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August 1, 2007

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Change Urgently Needed by Developing Countries in Globalization Trends

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Joseph Stiglitz

In a wide-ranging and devastating attack, Nobel Prize winner Joseph Stiglitz said the situation of billions of people in the world's developing countries had been persistently undermined by rich nations, international organizations such as the World Bank and misguided globalization policies.

"Matters have become worse in recent years," Stiglitz said Tuesday, July 31 at a seminar in Tokyo, but added that "Change is possible. Indeed, change is inevitable" and outlined a series of globalization reforms which would help rather than hinder developing countries to raise the standard of living of their populations.

Stiglitz, a faculty member at Columbia University, 2001 winner of the Nobel Prize in economics, former chief economist at the World Bank and member of the Clinton Administration, was invited to Tokyo by the Japan International Cooperation Agency (JICA). After meeting President Sadako Ogata, he presented a keynote speech, 'Making Globalization Work for Developing Countries' at a follow-up seminar.

His presentation covered many of the challenges faced by JICA in its own efforts to provide technical assistance to developing countries. When an ongoing reorganization of the agency is completed in 2008 through a merger with the Japan Bank for International Cooperation (JBIC), President Ogata has announced her intentions to greatly expand research into such areas as the impact of globalization on poor nations.

Professor Stiglitz outlined his well known criticisms of the policies of rich nations, the World Bank and International Monetary Fund (IMF) and many aspects of globalization in his speech.

"Economic globalization has outpaced political globalization," he told his audience and "globalization, as it has been managed, has undermined democracy." Developing countries had born the brunt of this failure and had not enjoyed many of the benefits developed nations had reaped from the transformation.

It has been an era marked by unfair trade treaties; distorted agricultural policies; the dominance of special interests; global warming, where the major source of pollution came from the industrialized 'north' but the major consequences were felt in the developing 'south'; and a widening 'knowledge gap' between rich and poor nations.

World Bank and IMF policies have often been misguided, he said, and as an illustration he noted that using these imposed guidelines growth in Latin America in the 1990s had been only half of what it was in earlier decades.

The United States at the end of the Cold War had also missed an opportunity for global leadership and had instead used its unchallenged position "to advance parochial commercial interests often in a unilateralist manner."

He acknowledged a widespread opposition to globalization but said this was "not so much against globalization itself, but to the way it has been managed with economic values dominating all other values."

Change is inevitable, Stiglitz said, but "the question is only whether we make the changes before a crisis occurs."

He outlined a series of proposed reforms. Markets in rich countries must be opened up to developing states, tariffs against their products slashed, labor markets liberalized, abusive bank secrecy ended, foreign assistance increased and the international financial reserve system reformed.

An International Competition Authority should oversee global competition, an International Commercial Court must enforce legal environmental obligations and on global warming, the professor said developing countries should be compensated for providing environmental services and for environmental damage suffered and that ecological taxes should be imposed "to tax bad things rather than taxing good things."

In response to a question, the visiting professor emphasized the importance of strengthening the structures of both individual states and regional mechanisms to meet the challenge of globalization and also underlined the need for 'individual protection,' or 'human security.'

That is a concept that JICA has increasingly introduced into its projects and underscores not only the importance of state infrastructures but also the need to directly engage individuals and local communities in such areas as education, health and work policies to ensure both their security and higher standards of living.

"Japan, as the second largest economy in the world, has a special responsibility and a special opportunity for making globalization work," Professor Stiglitz concluded because it understood the development process, the need for global peaceful cooperation and is already deeply involved in helping to reduce poverty in developing countries.

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