Published on Tuesday, October 16, 2001 by the Inter Press Service

Nobel Laureate Encourages Global Justice Movement

by Tim Shorrock

WASHINGTON - Joseph Stiglitz, whose critiques of free market fundamentalism
cost him a senior job at the World Bank in 1999 but won him the Nobel Prize
for economics last week, has succinct advice for the global justice
movement: Keep it up .

''The recognition that the trade agreements of the past have been unfair is
one of the important lessons of the anti-globalization movement,'' he says.
''I think it's something that will stick with us. And if we go forward with
another round of trade talks, it will shape our discussions.''

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 c 2001 IPS-Inter Press Service

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Neil Watkins
World Bank Bonds Boycott
Center for Economic Justice
1830 Connecticut Ave., NW, 4th floor,
Washington, DC 20009
Tel: (202) 299-0020 / Fax: (202) 299-0021
Web: www.worldbankboycott.org

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