No tradeoffs here

Prof. Stiglitz broadly makes the following points in this book. First, globalisation has yielded positive results over a long period for many economies. According to him, for East Asia "[g]lobalization""in the form of export-led growth""helped pull the East Asian countries out of poverty. Globalization made this possible, providing access to international markets as well as access to technology that enabled vast increases in productivity. These countries simultaneously achieved growth and stability" . Second, one cannot pull back from globalisation and should not do so. Stiglitz points to the beginning of some protectionist rumblings in Europe and the US but says quite explicitly that we are now far too integrated a global economic system for us to revert back to isolationist and protectionist regimes. Third, Stiglitz shows that the consequences of globalisation have not always been positive and the world has seen increasing inequalities and divergence in living standards, which have been quite contrary to accepted wisdom that growth in an integrated system would tend towards convergence. Moreover, some parts have seen immiserisation, and worsening of human development indicators, which should simply be unacceptable in any economic regime. Fourth, he warns that if these diverging tendencies and inability to ameliorate the worst aspects of human deprivation are not addressed by urgent and worldwide action, there could be a backlash against globalisation""unfortunate, but plausible. So he finally suggests an entire gamut of reforms that should improve global governance by making it more democratic and accountable to those who are most affected.

Thus, his important contribution is the set of clear and comprehensive recommendations on how to make globalisation work better for the deprived, disadvantaged and disempowered. Stiglitz has done us all a great service by emphasising that globalisation does not necessarily imply rising inequalities, growing deprivation and disempowerment of the people and ecological and cultural degradation. His recommendations are far to comprehensive and often quite technical to be discussed here. But let me make three submissions. First, the suggestion that the current US administration would lead the largest economy in the world, with the largest ever accumulation of external debt, to mend its profligate ways and work for the greater good of the greater numbers sounds at least a bit idealistic. But let us all hope that at least a debate is started in the US on the issues raised in this volume. Second, the recommendation for an alternative reserve currency called 'bancor' is perhaps a bit ahead of its time. But it has a serious implication for Asia, which should, according to many, now try to move in the direction of a single reserve currency as is reflected in the work on the Asian Currency Unit started in the ADB. Third, the recommendations for a more just, accountable and democratic global governance do not go on to show how this change of institutions and mindset will be brought about. Could a stronger emphasis and more detailed treatment of the ethical framework required to make this change be a useful addition?

But the one small weakness, if I dare point it out, is that Prof. Stiglitz almost makes the present global economic governance institutions, notably the Bretton Wood Twins and the WTO, synonymous with globalisation. And while acknowledging Asia's successful experience with global integration, he could be read by biased readers as one who is somewhat opposed to liberalisation and for a better and more effective role for properly regulated markets. This is specially unfortunate in the Indian context where we are still struggling to overcome our inherent statist bias and a longing for a government-led quick fix to end all poverty and produce the Ram Rajya by the proverbial waving of the public sector magic wand. In India, the real break in growth and poverty reduction came along with a greater opening of the economy and the services sector boom is almost entirely on account of taking advantage of global opportunities. I hope nobody in India gets the wrong message, which clearly Professor Stiglitz does not want to give, that greater integration with global flows, of course, on our own terms and according to our own priorities and capabilities, has been and will remain the more effective means to sustain rapid and inclusive growth for India.

We in Asia will simply have to continue with our self-designed efforts to make globalisation work for us with the government and the market working in tandem to make this happen. By emphasising the Asian success in his present volume Prof. Stiglitz correctly brings out that there is no trade off between free markets and good governance. In fact the two complement each other.

The author is Director and Chief Executive, ICRIER. The views are personal

Making Globalization Work

Joseph E Stiglitz
Allen Lane
Price: Rs 595; Pages: 384