Joseph E. Stiglitz ”Globalization and Its Discontents” Essay

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Introduction

Many people associate economic globalization with the controversial issue of free trade. In some cases, economic globalization is associated with free trade and liberalization, improvements in economic conditions of less developed countries, and enormous opportunities for multinational (MNEs) and transnational corporations (TNCs). Thus, many critics and economists oppose economic globalization citing the alleged benefits of globalization. In the book Globalization and its Discontents, Joseph E. Stiglitz proposes a unique approach and vision of globalization, its problems, and opportunities for the modern world. The book consists of 9 chapters devoted to different economic and business problems of globalization and its relations with other spheres of modern life.

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Central argument

The central argument of the book is that globalization has many weaknesses and threats for a modern world that economists and politicians are neglect. Stiglitz states that the process of globalization started with advances in transportation technology in the second half of the nineteenth century which resulted in the colonization of countries outside Europe and America (Ohmae, p. 66). The capitalist world under the leadership of the United States of America moved for trade liberalization and this agenda was accelerated by developments in information technology and communications. The dominant system for world governance in the first wave of globalization was the colonial domination of the world by European powers. In the second wave of globalization, various international agencies were established to loosely oversee the liberalized world economic order. The important international agencies which were established to oversee the global system were the International Monetary Fund or the IMF and the General Agreement on Tariffs and Trade or GATT. The GATT was later transformed into the World Trade Organization or the WTO, which is made up of 28 intergovernmental agreements by which member states agree to limit their sovereign right to intervene in international trade. It was hoped that with such agencies, it will be possible to facilitate international trade and manage the international economic system. The WTO today has 144 member states and an additional 30 which are awaiting accession. The benefits that have been provided by the WTO agreements include the liberalization of international trade, the rule of law, a procedure for the settlement of disputes, cutting of tariffs by the industrialized world, and the elimination of the most favored nation status amongst others. These measures have considerably enhanced the volume of international trade with nearly 25% of the global output being traded. Despite the criticism levied against it, the WTO has been successful in the past 50 years to provide a mechanism to avoid protectionism and trade retaliation, with its Council having authorized retaliation through tariff increases in very few cases (Stiglitz, p. 63).

The role of WTO

According to Stiglitz, the WTO also has its critics and there are demands that the functioning of this organization be made better. It has been said that there are deficiencies in the legal-institutional framework that govern the relationship between the global regional trade agreements such as the North American Free Trade Agreement or NAFTA, the European Union or the EU, the Association of Southeast Asian Nations, or ASEAN and the multilateral trade system. The member states agreed to clarify the WTO rules governing the Regional Trade Agreements or the RTAs in the Doha round of talks. It has been claimed that regionalism consisting of regional trade agreements is a danger to the global multilateral trade system because they present preferential trading relationships between countries. Article XXIV of the GATT agreement had made it possible for regional trade agreements to exist without harming the multilateral trading arrangements. However, it has been claimed that Article XXIV has been abused by the member states and substantial trade diversion had been made possible in the European Union or the EU for example (Ohmae, p. 54).. Trade liberalization, which is what WTO is all about, has also meant that the organization has been attacked in developed countries with high labor costs and by the environmentalists for attempting to open up trade without regard to human standards. The developed world wants to maintain labor standards while the underdeveloped world sees cheap labor and the lower cost of production as its advantages. It has been claimed by all that the major issues of the current debates in the WTO, anti-dumping, labor standards, and environmental implications of trade have human and developmental dimensions. Following Stiglitz (2002):

”Globalization can further be defined as the arrival of ‘self-generating capital’ at the global level: that is, capital as capital, capital in the form of the TNC, free of national loyalties, controls, and interests. This is different from the mere internationalization of capital, which assumes a world of national capitals and nation-states; it is the supersession by the capital of the nation-state (10).

There have been calls for humanizing globalization and other concerns have been expressed about unequal wealth distribution between the North and the South as well as within countries with the downsizing of the middle class. It has also been stated that trade liberalization and globalization have created unwanted interdependencies with a system that is incapable of managing these interdependencies (Stiglitz 214).

