Saturday, November 25, 2006

Review: Making Globalization Work

I met Josepth Stiglitz when he visited Google on his book tour. His intelligence, grasp of the issues, and obvious concern about important issues like global warming impressed me, and I looked forward to reading the book.

This is an important book, and may very well be the best book I've read all year. It answers several questions:
  1. Why did the IMF and World Bank prescriptions for the Asian crisis fail?
  2. What precipitated Argentina's default of its debts?
  3. Why does the U.S. run persistent trade deficits, no matter what its budget situation is?
  4. Why do Asian countries insist on continually buying American debt despite the fact that the money they spend doing so is better plowed back into their own countries with better returns than U.S. Treasury bonds?
  5. Why do the most successful developing economies have high savings rate? Conventional wisdom says that those countries are best off borrowing money and building out infrastructure with debt.
Stiglitz has several proposals for all the major issues he addresses, including the inequity between rich and poor, the problems of over-fishing and global warming, and what the world can do about it. The proposals are sound, based on solid economics, and plausibly will solve major problems if only they would be implemented. Given that the USA frequently refuses to go along with proposals that promote equity over its narrow economic interest groups, Stiglitz even has proposals as to what the rest of the world can do, independent of the USA, that can ultimately put pressure on the USA to join on important issues such as global warming.

As an investor, I have substantial assets in US companies that will be hurt by many of his proposals. As a humanist and an environmentalist, nothing would make me happier than to see his proposals be implemented. As a cynical person, I'm willing to bet that his ideas will not be implemented --- our pharmaceutical lobbies as well as our energy companies are too powerful to overcome, and our democratic process not transparent enough. And I don't expect the general electorate to read this book, understand it, or vote on issues other than Gay Marriage or the National Pledge. If it were, the last 2 presidential elections wouldn't have been even close.

Nevertheless, for an understanding of how a Nobel-prize winning Economist can apply his intellect and the tools Economics provides to solve major world problems without inventing new bureaucracies, this book is a breath of fresh air. Highly recommended and worth paying full price for if your library has a long wait for this book.

The globalizers of the past twenty years may have thought that the economic doctrines they pushed for through the international institutions would by now have succeeded so well in enhancing the well-being of everyone that all would be forgiven. Perhaps they hoped that even if there were growing inequality, so long as there was money trickling down the poor could be placated. Even if a few were denied access to lifesaving medicines, if overall enough people saw their health improve they might be satisfied. As we have seen, for too many the promised benefits did not materialize...
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