Reviews of Globalization and its Discontents.
Great Examples, Poor Analysis July, 2003:Reviewer: Doug Mackenzie
The author makes several specific claims. First, free market ideology at the IMF resulted in privatisation and
deregulation in Asia and Eastern Europe. Second, free market ideology assumes perfect information and perfect
competition. Third, markets lack perfection and fail. Fourth, critics of government claim that government policy
favors special interests, but this it does not. On page 13 Stiglitz derides the notion that "special interests use
tariffs and other protectionist measures to increase their incomes at the expense of others". He claims that those
who criticize government for inherent bias towards special interests are ideologues. The rest of his book consists
almost entirely of examples of special interests benefiting at the expense of others, thus vindicating these
supposed ideologues.
Stiglitz describes how bailouts benefited well-connected financial interests in the US, Asia, and Russia. He
describes, in some detail, how special interests made off with fortunes, while ordinary people shouldered the
burden of these subsidies. This supports the case for government failure, though the author fails to realize this.
Stiglitz criticizes the IMF for assuming that it could outguess the market with its' interventions and demands for
restructuring. He points to examples of in Russia of private firms being squeezed while cronies of Yeltsin made
off with millions. On page 118 Stiglitz complains that the IMF interfered with "nuts-and-bolts decisions: what
the firm should produce, how it should produce its' output, and how it should be organized". On page 128 he
complains that the IMF forced bank restructuring on Indonesia. These examples of intervention invalidate his
claim that the IMF forced privatization and instead show that it pursued interventionist policies.
The evidence in this book refutes its' arguments. Rather than being driven by 'free market fervor' the IMF
intervened in markets routinely. Rather than serving the general public with this intervention, the IMF catered to
special interests- a tendency that Stiglitz explicitly ridiculed. Rather than believing in Darwinian competition, the
IMF delivered huge bailouts to special interests. The IMF promoted free markets every bit as much as the Pope
promoted Atheism.
On page 74 Stiglitz claims that markets require perfect competition and perfect information to work. Short of
these ideal conditions, markets fail (to achieve perfection) and government can, in principle, improve resource
allocation. A perfect government can improve upon imperfect markets. But the evidence of this book shows that
the worst failures come from huge governmental agencies, like the IMF and US Treasury- the primary culprits in
this book. Stiglitz is fond of making false comparisons between imperfect markets and ideal notions of
government, but this approach is fallacious.
Stiglitz explicitly denies that rapid privatization can work, but ignores instances like Hong Kong and West
Germany, where rapid and extreme privatization yielded 'economic miracles'. He speaks fondly of a larger and
more open global governing body. But, Stiglitz shows that current global governing agencies cater to special
interests and gives the reader no reason to expect anything different from a larger agency of this kind. If
anything, a larger and more powerful gobal regulatory agency would be even more corrupt than the IMF.
A must-read in globalization and international finance, June, 2003 Reviewer: from Saudi Arabia
As a consequence of the great advances mankind achieved in the fields of communication and travel;
globalization was not a choice anymore as much as an actual reality. It was not a question of whether to accept
globalization or not, but rather a question of how to channel its forces to serve the benefits of all those that are
involved. Global institutions such as the IMF, the World Bank, and the WTO had to be brought into existence to
regulate the process of globalization. Each institute was given a main directive to pursue, and that for the IMF
was the difficult task of ensuring global economic stability.
Unfortunately, one does not have to be an economist to realize that the IMF failed miserably in its mission. The
East Asian crisis of the late 1990's, the so-far failing conversion of Russia from communism to capitalism, and
more recently, the Argentina crisis are exactly what the IMF should have prevented or, at least, significantly
minimized.
However, The author tells us in this book that these failures did not happen in despite of the IMF, but ,
shockingly, because of the IMF. And in the cases that the IMF was not the cause of the failure, it caused that
failure to bloat and metastasize.
What makes this book more remarkable is that the author, Joseph E. Stiglitz, is not someone to take lightly, but a
Nobel prize co-winner in economics who served on the Council of Economic Advisers under president Bill
Clinton and later became the chief economist and senior vice president at the World Bank.
Stiglitz begins the book by explaining the specific roles of the global institutions and especially the role of the
IMF. From there he describes how many developing (and few developed) nations were let down by the promises
of globalization and its institutions. But, he argues, these failures are not caused by the process of globalization
itself, but are products of the policies of the IMF.
You would wonder though, how could the IMF with its access to profound expertise and its possession of vast
wealth fail so badly in its job. Stiglitz explains that the problem with the IMF is not caused by poor knowledge
or lack of funds. The problem is a fundamental one, which is caused by the fact that the IMF is not accountable
to the people that are directly affected by its policies, bur rather to the US treasury who in turn is under immense
pressure from the US investors. This unfair accountability lead the IMF to unconsciously replace economic
science by an ideology that primarily served the interests of the US investors. This ideology is all about markets
liberalization, which became an end to the IMF rather than a mean to accomplish economic stability. This
change of goal, accompanied with high levels of secrecy, was the cause behind the IMF's failure.
After explaining this the author delves into the cases of the Asian crisis and the failed Russian transformation.
He tells in painstaking details how these crises evolved and what role the IMF played at every stage. He gives
interesting insights and intelligent suggestions to more sensible alternatives that the affected countries could
have pursued. He also gives account of other countries that did not comply with IMF policies and succeeded
because of that. Stiglitz is a very intelligent and knowledgeable economist, so you can be assured that you will
have access to invaluable economic analysis of those affairs. His writing style is wonderful as well, so you don't
have to worry about incoherence or experiencing boredom going through the book.
Finally, he provides more analysis into what causes the IMF to fail the way it does and extends suggestions to
overcome its shortcomings and those of other global institutions as well.
This book is a treasure of economic science and analysis, and of economic history as well. It received a great
amount of criticism mainly because it accused many influential bodies and persons of misplacing their priorities.
This is a dangerous accusation since it makes the accused blamable for disasters that have affected billions of
people and still do until this day.
In my opinion, the fact that Stiglitz was discharged from the World Bank after voicing his views in a World
Bank report only proves his integrity and his genius. Some critics accused him of bitterness and are saying that it
is the cause of him writing this book. But even if so, his bitterness is over a good cause and he has the
knowledge and the experience to defend it better than anyone else.
This is a very valuable and interesting book. If you are interested in globalization and international finance then
this is definitely a must-read.