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Book Review


Stiglitz, Joseph E. Globalization and Its Discontents (New York: W. W. Norton, 2003). 288 pp, $15.95 (paper).

     Joseph E. Stiglitz, a professor at Columbia University, was the 2001 Nobel laureate in Economics. He served as Chairman of the Council of Economic Advisors during the Clinton administration, and then served as vice president and chief economist at the World Bank from 1997 to 2000. In this book, he has written a sharp critique of the contemporary trend toward globalization, based on his extensive experience in the study of economics and in international finance and banking. Stiglitz points out the imbalances created by the policies of 'first world' nations (and their bankers) and the pressures those imbalances place on developing countries. Using the economic crises in Asia and Russia during the 1990's as his primary case studies, Stiglitz carefully describes the intentional actions of bankers and policy-makers that led to the collapse of those nations' economies. He then presents a well-reasoned list of reforms that he proposes for the international financial system and for the World Bank in particular. Globalization and Its Discontents is an important and timely study of the global economy in the 21st century that should be required reading for students and scholars of world history alike. 1
     In the first three chapters of Globalization and Its Discontents, Stiglitz describes the developments of international finance institutions such as the World Bank, the International Monetary Fund, and the World Trade Organization. Stiglitz stresses that he is not opposed to globalization per se. Indeed, he notes that "Globalization itself is neither good nor bad. It has the power to do enormous good." (20) However, he argues that its track record is one of limited success. Stiglitz is critical of the power given to finance ministers and central bank presidents who, loyal to their own banking sectors, place policy goals ahead of the needs of people in developing economies. He argues that "a world government, accountable to the people of every country" is needed "to oversee the globalization process" and to limit the power of financial institutions over the global economy. (21-22) Stiglitz is also highly critical of the secrecy and lack of openness at places such as the World Bank and IMF. As he notes, "Today, in spite of the repeated discussions of transparency, the IMF still does not formally recognize the citizen's basic 'right to know': there is no Freedom of Information Act to which an American, or a citizen of any other country, can appeal." (52) 2
     Chapters 4, 5, and 6 present detailed case studies of the economic crises in Asia and Russia that roiled global markets in the 1990's. Stiglitz describes this period as "the greatest economic crisis since the Great Depression—one that would spread from Asia to Russia and Latin America and threaten the entire world." (89) He argues that, "in retrospect, it became clear that the IMF policies not only exacerbated the downturns but were partially responsible for the onset." (89) In both situations, Stiglitz places the blame on policy-makers' desire to force a political policy into place through economic means. In Asia, this meant enforcing a strict laissez-faire attitude towards the needy. In Stiglitz's view, "the IMF often talked as if what the economy needed was a good purgative. Take the pain; the deeper the pain, the stronger the subsequent growth." (122) In the case of Russia, he argues that IMF policy was controlled by a desire to bolster the administration of Boris Yeltsin. As Yeltsin's problems, and those of the Russian economy, mounted, he describes reactions within the IMF and the U.S. Treasury as "not unlike those of officials earlier inside the U.S. government as the failures of the Vietnam War became clearer: to ignore the facts, to deny the reality, to suppress the discussion, to throw more and more good money after bad." (168) 3
     The final three chapters of the book contain Stiglitz's proposals for making reforms to the system to prevent, or at least minimize, future economic crises. Chief among these reforms are the need for better governance of international financial institutions and greater openness and transparency in their decision-making. Stiglitz also calls for improved regulation of banking and finance sectors and increased attention to safety nets for the poor. He also advocates additional economic assistance to developing nations and the forgiveness of the huge debt burdens that restrain those nations' economies. He argues that a more balanced trade policy is also needed to help reduce economic inequality among world nations. 4
     Globalization and Its Discontents is a powerful book that sets out a clear challenge to the global financial establishment. As Stiglitz describes in the afterword to the paperback edition, it has been received with harsh criticism from many within the IMF and multinational banking hierarchy. Still, even if one is not inclined to agree with his interpretations or his economic views, it is difficult to challenge his description of the events in question. His careful narrative, clear explanations, and extensive citations make for a powerful argument. Furthermore, his essential thesis, ie. that reforms are needed within the IMF and the financial establishment, seems to be one that most students of the global economy would be willing to accept. I would not hesitate to include Globalization and Its Discontents as a reading selection for any number of courses. While some details are overly technical at times, the overall message of the book is clear and easy to understand even for those who are intimidated by economic jargon and theories. It is appropriate not only for a course that focuses on economic themes, but also for a general World History survey. And while this book could certainly stand on its own on a reading list, I would consider placing it alongside two other recent books on the same topic. For a broader and more traditional history of globalization, I would begin with the recent English version of Jürgen Osterhammel and Niels P. Petersson, Globalization: A Short History (2005). For a contrasting view to Stiglitz's, I would include Martin Wolf, Why Globalization Works (2004). 5
      Nobel laureate Joseph E. Stiglitz has presented many thought-provoking issues in Globalization and Its Discontents. It should influence our thinking about the global economy and the relationship between nations in the modern world. His book deserves to be read and his ideas are sure to be the basis for debates on economic policy and theory for years to come. 6
William E. Doody
Indiana Area School District

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