In the preface to the book, Stiglitz candidly wrote that “I have written this book because while I was at the World Bank, I saw firsthand the devastating effect that globalisation can have on developing countries, and especially on the poor within those countries.” He forcefully argued that “globalisation today is not working…….for many of the world’s poor…..for much of the environment…….for the stability of the global economy.”

Making Globalisation Work

In the present book, which is a sequel to Globalisation and Its Discontents, Stiglitz takes his argument further by offering a set of fairly comprehensive and specific suggestions which can make globalisation an effective and viable strategy for transforming the lives of million of people around the world. Stiglitz is eminently qualified to write authoritatively—and as an insider—on globalisation on three counts. In the first place, as a professional economist, he has devoted more than a quarter century to research and writing about development, monetary policy and the economics of information. Second, his close association with the U.S. government and the World Bank and the International Monetary Fund provided him with a first-hand understanding of how government and global institutions work. Third, as vice-president of the World Bank, he visited dozens of countries all over the world and exchanged views and experiences with academics, political activists, non-governmental organizations, students and farmers.

Making Globalisation Work is the outcome of Stiglitz’s mature reflections on globalisation and his wide and varied experiences and observations. He is neither a starry-eyed protagonist of globalisation nor a fanatical opponent of it. His analysis is marked by a refreshing sense of objectivity, balance and moderation and is not overshadowed by partisan ideological or political considerations. One is impressed by his intellectual and moral integrity and courage of conviction. Stiglitz writes in a straightforward and highly readable style. One can scarcely fail to notice in the book a deep concern and compassion for the poor, especially those in the developing countries.

A balance sheet of globalisation

Stiglitz believes that globalisation has the potential of enhancing the well-being of the poor and that this potential needs to be harnessed. He mainly focuses on the economic dimensions of globalisation, which entail the closer economic integration of the countries of the world through the increased flow of goods and services, capital and labour. Increased trade, new technologies, foreign investments, and expanding media and Internet connections, which are intimately related to globalisation, have fuelled economic growth in many countries. The era of globalisation has opened numerous unforeseen opportunities for millions of people around the world.

Globalisation—in the form of export-oriented growth—played a highly important role in pulling the East Asian countries out of poverty and economic backwardness. It provided them access to international markets as well as to technology that greatly enhanced productivity. South Korea, Malaysia, China and Indonesia provide vivid examples of how globalisation—if managed with prudence and foresight—can transform a country’s economy.

The average level of education in South Korea in 1960 was less than four years. Today, South Korea leads in high-tech industries such as computers and chip production, thanks to globalisation, and its per capita income has increased more than 16 times in the past four decades. In Indonesia, the poverty rate—defined as living on $ 1 a day—fell from 28 percent to 8 percent between 1987 and 2002, while health and life expectancy improved and literacy became nearly universal. In 1960, Malaysia’s per capita income was $784; today it is over $4000. China’s achievements in recent years have been amazing. Incomes have increased more than eightfold since 1978 and poverty has fallen by three-quarters (p. 31).

The discontents of globalisation

Stiglitz points out that globalisation has the potential to bring enormous benefits to people in both the developing and the developed countries. But the evidence is overwhelming that it has failed to live up to this potential (p. 4).

Stiglitz points out that globalisation has the potential to bring enormous benefits to people in both the developing and the developed countries. But the evidence is overwhelming that it has failed to live up to this potential

There is a growing realisation that globalisation has brought about wide disparities and asymmetries of wealth, power and resources globally as well as within nations. The global distribution of wealth and income is highly unequal. The yearly income of the richest 10% of households in the world is nearly as much as that of the bottom 90%. The richest 1% of the world, concentrated in the United States, Europe and Japan, own about 40% of the world’s wealth. On the other hand, poverty is widespread across the developing countries—where nearly 80% of the world’s population lives. A substantial portion of the world’s population has failed to gain from globalisation. Nearly one-fourth of the world’s population living in developing countries lives on less than $1 a day; more than half of the global population survives on less than $2 a day.

