Critics of Globalization

Stiglitz stated that opening up to international trade has helped many countries grow far more quickly than they
would otherwise have done. International trade helps economic development when a countrys exports drive its
economic growth. Because of globalization many people in the world now live longer than before and their
standard of living is far better. Globalization also has reduced the sense of isolation felt in much of the
developing world and has given many people in the developing countries access to knowledge well beyond the
reach of even the wealthiest in any country a century ago.

Talked about the proponents of globalization, he stated that, they have been, if anything, even more unbalanced.
To them, globalization is progress, developing countries must accept it, if they are grow and to fight poverty
effectively, but to many in the developing world, globalization has not brought the promised economic benefits.

In the other hand, the critics of globalization accuse Western countries of hypocrisy, and the critics are right.
The Western countries have pushed poor, countries to eliminate trade barriers, but keep up their own barriers,
preventing developing countries from exporting their agricultural products and so depriving them desperately
needed export income. They see globalization in a very different light than the treasury secretary of the US, or
the finance and trade ministers of most of the advanced industrial countries.

Globalization and International Institutions Mistakes

Globalization has been accompanied by the creation of new institutions that have joined with existing ones to
work across borders, that why its powerfully driven by international corporations, which move not only capital
and goods across borders but also technology. Globalization has also led to renewed attention to long-
established international intergovernmental institutions: UN to attempts to maintain peace, the ILO with decent
work slogan, and the WHO, concerned with improving health conditions in the developing world.

According to Stiglitz, to understand what went wrong with globalization, its important to look at the three main
institutions that govern it: the IMF, the World Bank, and the WTO, as the institution which had play a role in
the international economic system. But as his emphasized, Stiglitz was concerned only with IMF and World
Bank, as the center of the major economic issues of the last two decades, including financial crisis and
economic transition, he written. He explained the Keynes general theory (lack of sufficient aggregate demand
explained economic downturn, government policies could help stimulate aggregate demand) as the solution for
the Great Depression.

The IMF is a public institution which established with money provided by taxpayers around the world, was
founded on the belief that there was a need for collective action at the global level for economic stability, but
then changed markedly, became founded on the believe that markets often worked badly, it now champions
market supremacy with ideological fervor, that there is a need for international pressure on countries to have
more expansionary economic policies- such as increasing expenditures, reducing taxes, or lowering interest
rates to stimulate the economy, and today it typically provides funds only if countries engage in policies like
cutting deficits, raising taxes, or raising interest rates that lead to a contraction of the economy.

As Reagan and Thatcher started their neo-liberalism in US and UK, the IMF and the World Bank became the
new missionary institutions, through which ideas were pushed on the reluctant poor countries that often badly
needed their loans and grants. Then, the Keynesian role for the government in job creation was replaced by the
Washington Consensus, between the IMF, the World Bank, and the U.S. Treasury about the right policies to
developing countries. Stiglitz saw that the Washington Consensus policies were ill-suited for countries in the
early stages of development or transition. Most of the advanced countries, had built up their economies by
wisely and selectively protecting some of their industries until they were strong enough to compete with foreign
companies.
Those two institutions could have provided countries with alternative perspectives on some of the challenges of
development and transition, and in doing so they might have strengthened democratic processes, but they were
both driven by the collective will of the G-7 (the governments of the seven most important advanced industrial
countries).

Stiglitz concluded that it was clear that the IMF has failed in its mission, because had not done what it was
supposed to do, like provide funds for countries facing an economic downturn to enable the country to restore
itself to close to full employment. Many of the IMF policies premature capital market liberalization have
contributed to global instability. In once a country was in crisis, IMF funds and programs not only failed to
stabilize the situation but in many cases actually made matters worse, especially for the poor. Thus, IMF failed
in its original mission of promoting global stability, it has also been no more successful in the new missions that
it has undertaken, such as guiding the transition of countries from communism to a market economy, like what
had been happened with Russia case.

