World Trade Organization
The book ‘Globalization and Its Discontents’ is indeed a remarkable insight. The personal experience at the World Bank has been drawn by the author ‘Professor Stiglitz’ as a Chief Economist to clarify the global economy’s main events of 1990. This book analyzes the primary episodes as the Russia’s Post-Soviet Reforms and the Asian Crisis. Generally, a economist’s empirical analysis depends on the formal statistics but such tactic has been avoided in this book much to the credit by the Professor Stiglitz.
The empirical record is filled with the help of written history that clarify our understanding and thoughts with respect to economic processes. The full advantage has been taken by the author from his position and comprehensive information has been written regarding the essential changes of global economy. The author ‘Professor Stiglitz’ also states as to how the policies at the World Trade Organization, the US Treasury and the International Monetary Fund are affected through the political factors.
The author claims that the actions of special interest has are thinly veiled by the bad economics and ideology (p. xiii). The private interests for alleged liberalization and privatization were lobbied successful which resulted in overall crisis. These interests were served as intellectual cover
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The important theoretical arguments are too supported in this book through some examples which relates to the political economy but such arguments are not generally supported elsewhere as it has been intended by the author. This book has a basic deficiency of understanding the meaning of Public Choice concepts. The author is generally concerned with the rent seeking which is determined as a conceptual theory of ‘how tariffs are used by special interests and how the incomes are increased by other protectionist through measuring and considering the expense of others (p.
13). The author states that the ideological fervor is associated with this theory and further claims that the problems of developing countries are better explained by means of market failure arguments. There are two reasons for peculiar attitude towards rent seeking. The first one is description which is much similar to Mancur Oslon’s collective action problem rather than rent seeking. The second one is the supplement of various examples related to global economy of 1990 such as collective action problems.
The author asserts that the central bank governors, finance ministers, the WTO and the trade ministers align themselves with the financial community and members of business. The author claims that Russian privatization resulted in higher rent seeking that is determined as the ‘briberization’ (p. 58). The government ministers were enriched through the working of ‘privatization’ instead of supporting treasury coffers.
The author describes that the electricity deal in Pakistan was backed through 235 US officials and a World Bank sponsorship, from which, the profits were earned by the narrow private interests from exorbitant and prearranged prices (p. 71). ‘Trickle Down’ economics are too referred by Stiglitz in which a notion has been described that the expenditure of increased incomes by rich people will result in economic growth for the poor people. The members of narrow interests have trickled up the wealth thereon (p. 78 & 208).
The author explains a powerful class of businessmen and oligarchs created by Boris Yeltsin. The public coffers were looted and special tax privileges were benefited by the political elites and the billions were loaned to Russia by the IMF. The private firms were squeezed so hard by the local government officials that investment was not possible due to having no incentives (p. 190). The author argues that billions were provided by the IMF for bailing out banks and poor masses were provided short food subsidies (p. 130, 216).
The author criticizes the dealing of $30 billion with Japan which was done by the IMF and Treasury. This money was provided to other foreign and American banks instead of supporting the economic situation of Japan (p. 113). During the Asian crisis, the financial interests bailing of $23 billion is also recounted by the author and too describes it as a corporate welfare (p. 119). The IMF’s narrow economic view is blamed explicitly by Stiglitz which is the ideology of ostensible free market that oppose to essential subsides and provision of food to the poor (p. 77).
The globalization suffered discontents due to their ‘outworn presumption’ related to marketing leads. Still, an evidence is supplied regarding the IMF willingness for provision of subsides to business and narrow financial interests. The public choice arguments are overlooked by the author which relates to the ability of concentrated interests in achieving subsides through expenditure of broader interests. The public choice explanations should be considered by Professor Stiglitz instead of blaming free market ideology which should describe the ways of gaining concentrated interests at public expense.
The ‘comparative institutions’ approach was also overlooked by the author which involve the market failure arguments taken by critics. The author confers to the Coase theorem which is dismissed by him on the basis of questionable assumptions (p. 164). The author asserts that policies were formed by free market fundamentalists on grounds of marketing naive faith (p. 32). The supply always equals demands was the derivation by author from the medium competitive model (p. 35). The author criticizes that perfect information and perfect competition is required by the markets (p.
74). As the transaction costs are faced and perfect information is lacked by the agents in markets, thus, the efficient results will not be delivered in the markets and in return, the government will need to enhance the condition through the market outcomes. The author strengthens the Demsetz (1969) comments that the government can assume the Nivrana Fallacy for enhancing the market imperfection. The author, somehow, fails to evade this fallacy and points out various conditions of government failures in this book which is particularly odd.
