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Dark Side of Globalization: Review of "Globalization and Its Discontents"

Victor Rosado
Date Published: 
February 14, 2003

Globalization and Its Discontents
Joseph E. Stiglitz
Allen Lane, 2002

Wouldn’t it be interesting to be a fly on the wall inside one of Washington’s elite international economic institutions, the International Monetary Fund (IMF), the World Bank or the World Trade Organization (WTO)?

Enter Joseph Stiglitz, former economic advisor to the Clinton administration and Chief Economist at the World Bank. His book, Globalization and Its Discontents, offers a insider’s critique of the dark side of globalization that is clear, open and honest but lacks real depth in trying to unveil the system that drives globalization: global capitalism.

Stiglitz argues that the World Bank, WTO and the IMF have failed miserably to fulfill their original missions. Intended to rebuild global economies in the Post-WWII era, ensure economic stability and help develop the Third World, these institutions have put countries like Morocco, Russia, Argentina and Brazil into severe deep economic recessions and depressions. For instance Russia, according to Stiglitz, may take decades to recover from the orgy of asset stripping done by “Mafia-like” oligarchs and Boris Yeltsin’s political cronies, all accomplished under the watchful eye of Washington.

According to Stiglitz, the international financial institutions have tragically veered off course in an era dominated by neo-liberalism and free market fundamentalism. He explains: “The ideas and intentions behind the creation of the international economic institutions were good ones, yet they gradually evolved over the years to become something very different.

“The Keynesian orientation of the IMF, which emphasized market failures and the role for government in job creation, was replaced by the free market mantra of the 1980s, part of a new “Washington Consensus”—a consensus between the IMF, the World Bank, and the US Treasury about the “right” policies for developing countries—that signaled a radically different approach to economic development and stabilization.”

Stiglitz blames the IMF and World Bank for creating artificial investment and real estate bubbles made possible by massive inflows of foreign capital into developing and poor nations. When the bubbles burst, these countries are left drowning in debt and required under the “structural adjustment programs” of the IMF to balance their budgets to pay back their loans at incredibly high interest rates.

Food subsidies were cut in Indonesia and many African nations were forced to divert monies from education programs to pay back the Fund. In some of the poorest nations of the world, farmers could not afford to buy equipment and seeds for their harvest and kids were forced to pay to go to school.

Corrupt officials

The WTO is no less at fault for the failures of globalization. Having eliminated trade barriers and ancient institutions that inhibited the flow of capital, the WTO went too far establishing free trade agreements that unfairly tipped the balance of power towards countries like the US, France, and Japan. Multinational corporations and banks based in developed countries were rewarded with mega-profits while ecosystems are being destroyed in East Asia and Latin America, thanks to World Bank-subsidized shrimp farming.

The global AIDS crisis continues because the WTO created new laws based on international “intellectual property rights” that don’t allow companies in Brazil and India to compete and produce drugs that their people can afford. Due to WTO trade regulations and patents, multinational pharmaceutical corporations also benefit from bio-piracy: the patenting of indigenous peoples’ knowledge of medicine and herbal remedies.

The bottom line is that resource-rich nations are robbed of their human and natural capital so that advanced industrialized countries remain in power while literally hundreds of developing nations sink into economic depression.

The problem with the IMF, World Bank and WTO, according to Stiglitz, is that they have been contaminated by corrupt officials who are later rewarded handsomely by some of the top investment and banking firms in the world such as Citicorp. He goes on to say that the policies of the major international economic institutions, however, are not always necessarily to blame. It is explained as just their bad “sequencing”, or timing, in introducing reforms to developing and poor nations.

This is the basis of Stiglitz’s critique of the IMF, WTO, and World Bank. His solution is to reform these institutions of globalization, not—as the anti-capitalist protests have demanded—abolish them. It is too bad that Stiglitz doesn’t realize that the IMF, WB, and WTO did exactly what capitalist institutions are supposed to do in pumping superprofits to transnational banks and corporations.

Stiglitz admits that you can’t get rid of these institutions because similar ones will be created after they are destroyed. I say, all the more reason to get rid of the global capitalist system that generates these institutions and is behind the exploitation of the world’s poor, working people and our environment.