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![Joseph Stiglitz]()
Professor Joseph Stiglitz addresses the
media at New York's Columbia University Wednesday, Oct 10,
2001, after winning the Nobel Prize in Economics. Stiglitz
showed how the control of information influences everything
from used car sales to the recent boom and collapse in
high-tech stocks. (AP Photo/Tina Fineberg)
| Regardless of whether a new round of
comprehensive trade negotiations is launched next month at the World
Trade Organization ministerial meeting in Qatar, he says, the United
States and other rich countries should follow Europe's 'everything
but arms' agreement by opening their markets to the least developed
countries (LDCs) ''and say, for the poorest countries, we aren't
going to wait for a round of trade. To show our good faith, we will
commit ourselves to the poorest countries, opening up our markets
immediately.''
''It's not a question of negotiation. The amount that it would
hurt the developed countries is so small,'' he adds. ''It would
provide an opportunity for them (the LDCs) to produce something with
a market.''
As for the International Monetary Fund (IMF), which Stiglitz has
rebuked for its myopic focus on ''old problems'' like inflation, he
proposes a new direction that would return the institution to its
post-World War II mission of addressing real-world problems, such as
the recession that has deepened since the events of Sep. 11.
''It's time for the IMF to worry about the global economic
slowdown and provide the liquidity that would allow for global
expansion,'' Stiglitz says. He urges the IMF to target the
substantial funds it controls towards ''global economic needs'' such
as the ''fight against terrorism, the fight for a better global
environment, the fight for a more equal world that would reduce the
disparities between the haves and the have-nots.''
Stiglitz's advice and analysis will receive more attention now
that he, along with U.S. economists George Akerlof and Michael
Spence, has won the 2001 Nobel Prize for economics. The award,
announced Oct. 10 in Sweden, was made for their research in the
1970s and 1980s showing that markets, when mixed with imperfect
information, fail to allocate resources fairly. Governments, they
concluded, have an obligation to address this problem by playing a
stronger role in the market system.
''Joseph Stiglitz's many contributions have transformed the way
economists think about the working of markets,'' the Nobel committee
said in making the award. Stiglitz now is a professor of economics
at Columbia University in New York.
During the Clinton administration, he served as chairman of the
Council of Economic Advisers and was later appointed chief economist
of the World Bank. There, he earned the wrath of then Treasury
Secretary Larry Summers, the administration's chief proponent of the
IMF, by publicly criticizing the fund for bailing out rich investors
and driving Asia into a depression during the financial crisis of
1997 and 1998. The Bank fired him, reportedly on Summers's orders,
in 2000.
Stiglitz explains the relationship between his theories and his
analysis of the Asia crisis thus: The crisis was sparked when banks
refused to roll over loans in 1997 to South Korea and Indonesia.
''That was a financial market imperfection caused by information,''
he says. ''So the credit markets were not working well. The
economics of information provided an explanation for why that was
the case.''
Asked what he would say to Summers and IMF and World Bank
officials who disliked his critique of the so-called ''Washington
consensus'' on market liberalization, Stiglitz chuckles at ''the
irony'' of the situation.
''In the 1970s and 1980s, the period for which I got the prize,
there was an increasing recognition of the problems of the market
fundamentalist model,'' he says. ''The Washington consensus, which
was based on market fundamentalist ideas, lived on as an
institutional position and became solidified . just when academia
was saying these ideas do not provide a good description of the
economy.''
Stiglitz says the George W. Bush administration has recognized
that the IMF bailout policies did not work and were, in effect,
''corporate welfare'' for investors funded ''by taxpayers not in the
United States but in Russia, Brazil and other countries, who ended
up paying the bills (for) the people doing the bad lending.''
But recent actions by the Bush administration, he adds,
underscore that ''special interests do have a lot of influence'' in
Washington. Specifically, he criticizes the administration's
decision earlier this year to investigate whether imports have
injured the U.S. domestic steel industry, an action that is likely
to lead to import quotas on foreign steel.
''You can't help but raise questions when someone says 'I believe
in a market economy' and then announces he wants to set up a global
steel cartel,'' he says.
Stiglitz also is sharply critical of the United States and Europe
for subsidizing agriculture and refusing to liberalize trade in
certain industries, such as ocean shipping.
During the next trade round, he says, ''what I would like to see
is redressing some of the imbalances of the past and going forward
with far more sensitivity to the needs and concerns of the
developing countries.''
Agriculture is one area where developing countries hold a
comparative advantage ''but they can't compete into markets where
there are these huge subsidies in the United States and Europe.''
In the area of services, he notes that wealthy countries like the
United States have only agreed to open financial services. ''Which
country is the major exporter of financial services? United States.
What services were not opened up? Construction services, maritime
services, services of unskilled labor that are of concern to the
developing world. Those remain closed.''
This is why the issues raised by the anti-globalization movement
are so important, Stiglitz says. He points to the pharmaceutical
industry, which became the target of developing countries and
anti-globalization critics for selling life saving drugs at prices
that ordinary people and the poor could not afford. Agreements
proposed by the U.S. Trade Representative would have supported the
companies' pricing policies, he adds.
''The global outrage was so strong that they (the companies) made
an agreement to make them available,'' he told IPS. ''It was a
global outrage, a civil society movement, that stopped that.''
He says he first became aware of the imperfections of markets
while working as an economist in Kenya in the 1960s.
''The period that I spent in Kenya really provided a lot of
inspiration for the work that I did over the subsequent years,'' he
says. ''You cannot live or spend time in a country like that without
thinking a great deal about unemployment, about how markets don't
work. And it turned out that many of the ideas that I developed in
Kenya, when modified, applied as well to developed countries.''
Copyright © 2001 IPS-Inter Press
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