Stiglitz points out that though there have been dramatic changes in the global economy and that people living in various parts of the world are now more connected than ever before, the world is not flat, contrary to what Thomas Friedman and others of his ilk assert. The gap between those who can effectively compete globally and those who cannot is increasing, and so is the gap between the developing countries—particularly those in Africa—and the advanced industrial countries of the Western world (p. 57).

The 2004 report of the World Commission on the Social Dimensions of Globalisation, established under the auspices of the International Labour Organization in 2001, presents a gloomy picture of globalisation. The report noted:

The current process of globalisation is generating unbalanced outcomes, both between and within countries. Wealth is being created, but too many countries and people are not sharing in its benefits. They also have little or no voice in shaping the process. Seen through the eyes of the vast majority of women and men, globalisation has not met their simple and legitimate aspirations for decent jobs and a better future for their children. Many of them live in the limbo of the informal economy without formal rights and in a swathe of poor countries that subsist precariously on the margins of the global economy. Even in economically successful countries some workers and communities have been adversely affected by globalisation. Meanwhile the revolution in global communications heightens awareness of these disparities….these global imbalances are morally unacceptable and politically unsustainable (quoted in Stiglitz, p. 8).

The Commission surveyed 73 countries around the world and found that in every region of the world, except in South Asia, the United States and the European Union, unemployment rates increased between 1990 and 2002. By the time the report was issued (2004), global unemployment had reached a new high of 185.9 million. The Commission also found that 59 percent of the world’s people were living in countries with growing inequality, with only 5 percent in countries with declining inequality. Even in most of the developed countries, the rich were getting richer while the poor were often not even holding their own (p. 8).

The critics of globalisation—and their numbers are growing—point out that the rules of the game that govern globalisation are unfair, specifically designed to benefit the advanced industrial countries. Globalisation has taken away much of the autonomy and sovereignty of the developing countries. In this sense, globalisation has undermined democracy. Globalisation has often meant the Americanization of the economy, culture and lifestyle, which has caused resentment in large parts of the Third World. The Euro-American economic system that has been imposed on many developing countries in the name of globalisation is inappropriate and grossly damaging to their economies (p. 9).

The World Bank defines poverty as living on less than $ 2 a day and absolute or extreme poverty as living on less than $ 1 a day. There is no denying that the percentages of people living in poverty in many countries around the world are falling. At the same time, however, the absolute number of poor people is rising. Poverty in the developing world has increased over the past two decades. Today, some 40% of the world’s 6.5 billion people in the developing countries live in poverty—up 36% from 1981. A sixth of the world’s people—877 million—live in extreme poverty. In Africa, the percentage of the population living in extreme poverty has increased from 41.6 percent in 1981 to 46.9 percent in 2001. In other words, the number of people living in extreme poverty has almost doubled, from 164 million to 316 million (p. 11).

Today, some 40% of the world’s 6.5 billion people in the developing countries live in poverty—up 36% from 1981. A sixth of the world’s people—877 million—live in extreme poverty. In Africa, the percentage of the population living in extreme poverty has increased from 41.6 percent in 1981 to 46.9 percent in 2001. In other words, the number of people living in extreme poverty has almost doubled, from 164 million to 316 million

Closer integration into the global economy has brought greater volatility and insecurity and growing inequality in many countries around the world. Trickle-down economics, which holds that so long as the economy as a whole grows everyone benefits, has been discredited (p. 23). Ironically, globalisation has come to be vilified in both the developing and the developed countries. While the developing countries see the advanced industrial countries tilting the global economic regime against them, the latter are anguished by the threat of outsourcing. Factory workers in the United States see their jobs being threatened by competition from China. Farmers in the developing countries are alarmed by the highly subsidized corn and other crops from the United States. Workers in Europe see job protections being assailed in the name of globalisation. Peanut farmers in India are unable to compete with imports of palm oil from Malaysia. AIDS activists see new trade agreements raising the prices of drugs to levels that are unaffordable in much of the world (p. 269).

