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Fwd: NYTimes.com Article: A Disaffected Insider Surveys 'Globalization and Its Discontents' by Boris Stremlin 28 June 2002 05:28 UTC |
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Joseph Kahn chides Joseph Stiglitz as a "kiss and tell". It's interesting that he judges the strength of the Russian economy and Russian democracy on the degree to which the occupants of the Kremlin are pro-American. In any event, the Stiglitz book sounds like a decent primer on globalization. \----------------------------------------------------------/ A Disaffected Insider Surveys 'Globalization and Its Discontents' June 23, 2002 By JOSEPH KAHN During the prosperous but politically volatile 1960's, Presidents Kennedy and Johnson summoned a formidable team of diplomatic and military experts. Among them were Dean Rusk, Robert McNamara and McGeorge Bundy. They guided foreign policy at a time when it seemed the Russians might win the cold war. They fought Communism all over the globe and, notoriously, refused to let another domino fall in Vietnam. During the prosperous but economically volatile 1990's, President Clinton formed an inner circle dominated by the nation's finest financial minds. Among them were Robert Rubin, a Wall Street legend; Lawrence Summers, who gained tenure at Harvard at a younger age than anyone before him; and Stanley Fischer, an M.I.T. economist whose students staffed finance ministries worldwide. The three brought free markets to nearly every developing nation. They also committed hundreds of billions of dollars to defend capitalism's advances in Latin America, Asia and Russia. Joseph E. Stiglitz was at least nominally part of that inner circle, as Clinton's chief economic adviser and later chief economist at the World Bank. But he now argues that the way the Clinton team pursued American interests overseas was as flawed as the way ''the best and the brightest'' defended national security in the 1960's. Stiglitz's ''Globalization and Its Discontents'' is more of an economic treatise than a narrative critique, and he does not mention David Halberstam's work. But he paints a similar picture of how rampant arrogance, simplistic nostrums and disdain for foreign political realities doomed globalization. He argues that in the hands of the Washington brain trust, globalization became a neoimperialist force that left hundreds of millions of people worse off in 2000 than they were in 1990. Stiglitz shared a Nobel Prize last year for his work analyzing the imperfections of markets. His main complaint against Rubin and Summers, who served as Treasury secretaries, and against Fischer, the No. 2 official and de facto chief executive of the International Monetary Fund, is that they had too much faith that markets could transform poor countries overnight. He labels these three men market fundamentalists, who fought to maintain financial stability with the same urgency that an earlier generation struggled to contain Communism. Worse, he suggests, they shilled for Wall Street, conflating the interests of the big banks with the financial health of the world. Sensing a historic opportunity to secure capitalism's victory after the fall of the Berlin Wall, the Clinton team demanded wrenching reform for Russia, Eastern Europe, Latin America, Asia and Africa. The Treasury Department and the I.M.F., which follows the preferences of Washington, its largest shareholder, used huge loans to compel governments to sell off companies they controlled. Even some of the least developed nations were instructed to allow competition in their stock, bond and banking businesses immediately. Aid was withheld if governments spent too much money or protected key industries. This formula -- predictably, in Stiglitz's view -- led to financial bubbles and collapses in Mexico in 1994 and in Asia, Russia and Latin America from 1997 to 1999. The Clinton experts compounded the error by linking billions of dollars in emergency aid to even deeper concessions in managing trade, monetary policy, banking and privatization. Nearly everywhere this was tried, Stiglitz says, the changes deepened rather than alleviated recessions. Stiglitz amply illustrates how Treasury and the I.M.F. required nations to sell companies before the time was right. He also makes a good case that the monetary fund was fighting the last war -- the 1970's and 80's battle against hyperinflation -- when it advised developing countries in the 1990's. High interest rates and tight fiscal policies, the standard tools in the fund's medical kit, pleased Wall Street creditors. But slow growth was the problem, not inflation, and high interest rates painfully stifled growth. John Maynard Keynes had something else in mind when his ideas inspired the creation of the I.M.F. and the World Bank after World War II. Keynes envisioned