globalization and its discontents, a book review

8/7/2019 Globalization and its discontents, a book review

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Presented by

Malaika Abbas

Sarah Gilani

Khaula MansoorQasim Javed

Umair Cheema


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About the author

Joseph Stiglitz, an economist who

has spent a lifetime serving in

different financial institution

including:

IMF

World Bank

Also a professor at Colombia

University

criticized the two main

international economic institutions


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Relating theories to book

Firstly in 1774 herder described development as of a germ whichevolves and shape itself in order to survive or grow

This can be said for the structure of many MNCs now as they have

transformed and molded themselves according to the needs oftime and conditions

Since they belong to the developed countries their continuity andinterests are taken care of by International financial institutions

Even if it means on the cost of the poor countries

These MNCs have without a doubt has evolved from a germ to avirus


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In this book stiglitz discusses Russia which is a case of the Neo classical

theory As this theory favors Supply sides, Macroeconomic policies,

Privatization of public corporations, Calls for free markets and Dismantling

of public ownership in LDCs

Globalization and introduction of a market economy didnt produce

promising results in Russia

According to the Neo classical theory: The market failure is experienced byexternalities ,state corruption, in efficiency and lack of economic incentives which

were apparent in the case ofRussia

This was seen in Russia when in 1998, East Asia crisis came forward

As the role of the state in dependency theory, is adopting the technologies of

MNCs, which creates few jobs in comparison to population growth as it was here

in Russia


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Criticizes IMF for Inadequate

evaluation IMF implemented what they felt was right rather than what

actually was

IMF policies not only exacerbated the downturns but werepartially responsible for the onset collapse of Thai bhat on

July 1997

The single most important cause of the crisis was excessivelyrapid financial and capital market liberalization


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The book named Conversation with Lee Kuan Yew:

Citizen Singapore-how to build a nation

Displayed his irritation with American diplomaticincompetence

Yew strongly believed that the Us Secretary of State

and Deputy Treasury Secretary devised wrong policies

IMF and World Bank both are governed and dominatedby the wealthier nations and form policies to protect

their interest


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The self interest based policies

Many of heads chosen to head these institutions arechosen secretly and their experience of working in

less developed is not counted

They are product of other financial institutions andafter their tenure they go back to those institutions

That how can they know what is good for thedeveloping country until they dont see forthemselves how they are


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Force their policies on LDCs

When the fund entered East Asia it forced countries to raiseinterest rates to astronomical levels

The high interest rates increased the number of firms in

distress and thereby increased the number of banks facingnon performing loans

The higher rates made the recession worse and actuallydrove capital out of the country

The damage was done in East Asia because many firmswere highly leveraged many were forced into bankruptcy


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In Indonesia an estimated 75 percent of allbusinesses were put into distress

Thailand close to 50 percent of bank loansbecame nonperforming

It is far easier to destroy a firm than to create a

new one.

The mistakes were costly and slow to reverse.


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Unfair trade policies and hypocrisies

US itself doesnt implement these techniques of economic stabilization ratherpreaches these to others which includes the trade liberalization and privatization

US supported fair trade which appeared to be unfair for the developing countriescommitting themselves to a development round

Agreement was made that the rich countries would simply open their barriers forthe poor countries without any restrictions

Migration was liberalized as to facilitate the UN skilled labor that can travel wherethey are needed

This would help in global economic efficiency than capital market liberalization

In 1994, Aluminum prices fell


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Do International economic institutions have a monopoly over

RIGHT advice?

Can't other nations or institutions come up with a sound policy

The strategies of radical reform in Russia and other Europeans countriesfailed

The government of the Czech Republic initially got high marks from theIMF but the GDP rate of the year 1990s was less as compare to 1989

Poland and China employed alternative strategies Poland was the mostsuccessful of the European countries and China had experience a fastgrowth rate

Poland started with shock therapy to bring down hyperinflation tomoderate level


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The Poland deputy premier and finance ministerclaimed that his country gain this level of success dueto the rejection of the Washington consensus

Similarly chinas success over the past decade stands inmarked contrast to Russias failure

China grew at an average rate of over 10 % in the1990s

Chinas transition has entailed the largest reduction inpoverty in contrast to Russias transition.


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Is globalization all bad

Globalization today is not working much for world's poor, environmentand stability of global economy

Not all countries have been damaged by globalization china, Vietnam andfew Eastern European resisted successfully

East Asia had gained benefits in terms of trade, access to markets, healthand technology

The problem is not globalization, it lies with how it has been managed

IMF, World Bank and WTO set the rules of game

They served the interests of industrial countries and developed World


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Reshaping the financial institutions:

Interests and ideology

The Need for International Public Institutions

Governance

Reforming the IMF and the global financial system

Reform Efforts

What is needed?


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Conclusion

Stiglitz claims that privatization in Russia led to

greater rent seeking.

Stiglitz also refers to Trickle Down economics.

Boris Yeltsin created a powerful class of oligarchs and

businessmen.

we had a feeling that his opinion on the both IMF

and world bank were biased.

globalization and its discontents, a book review

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