dreyfuss, probably won't win the Nobel Prize in economics when it is announced this week. But he has earned every other distinction in the field -- a Ph.D. from MIT; the top prize for young economists from the American Economic Association; faculty positions at Yale, Princeton and Stanford. In 1995 he became chairman of President Clinton's Council of Economic Advisers and in 1997 chief economist for the World Bank.
Then, in a series of increasingly public critiques, Stiglitz delivered a stinging attack on the world trading system, a dissent that culminated with his resignation from the World Bank last year.
Stiglitz came to Minnesota last week to speak at the annual Nobel Conference sponsored by Gustavus Adolphus College in St. Peter to coincide with the announcement of the Nobel prizes.
Stiglitz argues that free trade and open markets could be forces for good -- reducing poverty in the Third World, sharing technology across borders, moving investment from rich nations to poor. But he says that trade has been "badly managed" by the rich countries and the International Monetary Fund (IMF), causing unnecessary instability and hardship in the developing world.
Stiglitz takes the debate to a higher level -- not just because he dissects the orthodoxy with its own tools, but because he uses the anecdotes of an insider to confirm the suspicions of the outsiders.
A few years ago, for example, Ethiopia came to the IMF seeking a loan to stabilize its troubled currency. Stiglitz had visited the east African nation and thought its progressive new leaders were taking the country in the right direction. But economists at the IMF balked at providing the loan. They didn't like Ethiopia's bookkeeping -- it counted foreign aid as well as tax revenues in reporting a balanced government budget. Stiglitz asked: So what? Foreign aid is unreliable, IMF economists replied. Stiglitz went home and had one of his World Bank researchers run a study; it turns out that foreign aid is actually a more stable revenue source than tax receipts for poor countries. But when he took these findings to his counterparts at the IMF, they refused to reconsider. "They wouldn't look at the facts," he said in an interview. "It was like talking to the wall."
About a year later, when the World Bank was preparing its widely read annual report on world economic conditions, the scholar in charge solicited several essays challenging the view that economic growth was reducing poverty. A top U.S. Treasury official read the draft and insisted that the criticisms be softened, according to Stiglitz. The editor resigned in protest, saying that politicians were rewriting staff research.
Then there was the debate over trade with South Korea. The Clinton administration was preparing for trade negotiations with its Asian ally and wanted to urge "capital market liberalization" -- that is, allowing Korean banks and corporations to borrow more easily from foreign lenders. Research by Stiglitz's staff at the Council of Economic Advisers showed that this might actually destabilize a small nation if its banks and regulators weren't ready for huge, fickle flows of money -- which is exactly what happened two years later. But when Stiglitz prepared a briefing paper on the matter, his rivals in the administration said the president didn't even need to study the question.
If Stiglitz finds fault with the big institutions of world trade, however, he would not tear them down. In fact, he thinks that free trade will ultimately be a good thing. And suddenly he sounds more like the leading scholars in international economics.
"Globalization does represent the best chance to lift the poor out of poverty they have lived in for centuries," he told the audience at Gustavus.
Later, in an interview, he added: "In China or Indonesia, the alternative to a job in a Nike factory might be unemployment and destitution. What you want is not for Nike to shut down, but for Nike to recognize that it doesn't cost much to build a factory with air conditioning, regular work breaks and so on."
What Stiglitz would like to see is better management of globalization, management that spreads the wealth. In particular:
The rich nations of North America and Europe should eliminate all tariffs and quotas on goods from developing countries. The poor nations would prosper faster if the rich nations would buy their sugar, peanuts, grains, textiles, shoes, garments and other low-tech goods.
Congress should fund the debt-relief program proposed by President Clinton so that poor countries, especially in Africa, don't have to spend so much of their current income repaying old debts to rich nations.
The IMF and the World Bank should have governing boards with greater representation from developing nations. The agencies now are funded chiefly by rich nations and operated by Western or Western-trained technocrats. These experts, Stiglitz says, often fail to understand the importance of such basic development tools as free primary schools and land redistribution.
Though Stiglitz has gained the reputation of a firebrand since his resignation from the World Bank, an hour's conversation shows him to be modest, funny, thoughtful, deeply concerned about social justice -- and ultimately optimistic.
"The marches (in Seattle and Prague) have had an effect," he said. "Remember that the marches of the Civil Rights movement and the (European) revolutions of 1848 had an effect too."
Maybe Stiglitz will turn out to be neither an insider nor an outsider, but a bridge between the two.
Dave Hage is a Star Tribune editorial writer.
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