Trade partnership

The concepts of global politics are related to trade partnership and international global order. The process of globalization itself has been subjected to a backlash with there being a danger that attempts may be made to reverse globalization. There are different opinions at work with the center-right globalizes calling for free trade, the center-left calling for universal labor and environmental standards and ethical codes while other factions demanding international communism and a global Jihad. Hence, different groups want a different version of the globe. Whereas some regional groups such as the EU may want societal standards, other regional groups just want free trade. Critics (Bhagwati 2004; Friedman, 2000) have wondered if the lethargic national governments in the third world can do more to enhance social justice, equity, and the standards of living of their people instead of blaming everything on international governance without making the efforts to take their responsibilities seriously. Hence, there is a need to rethink the governance of globalization as extending beyond mere trade liberalization and the International Monitory Fund so that globalization is better managed with efforts towards a more human face so that the process of globalization can serve its broader aims of bringing humanity together. However, before such attempts can be made possible, it will be appropriate to consider just what is wrong with the current process of globalization and what the various interested actors are demanding. It will then be worth investigating what can be done to reconcile such demands and bring about a better system for global governance. It can be said that there is a definite need for enhancements in global governance because there is always room for improvement and the protests that were seen at the Seattle round of WTO negotiations do indicate there are some shortcomings with the process of globalization (Stiglitz 216). Such an investigation can be the subject of a dissertation in which the difficulties, conflicting opinions, and the enhancements that are possible in the system for global governance presented by various opinions can be investigated along with the workings of the agencies associated with bringing about international order. There is an abundant body of published literature in which opinions and points of view, as well as remedies, have been presented about the governance of globalization, and hence, there is no shortage of material for consideration or analysis. Competition has become global but there are few rules for managing competition. Competition laws, anti-trust legislation, bankruptcy rules, etc do not exist on a global level and the enforcement methods are more voluntary (Levitt, p. 92).

The theory and study of globalization

The author does an effective job as he explains in detail globalize world order and its impact on political relations. Similar to Stiglitz, critics of globalization have lamented that the process of globalization and the modus operandi of the system of global governance today is exacerbating global inequality and making the rich nations richer at the expense of the poorer nations. It is claimed that the free trade regime which is claimed to be in place is denying market access to poor countries and thus denying the developing countries a chance to take advantage of their most promising sectors. It is clear that with the increasingly limited ability of national governments to interfere in matters related to international trade, whole ways of life and industries that supported communities are being forced to go through traumatic changes because of economic competition. These communities had become accustomed to their standards of living, conditions of employment, and societal standards which are being threatened because the poorer countries of the world want to gain competitive advantage by exploiting their workers to the extent that they never have any future security in their old age and are incapable of producing quality capable of competing. Kenichi Ohmae (1985) states:

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“The global economy is becoming so powerful that it has swallowed most consumers and corporations, made traditional national borders almost disappear and pushed bureaucrats, politicians, and the military toward the status of declining industries” (p. 45).

The countries of the South are all out to compete with cheap labor, reduction in manufacturing costs as a result of a disregard for the environment, and an absolute disregard for their human resources. Multinational corporations have emerged as the new actors which make manufacturing decisions, have the required knowledge related to manufacturing and trade as well as funds to invest. These multinational corporations also want liberalization of trade, as much freedom to do what they want to do, and an international structure for direct foreign investments. In attempts to woo these actors, the governments of the South have gone to extraordinary lengths to dehumanize their people and their environment, but with limited success (Stiglitz 225). Hence, there is a desire on the part of the intelligentsia of the globe to see that the governance of globalization is tackled with added dimensions that extend beyond the mere reduction of trade barriers to include an enhancement in the quality of human life for all.

Although interested parties have bemoaned the increasing powerlessness of the national governments, perhaps there is a need for a stronger global government that can share the burden of governance with the regional powers, or the national states (Yip, p. 43).

I suppose that there are no other concepts that should be included in this book, as all concepts are carefully selected by Stiglitz and reflect his ideas and opinion. I agree with the author that globalization has implications that extend to employment, economic welfare, and the political capacity of governments as well as sustainable consumption at the regional level. It is inappropriate to point all blame to the WTO because, despite trade liberalization, governments in many countries of the South could have done much more to make their countries competitive by pursuing a policy of import substitution, for example. However, there has been a tendency on the part of many governments in the South to blame their incompetence, lack of a desire to act in their national interest, and the ability to come up with creative solutions on the WTO and the system of global governance. The WTO consists of four councils that meet at the WTO headquarters in Geneva. Most Favored Nation or MFN status means that a contracting party treated all other contracting parties equally favorably. GATT was initially for the developed nations and its agenda was driven by the United States and the EU. When less-developed nations joined, they were required to make fewer concessions to join, and more than forty countries enjoy the status of an underdeveloped country (Yip, p. 77).

