Web Assignment 13: Joe Stiglitz's International Anti-Neoliberalism: Durham Students

Of all those arguing that the world economy was being badly managed in the interests of the rich in the 1990s and early 2000s, the most articulate was Joseph Stiglitz.

Surf over to http://delong.typepad.com/pe101/virtual_discussions/ and then to http://delong.typepad.com/PE101/2007/08/web-assignme-13.html. Write a comment of at least 200 words on what you think of some aspect of Stiglitz's position on how the world should be governed. Contribute to the discussion that is ongoing at http://delong.typepad.com/PE101/2007/08/web-assignment-13.html--that is, react and respond to not just Stiglitz but, to the extent it is appropriate, the earlier posters and commenters on the webpage.

Due by 5 PM on November 27

Comments

[Helen Louie]

In his article, “Toward a New Model of Development” Joseph Stiglitz emphasizes on the importance of dialogue in democracy. He states that dialogue is necessary because it helps make good decisions. In addition he believes that countries cannot rely on international institutions alone for assistance in policy because the international institutions do not always know what is best for the country. Lastly, he believes that a more diverse group of voices is needed when discussing issues, such that in discussing policies countries should take into consideration the political, economic, and environment effects, as well as have the voices of the people of the country when discussing the future policies. Therefore, that international institutions are important in that they provided outside perspective only.

I agree with Stiglitz because no one person or group of people knows everything and takes into consideration all of the possible effects. In discussions, a variety of people bring in different perspectives and points. I believe that this is necessary and like Stiglitz states will eliminate most of the bad decisions. Moreover, the point of views are heard and considered. In addition, I also agree with him when he says that the people, who should be making the decisions, should be the ones that the decisions will have an effect on. They can receive outside perspectives, but they are the ones that know best of what is important. Therefore, we should let countries make their own decisions, instead of forcing policy on them. We can give them suggestions, but it should be up to them to enforce or reject the suggested policies.

However, there is a flaw in this, such that this process takes up a considerable amount of time. Moreover, a certain group of people or a person could be a more persuasive speaker than the rest of the group. Thus, the rest of the group will be convinced that the persuasive speaker’s policies and decision is the best. Thus, the groups will compete in who can present the most convincing arguments, instead of taking into account the others’ arguments.

[Glory Liu]

Globalization is neither good nor bad. This is Joe Stiglitz main point. However, Stiglitz’s purpose in writing his various books on globalization is to show how the benefits of globalization has not reached all parts of the world, while the maliciousness of globalization has yet to be harnessed. The main problem is what he calls “global governance without global government” in his book Globalization and its Discontents. He hopes to address this problem in works such as The New Model of Development (which Helen talked about above), Achieving a More Equitable Globalization, and Making Globalization Work.

The most important thing, in Stiglitz view, is to change the structure of the existing global governance through improving dialogue. This means changing the way dialogues take place—not having the G-8 countries making decisions for the world in “back room” discussions—and changing the voting rights in institutions such as the IMF. Voting in the IMF (if anything is actually voted on) is coming from the voices of trade ministers who don’t necessarily look out for the best view of their country or other countries. IMF decisions take place in five-star luxury hotel rooms as they discuss policies for impoverished countries. How do these people know what it’s like to live in poverty in Bangladesh? So much for a “democratic institution.”

Stiglitz bemoans such circumstances: “A dialogue on these issues never happened. And policies failed miserably.” (Achieving a More Equitable Globalization, p. 4). The world’s political, economic, and social decisions cannot be determined by the minds of a couple trade ministers. Trade, while important, isn’t the only lens through which people view the world. Stiglitz suggests “more voices at the table,” including people from aid agencies. As he says in Globalization and its Discontents, “Development encompasses not just resources and capital but a transformation of society.” Stiglitz would suggest global partnerships not only with elite finance ministers, but with people on the ground from each specific country so that the social, HUMAN aspect of development is addressed through globalization.

The hardest part of creating a new global government is changing the mindset of the old. This means that the people in charge has to recognize both the benefits of a market system as well as its immense failures. And most of all, the governance is GLOBAL, which means it should focus on GLOBAL issues, not just the local or national interests of a dominant state. Things such as global warming, environmental sustainability, the AIDS epidemic, or the possible outbreak of a global war affect ALL people, which is where a global institution should step in. Global governance does not mean determining the trade policy of Ethiopian farmers. Again, this is no easy task to build a new global government (or even reform the existing structures) because most of it hinges on the United States changing its own ideas. Are we willing to give up veto rights in the World Bank and IMF to promote a more equitable globalization? That’s a tough question to answer, but Stiglitz suggests that we have to answer it.

[John Doylemason]

I also read “Toward a New Model of Development” by Joseph Stiglitz and agree with many principles he outlines and his analysis of the Chinese economic situation.