the fund as an ecumenical force for growth, providing capital to help governments raise output when markets faltered. During the Clinton era, according to Stiglitz, the fund became Hooverite, forcing a failing nation to ''beggar'' itself, as he puts it, to meet the financial and monetary objectives of an inflexible economic orthodoxy. The prescriptions had all the science of a medieval bleeding. ''Not for 60 years have respectable economists believed that an economy going into a recession should have a balanced budget,'' he writes. Much of the book is devoted to case studies that support this thesis. Malaysia is cited because it rebounded quickly after the Asian crisis despite -- or perhaps because of -- its rebuff to the I.M.F. China has never accepted aid from the fund, but its performance has been miraculous compared with that of Russia, one of the biggest I.M.F. clients. Russia produced two-thirds more than China did in 1990; China produced two-thirds more than Russia did in 2000. These failures have been debated for the past several years and form the intellectual cornerstones of the antiglobalization movement. But Stiglitz packs more wallop both because he argues his case trenchantly and because he writes as a disaffected insider. Yet for the same reason, his book seems overly tendentious, even vengeful. He refers to the ''faceless'' international bureaucrats of the I.M.F., but surely they were not faceless to him after his years at the World Bank, its sister institution. He can seem sanctimonious. ''Unfortunately, my forecasts turned out to be all too right'' is a typical conceit. Stiglitz inexplicably chooses not to detail his own conflicts with Rubin, Summers and Fischer. He does not reveal the circumstances of his resignation from the World Bank in 1999, even though bank officials have said that it came at the behest of Summers. He provides a handful of anecdotes about his involvement in major decisions, but they are full of innuendo. Stiglitz claims that Rubin and Summers hatched the most important policies in secret, leaving not only him out of the loop but also the president. Recounting debates about aid to Russia, he writes, ''Treasury viewed the issue as too important to let the president have an important role.'' But he leaves the charge dangling. Politics, unlike economics, has no invisible hands. Yet the book makes no effort to sort out the political and diplomatic machinations that shaped policy. Stiglitz ignores the fact that the right wing dislikes the I.M.F. as much as the left wing does, and that conservatives saw the Clinton-led fund as intervening too much, not too little, in the market. Russia's economy performed dismally during the Clinton era. But growth was not the only goal. Did Russia policy create ''the worst of all possible worlds,'' as Stiglitz claims? One can imagine something worse than a relatively democratic nation -- run by the moderately pro-American Vladimir Putin -- now growing again after a painful transition. Stiglitz also makes a superficial case for an imperialist plot. Yes, the Clinton administration pressured countries to attend to the financial markets. But the administration bowed to the bond market at home, too, where fiscal discipline helped feed the 1990's boom. Stiglitz acknowledges that private capital flows to the developing world grew sevenfold in seven years during the 90's, while foreign aid stagnated. That American and many foreign leaders wanted to eliminate barriers to those flows -- and did so too quickly in some cases -- is not as unfathomable as he maintains. While parts of this book are disappointingly shallow, Stiglitz's critique of the market-driven 90's still resonates, especially when the business pages are full of stories about white-collar crime and the stock market seems stuck in a perpetual rut. Even the United States cannot blithely assume that financial markets will work on autopilot. It is testament to the salience of Stiglitz's arguments that many economists -- even some Bush administration officials -- now embrace his view that economic change in the developing world must evolve more with local conditions, not on Washington's calendar. Without a thorough makeover, globalization could easily become a quagmire. Joseph Kahn writes about international economics for The Times. http://www.nytimes.com/2002/06/23/books/review/23KAHNLT.html?ex=102624 0932&ei=1&en=33cebbe493e76fc1 HOW TO ADVERTISE --------------------------------- For information on advertising in e-mail newsletters or other creative advertising opportunities with The New York Times on the Web, please contact onlinesales@nytimes.com or visit our online media kit at http://www.nytimes.com/adinfo For general information about NYTimes.com, write to help@nytimes.com. Copyright 2002 The New York Times Company
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