Making Globalization Work , By Joseph E. Stiglitz.
Published by W.W. Norton & Company, 2006, 384 pp.

Author Joseph Stiglitz recognizes the potential benefits of well-managed globalization in his latest book.

In his latest book, Making Globalization Work, Joseph Stiglitz - Nobel Prize winner and former World Bank chief economist - updates his previous work, Globalization and Its Discontents where he assessed the emerging problems of globalization as they were in 2002 and focused on the failings of international institutions like the World Bank and International Monetary Fund. Revisiting the theme four years later, he looks at how the world has changed and what can and needs to be done to mitigate the many problems associated with globalization. Stiglitz's viewpoint is shaped as much by morality as economics as he lays out the current issues and offers sound recommendations in an accessible format.

Stiglitz marvels at the speed with which we have become economically interdependent over the last four years through the increased flow of goods, services, capital and labor. He believes that the benefits of this economic integration are enormous for both the developing and developed world - if globalization could only live up to its potential.

For Stiglitz, there are several reasons why the potential of globalization remains unmet. First and foremost, the "rules of the game" are unfair, benefiting only a few at the expense of many. These rules are determined primarily by rich developed nations. Therefore, the management of globalization as it has occurred thus far has been in the hands of the developed world and generally for their benefit.

The management of globalization as it has occurred thus far has been in the hands of the developed world and generally for their benefit.

Second, even with developed nations tipping the tables in their favor, economic prosperity has not benefited them entirely - there are plenty of "losers" in the rich nations, too. For example, while average disposable income in the United States went up nearly 11 percent between 1999 and 2004, the average family's purchasing power actually decreased by 3 percent. As Stiglitz says, "If economic growth is not shared throughout society, then development has failed."

Third, more often than not, globalization encourages material values over other values. Stiglitz addresses this concern in his discussion on multinational corporations. He points out that it is not realistic to blame corporations exclusively for the spread of endemic materialism. However, he does attribute at least some the world's materialism to these corporations and their ubiquitous advertising. He also blames the misalignment of private incentives (high profits) to social costs and benefits (the state of the environment, the health of individuals, etc.) inherent in the multinational corporation structure.

Finally, Stiglitz addresses the relationship of globalization and "Americanization" focusing on the proliferation of the American economic system. The United States is arguably the most economically powerful nation and has encouraged the propagation of the market economy model throughout the world. As a result, most world markets have a decidedly American flavor. Many people in foreign lands feel that this system is pushed on them whether they want it or not - and this leads to resentment against the United States and globalization.

How Do We Make Globalization Work?

There are no easy solutions but Stiglitz is optimistic that change, even just a little bit, is possible because "economics is not zero-sum." He claims that globalization can be directed to benefit both the developed and the developing world. All that is needed is a change in mindset, which he hopes his book will generate. Throughout the book, he offers ideas to engender this necessary change and gives examples of where it is currently happening. He cites China as a positive example and how economic growth there has been managed to be slow and strategic, consequently boosting millions out of poverty. Yet Stiglitz remains pragmatic, recognizing that change will meet strong opposition from special interests and cannot happen overnight.

Globalization can be directed to benefit both the developed and the developing world; all that is needed is a change in mindset.

At the beginning of his book, Stiglitz lists six areas that the international community has identified as needing more attention: eradication of poverty, foreign assistance and debt relief, fair trade, trade and market liberalization, the environment, and governance of international public institutions. Each subsequent chapter then deals with one or two of these aspects - presenting case studies, spelling out challenges and providing detailed recommendations of how to make that particular aspect of globalization work and why.

Among Stiglitz recommendations are creating a global reserve system or motivating multinational corporations to align their private incentives with social benefits. Stiglitz manages to present these arguments clearly and convincingly despite their initially overly optimistic and outlandish feel. He challenges the reader to look beyond numbers and remember the big picture. "Success," he says, "means sustainable, equitable, and democratic development that focuses on increasing living standards." He criticizes past dependence on GDP (gross domestic product) as the standard measure of economic success. While GDP is a quick and easy measure of economic growth, other factors that are not so easily measured, such as health, education and quality of life, must also be considered.

