Nobel prize-winning economist Joseph Stiglitz is one of the most influential critics of the political agenda that has been riding on the back of the globalization process. The views he expressed in his famous tome “Globalization and its discontents” have now become mainstream thinking: few people, except perhaps a handful of hardcore believers in the powers of the markets to regulate themselves, now doubt that globalization has side-effects. Its most damaging impact is the growing income disparity that has developed both between rich and poor states, and within the borders of single countries. The Washington Consensus, based on the belief that a country’s economic growth would eventually filter down to benefit the whole society, no longer lives up to its name and is increasingly being challenged. But no alternative system has been put forward to ensure that globalization, instead of deepening the divide, helps level the playing field.
As Stiglitz points out in his latest book, “Making Globalization work,” published late last year, we now have an “imperfect system of global governance without global government.” International institutions like the International Monetary Fund (IMF) and the World Bank have lost some of their legitimacy and trade negotiations have failed to redress the global balance. Without a proper decision-making architecture, globalization lacks the tools needed for fine-tuning.
During a workshop, “Covering Globalization,” co-organized by the Columbia University Graduate School of Journalism and the Initiative for Policy Dialogue, that took place in New York last week, Stiglitz highlighted some of the shortcomings of globalization while expressing a belief that it can be better managed.
Currently the dice remains heavily loaded in favor of the most developed nations. While the US and the EU demand that developing countries liberalize their economies they protect their own markets. Stiglitz gave US cotton subsidies as an example: although only 25,000 farms in the US benefit, the subsidies drive world prices down and therefore have a devastating impact on developing countries. And it is not just millions of poor cotton farmers in Africa and elsewhere that are affected: because the bulk of the subsidies go to large industrial farms, small US farmers too are being driven out of the market.
For emerging economies globalization offers pros and cons. It has allowed a country like India, for instance, to develop a successful IT industry despite its poor infrastructure. But it also means that financial markets in Turkey are now more affected by factors outside the Turkish government’s control, such as the ripples caused by the collapse of sub-prime lenders in the US, than by domestic events.
Climate change is adding a new challenge, one that the world’s nations will need to face together. It is unrealistic to expect corporations, driven by the bottom line, to regulate themselves. What is needed, according to Stiglitz, is a new “global social contract” that would better balance the needs of developed and developing countries. We are still far from reaching global agreement on its terms, but there is growing awareness that we are all in the same boat and inequalities will need to be addressed to make the future sustainable.
