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Economist Joseph E. Stiglitz views the process of economic globalization as an enormously powerful process driven in large measure by corporate interests. While powerful IFIs like the IMF seek to control these processes, Stiglitz argues that the IMF’s narrow intervention strategies and bad economic policies drastically limit the ability of these powerful institutions to direct the global economy.
 

Economist and Nobel Laureate Joseph E. Stiglitz says that, fundamentally, globalization “…is the closer integration of the countries and people of the world….” This integration has come about because of:

  • An enormous reduction of cost in transportation and communication,
  • The breakdown of artificial barriers in the flows of goods, services, capital, knowledge and people across borders.

In his book, Globalization and Its Discontents, Stiglitz focuses on the economic aspects of globalization. Specifically, he is interested in the role of international financial institutions (IFIs)—focusing on the International Monetary Fund (IMF)—in global economic processes over the past half century.

His purpose is not merely to describe. Stiglitz wants to impress upon his reader that the nature and character of economic globalization have depended heavily on the interventions of the IMF, and that the effects of these interventions have not always been good. Indeed, from Stiglitz’s perspective, the IMF has hurt more than helped. Put flatly, some of the economic policies advocated by the IMF in recent decades have increased the misery of many humans across the globe.

Economic Driver Does Not Mean Control

Stiglitz says that globalization is powerfully driven by corporate interests. As corporations move to extend their reach across state and geographic boundaries, they extend not only economic aspects of globalization, but globalize such things of culture and law as well.

However, even though economic globalization may be driven by corporate interests, the process is not under the control of corporate interests. IFIs like the IMF and the World Bank exert tremendous influence on the historical course of globalization, and even though these IFIs primarily serve the corporate and financial elites of highly industrialized countries, no one is really in control of globalization.

No Invisible Hand

For Stiglitz, economic history is much more complicated than a theory of the inexorable logic of market forces would suggest. History is also beyond the control of hidden financial elites pulling the levers of economic progress. Economic policies and ideologies influence not only the ways that economic globalization play out, but also the strategies and mishaps of financial and corporate elites who try to steer this unwieldy process.

Stiglitz devotes the majority of Globalization and Its Discontents to describing and analyzing how and why the outcomes of economic globalization are beyond the control of the IMF. Powerful IFIs formulate policies, develop strategies and take action, often to find that their interventions have quite different (and sometimes opposite) effects.

One Size Does Not Fit All

Although Stiglitz is highly critical of the recent policies of the IMF (which he views as a betrayal of the IMF’s original mandate and philosophy), he also believes that the IMF is insensitive to (or incompetent to judge) the unique situations of different developing countries.

Stiglitz says that the Washington Consensus developed a “template” for intervention into national economies out of their experiences in Latin America. IMF leadership and economic experts are not required to have any experience with developing countries, nor do they take the time to gain sufficient knowledge of the situation on the ground. Because of this, the IMF approaches economic intervention with an overly narrow set of strategies. However, what works in Chile may not work in Romania.

Beyond intervention strategies, since the Thatcher and Reagan administrations in the 1980s, the IMF has fit itself into something of an ideological straight jacket. The IMF has become committed to the ideology that unfettered free-market capitalism will solve many (if not all) of the problems plaguing the global economy. Even if market forces do not work perfectly, they certainly work better than anything else in providing economic stability.

The irony is that the IMF originated out of the understanding (following World War II) that market forces do not work perfectly and that, in some cases, regulatory intervention is warranted to ward off economic crises and restore stability.

Globalization May Bring Good

It is important to point out, however, that Stiglitz is not an opponent of economic globalization. Indeed, he argues that economic globalization has brought about a number of benefits.

  • Opening up international trade has helped the economies of many countries grow faster than they otherwise would have,
  • “Exported growth” has enriched large regions (like East Asia) and made millions of people better off,
  • In general, the global population is healthier,
  • Even though working conditions in factories may not always be optimal, many people find this option better than “staying down on the farm.”

The problem, as Stiglitz sees it, is not economic globalization itself. Indeed, economic globalization has an unprecedented capacity to improve the lives of humans around the globe. The problem is that the policies of some of the largest, most powerful IFIs are preventing the promises of economic globalization from being realized.

Global markets are not perfect. Sometimes they require intelligent, democratically accountable interventions. However, this type of global economic leadership is something, in Stiglitz’s eyes, that the IMF is currently incapable of providing.

Bottom Line

Stiglitz views the process of economic globalization as an enormously powerful process driven in large measure by corporate interests. While powerful IFIs like the IMF seek to control these processes, Stiglitz argues that the IMF’s narrow intervention strategies and bad economic policies drastically limit the ability of these powerful institutions to control the global economy. In short, while corporate and financial interests may be the driver of globalization, the driver is not in control.

 
Data and Methods:

Data Source:

Based on the author's experience as the Senior Vice President and Chief Economist at the World Bank in the late 1990s.

Funding Sources:

  • The Brookings Institution
  • Stanford University
  • Columbia University
  • Carnegie Endowment for Peace
  • Ford Foundation
  • MacArthur Foundation
  • Rockefeller Foundation
  • UNDP
  • Canadian International Development Agency
 
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Reference

Stiglitz, Joseph E. 2002. Globalization and Its Discontents. New York: Norton. Ch. 1, pp. 3-22.

 
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