Firstly, his remarks on the export to consumption factors have been largely ignored until now. Many of the East Asian Tigers, China, and many Latin American countries have increased export levels of resources and manufactured goods at the expense of many western nations, largely the United States, whose global police/mother hen approach refuses to say no to up and coming capitalist ventures. As Stiglitz points out, there is a negative side from too much exportation, largely on a global scale, but also internally. Continued policies of growth through export cannot be sustained. Polarization of the population, economic stagnation and an outracing of employment are a result.

If China's 11th 5th year plan is to succeed and many of the other Asian countries follow suit, extended periods of growth for their respective counties can continue, but at the expense of the elite who benefitted from the earlier polarization. Even though China's labor force has seen period of unemployment decrease, this does not fully take into account workings of the economy. Consumption on the homefront is one of the lasting keys to success for a nation's economic well being. In order to fully meet this 5 year plan, China must eliminate the polarization of its population to spur investment and consumption domestically for future economic growth.

[Helen Louie]

oops, i meant "Achieving More Equitable Globalization" not “Toward a New Model of Development”

sorry!

[Joyce Yawa Amoah]

I don’t think that at this point in the globalization game there is a need to change the globlal governance. If the Washington Consensus is completely oblivious to the pain and suffering being caused by their biased policies in the developing world and among the world’s poor, then it is time that developing democracies pay serious attention to the Beijing Consensus.

In any case Joseph Stiglitz makes it easy to agree with his point of view on how to make globalization work. Over the years organizations like the World Bank, WTO and the IMF have dictated the terms that govern globalization especially when it comes to developing democracies. The IMFs Structural Adjustment Programs over the years had been a one-size fits all policy that has been imposed on these countries. The results over the years have demonstrated that the Structural Adjustment Programs have woefully failed yet the World Bank and the IMF have failed to mend their ways of doing business.

Why is it so difficult for these economists as Stiglitz pointed out to acknowledge the fact that their theories have failed? I don’t think they need to conduct any more experiments to test their theories as Stiglitz proposes. All that they have to do is pay a physical visit to one of the recipient countries and see for themselves. One of the IMF conditions attached to these loans is less government participation in the economy. As a result of this particular condition, most African countries in particular were forced to privatize their leading industries, and creating massive layoffs, while their counterparts in Asia decided to maintain government participation. Fortunately for Asia especially the TIGERS, their economists have a better understanding of what works for their economies than the handful of economic ministers from the donor countries sitting in their offices in Washington D.C.

In light of these unfair trade practices associated with globalization, I agree with Stiglitz that it is difficult to agree with Thomas Friedman that technology has made the world flat. Certainly technology has not level the playing field, it has instead widen the entire economic gap between the developed and the developing countries and the world’s poor in general.

[Zaheer Cassim]

So I also read Stiglitz ‘Towards a New Model of Dvelopment” and Dani Rodricks “After Neoliberalism, what?” I honestly don’t see why Helen is talking about. Helen is stressing the point of getting other countries opinions in fiscal policy, according to my interpretation of Stiglitz and Dani, there is no blueprint of capitalism that can work for every country and that each country has to find its own way of running its economy efficiently.

What I found particularly interesting in China that Stiglitz talks about is the need for investment internally. How the Chinese government should increase consumption, as exporting is hurting the lower economic Chinese citizen. Rodrik says the same thing, “an investment strategy that promotes investing in the home economy”(3). I like Stiglitz idea of taxing carbon polluters and think that the U.S can also benefit from a tax like this. This tax also allows the Chinese government to tax its people less, thus hopefully increasing consumption. It’s so ironic that the biggest problem in China is that they are saving too much, while in the States we don’t have any money to save. If China does implement Stiglitz idea of not investing overseas, imagine what that would do to the U.S economy; it would cripple us instantly (disclaimer, I may be wrong about this).

Stiglitz most important point is that the Chinese government needs to start investing in its own people. The Chinese government has to raise the standard of living for the masses. It does this by creating consumption and supporting local industries. By providing its people with a safety net of social programs, outside investors are also more prone to invest in China. Win, win.

Again Stiglitz and Rodrik also stress the need for institutions to protect the market. Overall, a free market is not something that the thinkers would be in favor for. There needs to be government intervention in all countries to make sure globalization and capitalism does not exploit the working class.

[Ellen Dobie]

I echo Zaheer's mention of Stiglitz's point of the inability to reproduce blueprints of capitalism; they don't exist in the first place. Stiglitz congratulates China for its ability to adapt policy to its own unique situation instead of adopting a ready-made one-size-fits-all capitalism plan. I feel that this is the point that Professor DeLong has been trying to hammer in all semester: there is no right answer. Everything is relative and dependent on something different.

Instead of summarizing Stiglitz's other arguments in "Toward a New Model of Development," I would like to focus on his mention of "vendor finance," the phenomena in which China has lent much of the money that has enabled those elsewhere to buy its goods. Stiglitz uses this point to lead into an argument about the peculiarity of China aiding the richest country in the world to live beyond its means while there are more pressing domestic needs. I, however, would like to look more into the idea of "vendor finance." I opine that this is the same trend we see with any large economic super-power: to maintain its power, the corporation/nation-state/international organization should create dependency in other key parts of the world.