There is a clear linkage between globalisation and Euro-American hegemony. Stiglitz points out that the rules of the game have been largely set by the advanced industrial countries—and particularly by special interests within those countries—and that they have shaped globalisation to further their own interests. They have not sought to create a fair set of rules, let alone a set of rules that would promote the well-being of those in the poorest countries of the world (p. 4). The advanced industrial countries actually created a global trade regime that helped their special corporate and financial interests, and hurt the poorest countries of the world.

Stiglitz says that there is a democratic deficit in the way globalisation has been managed. In the international arena the voices of developing countries are heard too little and the voices of special interests are heard too loudly (p. 128). The whole intellectual property regime, for example, is unfairly tilted against the developing countries (p. 125).

Stiglitz believes that even though globalisation is backed by strong economic and political forces, it is not inevitable. If globalisation leads to lower standards of living for many or most of the citizens of a country and if it compromises fundamental cultural values, then there will be political demands to slow or stop it (p. 23).

The cult of free markets

The protagonists of globalisation believe that free markets necessarily lead to growth and efficiency. Stiglitz points out that trade liberalization is among the most controversial aspects of globalisation and that the evidence for the positive linkage between trade liberalization and privatization on the one hand and growth and prosperity on the other is at best mixed (p. 15). The benefits of increased growth and greater efficiency brought about by trade liberalization are outweighed by its adverse consequences, including growing unemployment, lower wages, and erosion of democracy and national sovereignty (p. 62). A developing country that simply opens itself up to the outside world does not necessarily reap the fruits of globalisation. Even if its growth increases, the growth may not be sustainable. And even if growth is sustained, most of its people may find themselves worse off. Today, most economists agree that markets, by themselves, do not lead to efficiency (p. 29).

A developing country that simply opens itself up to the outside world does not necessarily reap the fruits of globalisation. Even if its growth increases, the growth may not be sustainable. And even if growth is sustained, most of its people may find themselves worse off. Today, most economists agree that markets, by themselves, do not lead to efficiency

Russia provides a dramatic illustration of the ironic failure of privatization. While Russia was in the process of transition from communism to capitalism, output and income fell by one-third from 1990 to 2000. Poverty in the former Soviet bloc increased from 1987 to 2001 by a factor of ten. Rapid privatization and liberalization brought with it hyperinflation. Prices in Ukraine at one point increased at the rate of 3,300 percent a year. The economy slid into deep recession and depression. Rapid privatization created a new class of oligarchs who took money out of the country. As government revenue dropped, spending on health, education and infrastructure collapsed and the educational system deteriorated. Life expectancy fell by four years between 1990 and 2000 (pp.37-39).

With the end of communism and the decay of an effective state, Russia, once the world’s second superpower, became increasingly dependent on its natural resources. By some estimates, some 70 percent of its GDP in recent years related to natural resources. Boris Yeltsin needed help in getting re-elected as president in 1996, and a small group of Russian oligarchs, who had the financial and organizational resources, agreed to help him out—in exchange for control over the nation’s vast natural resources. In 1995-96 auctions took place but they were rigged. As a result, the oligarchs got the country’s vast natural resources for a pittance. Some senior government officials believe the amount “stolen” exceeded a trillion dollars (p. 143).

The eroding credibility of global institutions

Stiglitz points out that international institutions such as the World Bank, the International Monetary Fund and the World Trade Organization reflect the interests of the advanced industrial countries, particularly special interests such as agriculture, oil and pharmaceuticals. At the IMF, a single country—the United States—has effective veto. The countries with the largest economies have the most votes. The head of the World Bank is always appointed by the president of the United States (without even having to consult the Congress) while Europe chooses the head of the IMF (p. 13). The IMF’s power and voting structure is dominated by a handful of rich Western nations. Most developing countries see the IMF as the enforcement arm of the U.S. Treasury.

