Notes on Globalization: T. Friedman vs. Palast vs. Stiglitz

Notes on Globalization

Globalization: Globalization has several major aspects, each having to do with the constancy (or frequency) and ease of interaction among all the regions of the globe, and the influence and consequences (positive and negative) of this interaction. The major aspects of globalization are:
-international communication and travel
-multinational corporations
-economic globalization (EG): robust interrelations between national economies
-mainly brought about by (i) the International Monetary Fund (IMF), the World Trade Organization (WTO), and the World Bank
-You should know the basic facts about these three organizations (i.e., a little about their history and major functions). See, especially, (i) Stiglitz=s paper, pp. 10 (bottom paragraph) - 16 (up to the 1st full paragraph); (ii) Prof. Page=s notes, Nov. 19, pp. 2-3.

The three authors we read on the topic of EG: basic, preliminary points to know:
-defenders (to varying degrees) of EG:
-Thomas Friedman
-Joseph Stiglitz (although he thinks EG needs to be radically reshaped)
-opponent of EG
-Greg Palast:

Main points of each of the authors:
-Thomas Friedman: Extreme free market capitalism is now the only viable economic system for obtaining a high standard of living. For:
-While other systems may be better at distributing income more equitably, no other system is sufficiently efficient at generating income. But since the former is useless without the latter (you need to have income, and lots of it, before you can distribute it equitably to all of your citizens) no other economic system is viable, as has now been demonstrated historically (with the collapse of other countries that utilized them).
-But once a country realizes the force of this point, and joins other countries in the global free market, this amounts to Aputting on@ Athe Golden Straightjacket@ (GS).
-Putting on the Golden Straightjacket consists in a country doing the following things (which amount to a minimization of government involvement in one=s market):

-(1) making the private sector the primary engine of economic growth, (2) maintaining a low rate of inflation and price stability, (3) shrinking the size of its state bureaucracy, (4) maintaining as close a balanced budget as possible, (5) eliminating and lowering tariffs on imported goods, (6) removing restrictions on foreign investment (7) removing quotas and domestic monopolies, (8) increasing exports, (9) privatizing state-owned industries and utilities, deregulating capital markets, (10) making its currency convertible, (11) opening its industries, stock, and bond markets to direct foreign ownership and investment, (12) deregulating its economy to promote optimal competition, (13) eliminate government corruption, subsidies and kickbacks as much as possible, (14) opening its banking and telecommunications systems to private ownership, and (15) allowing its citizens to choose from an array of competing pension options and foreign-run pension and mutual funds. (p. 87, near verbatim quote)
-The benefits of wearing the GS: increases the average household income, and standards of living generally.
-The costs of wearing the GS: (a) It hurts many people and nations (at least in the short run), and (b) it strips much of the power of governments: politicians have to make decisions that don=t conflict with the smooth operation of the global market. For if they do, then (e.g.,) international credit rating agencies will warn multinational corporations and investors of this, and the latter, foreseeing the negative financial impact of such political decisions, will withdraw from the country.
-And this will, of course, have devastating social and economic consequences for the country.

-Joseph Stiglitz: Two main points:
-The negative point: the WTO, IMF and World Bank are, currently, greatly harming other countries, due in large measure to a number of factors
-Faulty ideology (see esp.: p. 220, 3rd full paragraph-221, 1st full paragraph; p. 222, top): roughly, the extreme free market view: an unrestricted market will solve all the problems; and even if it can=t, nothing else can.
-counter-evidence to the ideology:
-countries that are worse off after IMF, World Bank intervention (p. 209)
-countries that are better off, even though they refused to follow the extreme free market view (e.g., the Far East) (p. 221).
-The people of the Aaided@ countries are not well-represented (see esp. pp. 40-43).
-Quote 1: A But the IMF is not particularly interested in hearing the thoughts of its Aclient countries@ on such topics as development strategy or fiscal austerity. All to often, the Fund=s approach to developing countries has had the feel of a colonial ruler.@ (p. 40)
-Quote 2: AThe message conveyed was all too often clear: in the best of cases there was a member of an elite B a minister of finance or the head of a central bank B with whom the Fund might have a meaningful dialogue. Outside of this circle, there was little point in even trying to talk.@ (p. 41)
-catering to the interests of multinational organizations (see esp. pp. 206, bottom paragraph B 1st half of 208)


-The positive point: Although the WTO, IMF and World Bank are, currently, greatly harming other countries (due in large measure to their catering to the interests of multinational organizations), these organizations are capable of great good in helping other countries, if GE is reshaped in certain ways.
-Quote: AI believe that globalization can be reshaped to realize its potential for good and I believe that the international economic institutions can be reshaped in ways that will help ensure that this is accomplished.@ (p. 215, bottom)
-There is a spectrum of different versions of the market system, ranging from little government intervention to fairly substantial government intervention.
-A number of countries with market economies (e.g., Japan, Sweden, Germany) have much more governmental intervention in their markets than the U.S., and yet:
(i) they lack such problems that plague the U.S. (for the points here and following, see esp. pp. 217-218)
-they have outstanding, universal health coverage
-they have excellent unemployment insurance
-they have superior retirement benefits
(ii) they are thriving economically
(iii) Athey are every bit as successful, even in terms of the innovations associated with the ANew Economy@.@ (p. 219)
-What=s the lesson? Government should play a larger role in EG, to ensure social justice and economic prosperity.
-Quote: AI have advocated a balanced [my emphasis, F.L.] view of the role of government, one which recognizes both the limitations and failures of markets and government, but which sees the two as working together, in partnership, with the precise nature of that partnership differing among countries, depending on their stages of both political and economic development.@ (p. 219-220)

Greg Palast: EG doesn=t/won=t benefit most people. Rather, it benefits corporations, and countries like the U.S. and the rest of the G-7 (Japan, Germany, etc.), and this is no accident. The structural adjustment programs, imposed upon needy countries by the IMF and World Bank (usually by bribing a government official with a huge sum of money), are supposed to help those countries. Instead, they are used as tools to drain the cash and natural resources out of the countries and into multinational corporations and affluent countries.

Palast: the A4 step program@ of Country Assistance Strategies (pp. 50-52) :
4) Privatization, i.e., sell industrial state assets (e.g., utilities). Officials bribed to sell these industries at ridiculously low prices.
5) Capital Market Liberalization: deregulate the markets. Often leads to the money being drained out of the country.
6) Market-Based Pricing: raising the price on staple goods like food, water, and gas. Predictably leads to riots.
7) Poverty Reduction Strategy/ Free Trade: opening the country=s markets to global trade, while reducing tariffs.