Consensus Is Emerging On The Destructive Effects
By Joseph Stiglitz
13 March, 2004
war on terrorism and in Iraq has distracted much of the world's attention
from the pressing issue of how globalization should be managed so that
it benefits everyone. A new report, issued by the International Labor
Organization's commission on the social dimensions of globalization,
reminds us how far the Bush administration is out of line with the global
consensus. The ILO is a tripartite Organization's with representatives
of Labor, government and business. The commission, chaired by the presidents
of Finland and Tanzania, has 24 members (of whom I was one) drawn from
different nationalities, interest groups and intellectual persuasions,
including members as diverse as the head of Toshiba and the leader of
the American Federation of Labor Congress of Industrial Organizations.
Yet this very heterogeneous group was able to crystallize the emerging
consensus, that globalization - despite its positive potential - has
not only failed to live up to that potential, but has actually contributed
to social distress.
The fault lies with
how globalization has been managed - partly by countries but, most importantly,
by the international community, including institutions such as the World
Bank, the World Trade Organization's and the IMF, which are responsible
for establishing the "rules of the game". The commission even
reached consensus on a number of concrete measures to help put a "human
face" on globalization, or at least mitigate some of its worst
The gap between
the emerging consensus on globalization, which this report reflects,
and the Bush administration's international economic policies, helps
explain the widespread hostility towards America's government.
Consider two issues
that have been part of recent bilateral trade agreements pushed aggressively
by the Bush administration. The crises in east Asia and the recent recessions
in Latin America show that premature capital market liberalization can
result in economic volatility, increasing poverty, and destruction of
the middle class. Even the IMF now recognizes that capital market liberalization
has delivered neither growth nor stability to many developing countries.
Yet, whether driven by narrow ideology or responding to the demands
of special interests, the Bush administration is still demanding an
extreme form of such liberalization in its bilateral trade agreements.
The second issue
concerns the unbalanced intellectual property provisions (Trips) of
the Uruguay round of trade talks, dictated by America's pharmaceutical
and entertainment industries. These provisions restricted countries
from making generic imitations of drugs, making many critically important
medicines unaffordable in developing countries.
Spearheaded by worries
about Aids, activists demanded that something be done. Just before last
year's trade talks in Mexico, the US made some concessions so that it
was no longer the only hold-out. In its bilateral trade agreements,
however, it is demanding what is becoming known as "Trips-plus",
which would strengthen intellectual property rights further, to ensure
that countries only have the right to produce inexpensive generic drugs
during epidemics and other emergencies.
The global consensus,
reflected in the commission report, calls for more exceptions so that,
say, drugs can be made available in any case where to do so could save
a life. To those confronting the prospect of death, what matters is
access to life-saving drugs, not whether what is killing the person
is part of an epidemic.
form the basis of enhanced ties of friendship between countries. But
America's intransigence in this area is sparking protests in countries,
such as Morocco, which face the threat of such an agreement; it is also
forming the basis of long-lasting resentment.
The commission highlights
other issues that have received insufficient global attention - such
as tax competition among developing countries, which shifts more of
the tax burden from business to workers. In still other areas, the commission's
report argues for more balanced perspectives. On exchange rates, for
example, it is more sympathetic towards mixed systems, in contrast to
the traditional belief that countries must choose between the extremes
of a flexible system and a fixed exchange rate (of the kind that contributed
so importantly to Argentina's woes).
As this example
shows, having different voices at the table in discussions of globalization
brings new perspectives. Until now, the main worry for most experts
on globalization has been excessive government intervention in the economy.
The commission fears just the opposite. It argues that the state has
a role to play in cushioning individuals and society from the impact
of rapid economic change.
The way that globalization
has been managed, however, has eroded the ability of the state to play
its proper role. At the root of this problem is the global political
system - if such it can be called. Key players such as the IMF and World
Bank must become more transparent and their voting structures must be
changed to reflect the current distribution of economic power - as opposed
to that prevailing in 1945 - let alone the need to reflect basic democratic
Whatever one thinks
of the commission's many concrete suggestions, this much is clear: we
need a more inclusive debate about globalization, one in which more
voices are heard, and in which there is a greater focus on the social
dimensions of globalization This is a message the world would do well
to heed, lest discontent with globalization continues to grow.
Stiglitz, professor of economics at Columbia University, is a Nobel
prize winner and author of Globalization and Its Discontents'
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