The World is Not Flat
Joseph Stiglitz won the Nobel Prize in 2001 for his work on the economics of information-how people with differing levels of knowledge interact with one another. The background gave him fascinating insights into the problems of globalization. His book Globalization and Its Discontents is a blistering analysis of how international organizations affect policy and the lives of ordinary people. A former chief economist at the World Bank, Stiglitz has now written Making Globalization Work, about the challenges of globalization and what it will take to make sure everyone gets a fairer shake.
Do organizations like the IMF and the World Bank still make sense?
The problem for both is that economic globalization has outpaced political globalization. Governments used to ensure that the capitalism was tempered and that development helped people across society. Now, we are more interdependent and need collective action on a variety of things, yet we have yet to create the political structures that allow that to be done in a democratic way.
Are these institutional problems?
Voting rights at the IMF and the World Bank are not democratically allocated. The Europeans always choose the head of the IMF while the Americans choose the head of the World Bank. Not very democratic, is it? And these organizations can be run by anyone, regardless of their qualifications. So, the people selected for these jobs often don't have much experience dealing with the very problems that these institutions were created to deal with. In the case of the World Bank's appointment of the current president [Paul Wolfowitz]-probably no appointment could have had less support from the rest of the world.
How do we approach issues like Third World debt?
We can start by appreciating how these economic ideas impact people. I went to Moldova-a country whose gross domestic product had gone down 70 percent since the beginning of transition [from Soviet-era communism]. It was supposed to make the country richer, yet three quarters of the country's national budget was being spent on paying foreign debts. It got very emotional when the daughter of one of [our] associates went to the hospital, the hospital ran out of bottled oxygen, and she died. There was no oxygen in the entire country. They couldn't afford a stable supply of goods, in part, because their foreign exchange was being used to service the foreign debt.
An extreme example, but what does this tell us?
Developing countries continue to bear the brunt of interest rate exchange rate risk. When countries borrow in dollars or euros, that's the inevitable consequence.
How can countries rich in resources be so deep in debt?
It's partly corruption; it's partly structural. Every loan has a lender and a borrower. Every bribe has a briber and a bribee. Quite often, the briber in these situations is a foreign company. If you want to maximize profit, then you can save money by bribing a government official to get resources at the lowest possible price.
Is individuality inevitably lost in all of this?
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