All arguments of the book make a useful advancement in Global Politics. Stiglitz supports all facts and opinions with theoretical literature and vivid examples from politics and the economy. These underdeveloped countries enjoy some preferential treatment and other member states are required to exercise restraint when referring these countries to dispute settlement. However, most member countries are now required to accept 95% of the whole package associated with being a member of the WTO. Hence, it is asserted that the power in the WTO belongs to the developed world and the rules can work in the favor of the developed world. The sanction for violating WTO accords is the imposition of duties. However, if an underdeveloped member state was to impose duties on a producer which belongs to the developed world, then such duties are likely to have a negligible impact. The imposition of similar duties by a developed country on a producer belonging to an underdeveloped nation, the impact is likely to be devastating and the WTO has no way available to it to enforce an unfair trade action. The WTO can require that non-compliance with WTO rules be punished by all nations (Stiglitz, p. 226). Another alternative to the imposition of duties can be a requirement for the losses suffered by a nation to be compensated by the nation whose companies are perpetuating the unfair trading practices. However, there has been considerable resistance to such a proposal from WTO members. Hence the WTO mostly deals with trade disputes between two nations and does not deal with the unfair trading practices of all nations and what the WTO can implement as rules have to be acceptable to the developed world as well as a majority of other members. The same ideas are expressed by Friedman (2000) who states that:

“Globalization is the inexorable integration of markets, nation-states and technologies to a degree never witnessed before—in a way that is enabling individuals, corporations and nation-states to reach around the world far­ther, faster, deeper and cheaper than ever before” (p. 9).

I suppose that Stiglitz makes a great contribution to the theory and study of globalization and the development of this field of research. The question that needs to be asked is what can be acceptable to all and can all the member states of the WTO agree on something which will be of real benefit to humanity, globalization, and the world? Because there are very many nations, points of view, and interests at stake, therefore, it is not an easy task to reform the WTO or push through an agenda that will be acceptable to all. Because of the global membership of the WTO, the WTO operates and changes its rules by a process of lobbying, political groupings, and consensus that is developed amongst member states. Because of the advanced economies of the developed world, it is the developed world that can develop consensus, alliances, and interest groups at the WTO.

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However, it is worth examining if any of the complaints or issues that are raised by the developing world is legitimate or politicking in their national interests. There are many groups at the WTO, such as the Group of 21 developing nations, and depending on their interests, these groups can develop alliances with non-government organizations and threaten to block matters which are not in their interest. Hence, a question does arise as to who is going to impose an absolute truth on all these nation members of the WTO and whose truth and interests will be acceptable to all. Industries and even multinational corporations are not members of the WTO and do not have a direct say in its proceedings or value systems. These corporations or industries are required to lobby their governments and get these governments to protect their interests in the WTO. Hence, although the WTO has made considerable progress on trade matters since the inception of the GATT, there is no absolute truth, morality, or recipe which is going to be immediately acceptable to the whole (Stiglitz, p. 246).

Conclusion

I suppose that all books selected for analyses and background information are excellent studies of globalization and its problems. Each author adds something new to the theory of globalization and its role in Global Politics. Global governance requires that there should be coordinated action amongst member states of the world to solve global problems on a broad front. Apart from the WTO, other agencies assist in the process of global governance including the World Bank, the International Monetary Fund or the IMF, and the United Nations. Solving problems related to global poverty, inequality of wealth distribution, and development is, therefore, not just the responsibility of the WTO and these problems require a multifaceted effort for their resolution. It has taken humanity since the dawn of civilization to even have reached a stage in its development when there are global forums available for discussion of global issues. These global institutions, however, are still weak as institutions and depend on the political will of a majority of the member states to take action on global issues. Concerted action of such institutions also depends on the will of the member states to initiate such an action. An alternative approach to global governance must, therefore, appeal to a majority and the recipe should be able to develop a popular political consensus along with a will for action. Such a consensus and will is only possible if the alternative approach to global governance is appealing to at least a majority. Ideas can only be imposed on others if they appeal to the concerned parties or those imposing ideas have the force or the economic clout to be able to impose such ideas. It is because of this that the developed world consisting of the United States and the EU has been able to play a leading role in global governance. Still, this does not mean that a good idea cannot be implemented at the agencies involved with global governance and politics.

Works Cited

  1. Bhagwati, J. In Defense of Globalization. Oxford: Oxford University Press, 2004.
  2. Friedman, Th. The Lexus and the Olive Tree: Understanding Globalization. Anchor; 1 Anchor edition. Press, 2000.
  3. Levitt, Theodore. “The Globalization of Markets.” Harvard Business Review, 1983, pp. 92-102.
  4. Ohmae, Kenichi. Triad Power – The Coming Shape of Global Competition. New York: Freepress, 2003.
  5. Stiglitz, J. Globalization and its Discontents, London: Allen Lane, 2002.
  6. Yip, George S. Total Global Strategy – Managing for Wordwide Competitive Advantage. Prentice Hall, New Jersey, 2003.
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