An Interview with Joseph Stiglitz, professor at Columbia University and a recipient of the Nobel Memorial Prize in Economic Sciences, published at U.S.News & World Report on September 10, 2006
Not only is the world not flat, but also there is growing inequality around the world, and there is a growing gap between the rich and the poor. The world is becoming less flat as that inequity grows. One way to think about globalization is simply the lowering of transport and communications costs. As we become more interdependent we need to solve together a whole host of problems. If the world is going to do it, we should do so in a way that reflects our fundamental values: democracy, fairness, respect for the individual, concern for the poor.
(By Alex Kingsbury)
Do organizations like the IMF and the World Bank still make sense?
The problem for both is that economic globalization has outpaced political globalization. Governments used to ensure that the capitalism was tempered and that development helped people across society. Now, we are more interdependent and need collective action on a variety of things, yet we have yet to create the political structures that allow that to be done in a democratic way.
Are these institutional problems?
Voting rights at the IMF and the World Bank are not democratically allocated. The Europeans always choose the head of the IMF while the Americans choose the head of the World Bank. Not very democratic, is it? And these organizations can be run by anyone, regardless of their qualifications. So, the people selected for these jobs often don't have much experience dealing with the very problems that these institutions were created to deal with. In the case of the World Bank's appointment of the current president [Paul Wolfowitz]-probably no appointment could have had less support from the rest of the world.
How do we approach issues like Third World debt?
We can start by appreciating how these economic ideas impact people. I went to Moldova-a country whose gross domestic product had gone down 70 percent since the beginning of transition [from Soviet-era communism]. It was supposed to make the country richer, yet three quarters of the country's national budget was being spent on paying foreign debts. It got very emotional when the daughter of one of [our] associates went to the hospital, the hospital ran out of bottled oxygen, and she died. There was no oxygen in the entire country. They couldn't afford a stable supply of goods, in part, because their foreign exchange was being used to service the foreign debt.
An extreme example, but what does this tell us?
Developing countries continue to bear the brunt of interest rate exchange rate risk. When countries borrow in dollars or euros, that's the inevitable consequence.
How can countries rich in resources be so deep in debt?
It's partly corruption; it's partly structural. Every loan has a lender and a borrower. Every bribe has a briber and a bribee. Quite often, the briber in these situations is a foreign company. If you want to maximize profit, then you can save money by bribing a government official to get resources at the lowest possible price.
Is individuality inevitably lost in all of this?
There is increasing recognition by economists that people have to have a sense of identity in order to cooperate and prosper. For example, it makes sense for countries to subsidize their own movie industry. If Morocco subsidizes its film industry, it is probably not going to undermine Hollywood. Yet there is lots of pressure on Morocco to abandon those types of subsidies.
Aren't commercial values subordinate to democratic principles?
If you put to a vote the question of whether or not people dying of AIDS in Botswana should have access to the drugs that could help save their lives, 99 percent would probably support that. But we never had that choice. Yet there was no national debate on that issue. If you look at the problem in detail, the money saved by enforcing patents for the drug companies was supposed to go to conducting research for new diseases. But more is going to advertising and researching lifestyle drugs like hair replacement.
So, is the world flat?
Not only is the world not flat, but also there is growing inequality around the world, and there is a growing gap between the rich and the poor. The world is becoming less flat as that inequity grows. One way to think about globalization is simply the lowering of transport and communications costs. As we become more interdependent we need to solve together a whole host of problems. If the world is going to do it, we should do so in a way that reflects our fundamental values: democracy, fairness, respect for the individual, concern for the poor. Unfortunately, the way the United States has been exercising leadership in the area of globalization has not been consistent with those values.