The IMF has made mistakes in all the areas it has been involved in: development, crisis management, and in
countries making the transition from communism to capitalism. Structural adjustment programs didnt bring
sustained growth even to those. Underlying the problems of the IMF and the other international economic
institution is the problem of governance: who decides what they do. The institutions are dominated not just by
the wealthiest industrial countries but by commercial and financial interest in those countries, and the policies
of the institutions naturally reflect this. The choice of heads for these institutions symbolizes the institutions
problem, and too often has contributed to their dysfunction. Almost all of the activities of IMF and World Bank
in developing world led by representatives from the industrialized nations. Thus the institutions are not
representative of the nation they serve. Also the problems arise from the finance ministers and the central bank
governors. Each of the ministers is closely aligned with particular constituencies within their countries.

As the closing statement, Stiglitz stated that its time to change some of the rules governing the international
economic order, to think once again about how decisions get made at the international level, and in whose
interest, and to place less emphasis on ideology and to look more at what works
Chapter 1: The Promise of Global Institutions

BACKGROUND:
International Organizations powerful institutions today
International Bureaucrats the faceless symbols of the world economic order are under attack
Protests of Intl Org Meetings continual flashpoints/conflict
1. WTO Seattle, 1999 protest
2. Annual IMF/World Bank protests
3. Protests not new in developing world, ARE new in developed world
4. Now, with communications advances, even 16-year olds have an opinion on NAFTA
5. As result, even conservative politicians must pay heed to negative effects of globalization (Chirac cited as
EXAMPLE)

ROLE OF GLOBALIZATION:
Brought much good through intl trade (Nike factory example)
Social benefits as well: Greater connection throughout world has allowed things like the International Campaign to Ban
Landmines and anti-globalization movement to develop
Economic integration helped stop Asian Financial Crisis from growing in 97
Sometimes results mixed: integration/market reforms in Russia so far bad
Western-driven with disproportionate share of benefits: Terms of Trade for poorest declining (7)
Other related issues: speculation, property rights infringement, conditionality of aid as a force that can undermine national
sovereignty, environmental probs

I. The Major Institutions of Globalization IMF, World Bank, WTO

A. International Monetary Fund (IMF) goal: to ensure global economic stability
1. Originally designed to provide loans to countries facing economic downturn to stimulate aggregate demand
(Keynesian approach)
2. Now, because of free market ideological influence, countries receive funds only if countries raise taxes or
interest rates, or slash deficits
3. Public institution only U.S. has effective veto
4. Because developing countries in continual crisis, IMF could regularly impose conditions on them
B. World Bank goal: to reduce poverty
1. Under McNamara and Chenery, Bank was very sympathetic to poverty reduction focus
2. In 1980s (Reagan era), Clausen and Kreuger moved the Bank in a much more free market direction
(governments were the problem)
3. In 1980s, Bank lending went beyond just normal projects to include structural adjustment loans
C. World Trade Organization (WTO) goal: to govern intl trade relations
A. Spawned from the General Agreement on Trade and Tariffs in 1995
B. Forum for trade agreement disputes and enforcement body

THE Washington Consensus

A. Name for the consensus between IMF/WB/U.S. Treasury for right economic policies for developing world to
pursue
B. These policies not always right for promoting growth
1. Example: capital market liberalization has been pushed despite the fact that there is no evidence
showing it spurs economic growth)
2. Example: U.S. and Japan used protectionism as an important tool for growth, but IMF/WB/WTO does
not promote that
C. IMF/WTO/WB leaders dominated by wealthy country interests
D. Leaders are chosen behind closed doors and often have little experience in developing world
E. World situation is now one of global governance without global government these key players dominate
Why Globalization....
There are a couple of alarming issues that Stiglitz brings to his readers' attention
IMF was supposed to limit itself to the matters of macroeconomics
, i.e., gov't expenditures.
1. The World Bank was supposed to be in charge of structural issues; where and how to spend money; financial institutions and the
labor market (p, 14)
2. After half a century, the IMF has failed in its mission; its premature capital market liberalization have contributed to global
instability (p, 15).
What has changed with the IFIs?
The ideas and the intention behind the creation of the international economic institutions were good ones, yet, they gradually evolved
over the years to become something very different
The Keynesian objectives of the IMF was replaced by free market mantra of the 1980s (the era of Reagan and Thatcher) (p, 16)
The underlying problem of the IMF and other international economic institutions, according to Stiglitz, is the problem of governance:
who decides what they do
Globalization can be reshaped, and fairly run with all countries having a voice in policies affecting them (p, 22)