The author has granted huge credit to John Maynard Keynes, IMF’s intellectual progenitor who clarifies the needs, intervention and working of government for improving markets. Regretfully, this claim was not clearly proved by the author. Keynes criticize the lack of private spending and believes it as the main reason for markets failure. But, the author do explains as to how a financial meltdown was triggered by the IMF in Asia with its monetary policies and banking regulations.
The bank closures in Asia and the tightening of monetary policy through the insistence of IMF rejected businessmen access to credit and resulted in collusion of banking in Asia (p. 116, 118). Such instance is suggestive with the working of Anna Schwartz and Milton Friedman (1963) that determines as to how the induced policies resulted in the financial and monetary collapse and how it caused financial pitfalls instead of low downturns in private aggregate spending. The author also takes the view of free trade in a strange manner.
The various industrialized nations of hypocrisy are right accused for pushing free trade in order to enhance countries and practice protectionism. The protection of United States uranium and aluminium producers as well as Western agricultural subsides are too condemned. The author realizes that poverty has reduced and high growth rates are resulted due to international trade (p. 4). Still, the arguments related to infant industry are endorsed accordingly by the author (p. 16).
The author should have been prevented by the Principle of Comparative Advantages for making such argument. The special interests examples provided by author which shapes policy identifies that the established industries should be protected by tariffs from competition. With author’s belief, inconsistencies have been identified which describes that the IMF is pervaded by free market thinking. Author suggest that ‘market knows best’ which has also been implied through logics of IMF (p. 101).
Still, the thoughts of IMF officials has been repeatedly indicated by the author which explains that market was wrong and the production planning would have been better than anyone else (p. 24, 127 & 147). Brief Critique It is an important book written by Professor Stiglitz. Anyone interested in public policy and economic development, should read this book. It is based on the era of globalization and decision making political economy practiced in international organizations. This book is partly manifest, partly memoir and partly involves criticism of International Monetary Fund.
It is informative and entertaining as a memoir. A tale of Washington experience practiced by Professor Stiglitz is being told. The author realized that the important game played inside the beltway was the politics. Also, the rigorous intellectual debate was less important than the ideology. Still, some respect was showed to Professor Stiglitz over there. The author’s words were not always honored by high ranked people but sometimes, those people listened the words but did not accept in any way and finally ignore the advice.
This book is powerful as a manifest. Everything that has been said by the author, does not needs to be agreed by a person but inadvertently, much of the mentioned ideas are realized to be important and needs to be debated thoroughly. This book generates a debate due to thorough considerations and requires some policies to be revised and review in future which are perceived to be readily accepted in Washington. The weakest point of this book comes into notice upon discussion over the criticism of International Monetary Fund (IMF).
The base of this weakness and criticism is not on the grounds of author ‘sayings’ but is centered wholly on the ‘ways of sayings’. The language is used aggressively and the tone is mostly hostile due to which an opportunity has been missed by the author in insulting the IMF staff. Professor Stiglitz mentions that the hall-mark of IMF is never based on intellectual consistency and thus, the ‘bad economics’ is practiced systematically by the staff. The author’s characterizations regarding the policies and economists of IMF are generally unfair and perceived simply ‘self-serving’.
If the author would have chosen comprehensive temperate style then effectiveness of this book would be much wonderful than it is recognized now by general readers. Thus, this book has important repute and needs to be thoroughly read and widely discussed by interested readers. Although, a sense of emptiness is left at the end of this critique but the face is, Professor Stiglitz is sincere and whatever has been mentioned by him are truly obvious from the main issues being confronted in globalization.
The author basically suggests and empowers the government’s abilities in order to strengthen the concepts and needs of globalization that will enhance the market conditions and will too prevent its failure in future. In short, the agenda should focus on ‘making globalization a fair process, putting end to abuse and corruption, helping generously to destitute and poor, implementing policies for raising productivity, promoting efficiency, competition and improving incentives and institutions.
Clearly, the focus of agenda should not be on supporting, encouraging and bringing back the corrupt politicians, xenophobic autocrats and other bureaucrats because these all people will not run the economy but will, indeed, ruin the economy once in for all. Conclusion This book has strengths as well as weakness but it generally depends upon the perspective of a reader as to how does one judges and debates over the description of this book and how does one credits the ‘Sayings of Stiglitz’ and finally, whether honors this book or not. References Stiglitz, J. E. (2002-2003), Globalization and Its Discontents, New York: W. W. Norton