Example: Wal-Mart. This corporation underpays and underinsures its employees...and they end up shopping at Wal-Mart. Structures are strategically crafted to create a cyclical effect: Wal-Mart creates its own consumer-base within its ranks of employees, and China creates its own consumer-base by supporting the US Dollar. The danger of cycles like these is dependency. Financial relationships like what the US and China have currently are highly dependent, which is ultimately unstable. Its stability is dependent upon the goodwill of China (who, of course, has its own stake in keeping the dollar where it is)--but ultimately the arrangement has to crumble. Who has more at stake?

Another interesting point of Stiglitz's is the underfunding of domestic small businesses. Lack of start-up capital could be remedied through industries such as microcredit and microfinance which have lending organizations that work outside of traditional lending establishments. More traditionally, microcredit and microfinance organizations work with structurally-exluded borrowers (such as rural populations, women, indigenous populations, the illiterate) who would traditionally not be ideal candidates for a loan from a bank. Instead, they can take out small loans from a microcredit organizaiton and with this capital create and foster their own business. Microcredit models have met great success in India and parts of Latin America and perhaps could have an important role in China (especially within its more disadvantaged population sectors.)

[Miranda Huey]

I found the arguments in the book Making Globalization Work very persuasive. Like others, I liked his perspective on the failures of neoliberal policies and on the “global” institutions which enact them. The premise of his argument is that people attack globalization for the way in which it has been carried out, which tends to favor special interests and those who are in power. To make trade fair, he argues that the market should allow infant industries in developing economies to grow, and the only way to do that is to force developed countries to have open markets in free trade systems but not to force developing countries to have this same openness. This seems like a very good solution, although discounting the impact this will have on those suffering from the most inequality within developed countries. He grants that globalization and trade liberalization has increased the feeling of insecurity within developing nations, which drives them towards protectionist policies. However, the real problem is that, as in the global market, special interests have taken hold of the rules of the game within countries, too, and manipulated them (monopolistic multinationals and extremely limiting intellectual property laws). The main argument that one should get out of his writing, it seems, is that not all economic actors are equal, and not all nations are equal, and therefore the rules should be different for each of them. The only way to do this to counteract the effects of globalization is though global governance institutions, which also should be safeguarded from special interests, through measures of accountability and changes in representation.

[Yelena Bakman]

Reading his piece’s I found my head nodding in agreement with his points and writing “duh” in the margins. His comments regarding the importance of dialogue are something that I believe that all of us know, as do the people in the White House, but not all those that know the power and necessity of it practice it. And I believe that is where our problem lies. If we utilized what we know then we would be better. Another necessary part of dialogue that we had encountered in the last week’s readings is the need for the dialogue to be both ways. An interesting point that Stern pointed out was that some parties do not come to the table with the same interests of peace as others; if the dialogue does not lead to results, then people will quite believing in its power. I believe that Glory expands on this point when she writes, “The world’s political, economic, and social decisions cannot be determined by the minds of a couple trade ministers.” Not only do you need players in the dialogue that are there intentionally with all sides wanting to reach a result that works for all involved, but you also need to represent more than commerce in the dialogue. Within the dialogue you need many perspectives to ensure the best results possible.

I do, however, disagree with Helen’s over optimistic point that, “[dialogue] will eliminate most of the bad decisions.” I think the presence of both lobbyists, ulterior motives, and corruption get in the way of dialogue working its magic, especially in the places that need it the most. Overall, I believe the necessity of good faith and a common goal of a result that all parties included are the key pillars of a good and productive dialogue. Without this foundation, there still may be a dialogue but its success and results are questionable.

[Aditya Gandranata]

I like Joseph Stiglitz opinion and I agree with what he said, especially the issues regarding the decisions and actions made by world organizations such as IMF, G-7, and World Bank officials in order to improve the lives of people in the third-world country. This issue reminds me of James C. Scott reading on how attention to details and local knowledge is very important in order to improve the condition of the local people. If people who do not know much or enough of the local situation try to “help”, the result could change the people’s condition from bad to worse instead of making it better. These people who made the policies do not live in the third world country and never experience what it feels like to work in the third world country, thus their knowledge to improve their condition is very limited. That is why a dialogue with country or even city officials is very important in order to address this issue.

Is dialogue going to be enough to improve lives and ensure globalization? I do not think so, because not a lot of people in some third world countries are skilled enough to help developing and managing the country. This is the reason why it will take some time for a country that is falling behind to catch up because even if globalization and free market occurs in the country whose people do not know how to work the system, the establishment of free trade (even if there is no trade barriers (it would be worse with its establishment)) and money lending would be useless and it could go to waste. Thus the effort has to come both ways from the world organizations and also the people of the country itself.