Our Choices

Stiglitz expresses concern over current management patterns and offers options for the future. He feels that there is nothing wrong with globalization, per se, only the way it is and has been shaped. Once changes are made to the ways globalization is managed, then we can move forward.

First and foremost Stiglitz fears that the easiest thing for developed nations to do is sit back and do nothing - letting the market run the show. Another concern is allowing developed nations to use their economic power to set the rules of the game permanently in their favor. This realpolitik view entails developed nations capitalizing on their economic power by enacting protectionist laws while doing whatever possible to gain access to foreign markets and paying "lip service to fair trade." In Stiglitz's view, this approach is not simply morally unjust, but economically and politically untenable. To use his example, U.S. citizens may not care about the hypocrisy of the United States government supporting fair trade and maintaining agricultural subsidies for its farmers, but the citizens of countries like Brazil and Argentina do care and have shown they will make their voices heard in protest.

There is nothing wrong with globalization, per se, only the way it is and has been shaped. Once changes are made to the ways globalization is managed, then we can move forward.

For Stiglitz, the only viable approach to managing globalization is coping with and reshaping it. However, "coping" means that nations like the United States will have to deal with some painful realities. For instance, globalization mostly hurts the people at the bottom, even in industrial countries. Therefore, it is necessary to enact policies that will alleviate the economic pressure on poorer people, like lower taxes and a more supportive social safety net.

"Democratic Deficit"

Stiglitz believes that what is ultimately wrong with globalization is that the rules of the game have mostly been determined by developed nations and their special interests. This has led to unfair rules, tilted in the favor of the most powerful nations at the cost of the well-being of developing nations, as well as poorer people in developed nations. Stiglitz calls this a "democratic deficit" and blames the institutions that set the rules - the International Monetary Fund, the World Bank, the United Nations, etc.

Stiglitz points fingers at the policies of the countries that run the aforementioned institutions, too, and at the voters in those countries who fail to recognize the global impact of their votes. He says, "we may live locally, but increasingly we will have to think globally, think of ourselves as part of a global community." This means we have to be respectful not only of our immediate neighbors but those on the other side of the planet, distant though they may seem.

Greater economic, social, political and environmental interdependence means that "events in one part of the world have ripple effects elsewhere, as ideas and knowledge, goods and services, and capital and people move more easily across borders." Disease, greenhouse gas emissions, terrorism - these are all global issues that have to be dealt with on a global level and Stiglitz believes they should be included on local agendas to best affect change.

The United States needs to be the nation leading the charge to make globalization fairer. As one of the greatest beneficiaries of globalization, it stands in the interests, economic and political, of the United States to make globalization work.

Stiglitz saves most of his criticism for the United States, the nation he finds most responsible for making globalization what it is today. Stiglitz argues that the United States gets away with doing what it wants whenever it wants, especially when its security is at risk. He warns that this will not be the case forever, and that the time will come when the United States cannot do whatever it wishes. Stiglitz explains, "the forces of global economic, social, political, and environmental change are more powerful in the long run than the capacity of even the mightiest nation to shape the world according to its interests or perspective."

Stiglitz also makes the case for the United States to be the nation leading the charge to make globalization fairer. Referring to the Declaration of Independence, Stiglitz notes that it reads "all men are created equal," not just Americans. As one of the greatest beneficiaries of globalization, it stands in the interests, economic and political, of the United States to make globalization work.

Making globalization work comes down to making globalization fair. For Stiglitz, this means tying social justice to international policy by carrying out contentious reforms and thinking more carefully about the international repercussions of local decisions. Stiglitz believes we have waited too long already and that the time for change is now.




Book review contributed by Sarah A. Hahn, a former Rotary World Peace Fellow who currently works for the Africa Grantmakers' Affinity Group in New York City. She is a frequent contributor to Global Envision.

To read another Global Envision article about globalization, see Is Globalization Passé?



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