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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               
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           
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                  
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                   
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              
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