There is a broad policy framework known as the Washington Consensus, which was jointly forged by the IMF, the World Bank and the U.S. Treasury. It emphasized downscaling of government, deregulation and rapid liberalization and privatization. The underlying assumption of the Washington Consensus was that markets invariably lead to growth and efficiency. Trade and capital market liberalization were the key components of this policy framework and it was widely believed that it would promote rapid development across the world.

In the early years of the present century, confidence in the Washington Consensus began to fray. It has been realised that it paid too little attention to issues of equity, employment and competition, to pacing and sequencing of reforms, and to the conduct and monitoring of privatizations. It focused too much on just an increase in GDP, and focused too little on sustainability—on whether growth could be sustained economically, socially, politically, or environmentally. Argentina, for example, got an A+ rating from the IMF, did well for a few short years but later experienced calamity (p. 17, 36).

By the 1980s many African countries had fallen on hard times. Many of them turned to the IMF and the World Bank for help. They were provided with loans, accompanied by conditions which required them to adapt the structure of their economy to the IMF’s market fundamentalism. Liberalization opened up African markets to goods from foreign countries, but African countries had little to sell abroad. Opening up capital markets did not bring an inrush of capital. Investors were more interested in taking out Africa’s bountiful natural resources. Soon agricultural productivity declined and poverty grew. The economy was plagued by deficits and inflation. Thus globalisation bypassed Africa. By the early years of the 21st century, the number of people living in poverty in Africa had doubled from the levels two decades earlier (pp.40-42).

The failure of the Washington Consensus can be seen around the world, in Africa, Latin America and in the economies in transition (p. 44). The IMF, which had pushed many countries to liberalize, conceded in 2003 that at least for many developing countries, capital market liberalization had not led to more growth, but to more instability (p. 16). There is a growing perception across the world that the structure of global institutions such as the World Bank, the IMF and the WTO is dominated by the rich countries, that their policies are designed to advance the interests of these countries, that the decision-making processes in these institutions are far from democratic and transparent, that little weight is given in the decision-making processes to the voices and concerns of the developing countries, and that the IMF’s short-sighted policy recommendations have brought ruin to many developing countries. Consequently, confidence in global institutions and in their legitimacy is eroding (pp. 276-277).

There is a growing perception across the world that the structure of global institutions such as the World Bank, the IMF and the WTO is dominated by the rich countries, that their policies are designed to advance the interests of these countries, that the decision-making processes in these institutions are far from democratic and transparent, that little weight is given in the decision-making processes to the voices and concerns of the developing countries, and that the IMF’s short-sighted policy recommendations have brought ruin to many developing countries. Consequently, confidence in global institutions and in their legitimacy is eroding

Multinational corporations

Multinational corporations (MNCs) are considered the engines of globalisation. MNCs are richer than most countries in the developing world. In 2004, the revenues of the U.S. car company General Motors were $191.4 billion, greater than the combined GDP of more than 148 countries. In its fiscal year ending 2005, U.S. retailer Wal-Mart’s revenues were $285.2 billion, larger than the combined GDP of sub-Saharan Africa. MNCs are not only immensely rich but also politically influential (pp. 187-188).

MNCs need to be given credit for bringing the benefits of globalisation to the developing countries and for helping to raise standards of living throughout much of the world. They have enabled the goods of developing countries to reach the markets of the advanced industrial countries. They have been the agents for the transfer of technology from the advanced industrial countries to the developing countries, helping to bridge the knowledge gap between the two. The almost $200 billion they channel each year in foreign direct investment to developing countries has narrowed the resource gap. Corporations have brought jobs and economic growth to the developing nations (p. 188).

On the other hand, MNCs often strip developing countries of their natural resources, leaving behind a trail of environmental devastation. Corporations such as Wal-Mart drive out small businesses and local entrepreneurs. They often indulge in dubious and morally questionable practices. Cigarette companies in the United States, for example, have engaged in a conspiracy for well over a half century to persuade smokers that there was no scientific evidence that smoking is injurious to health. Nestle tried to persuade mothers in the developing countries to use infant formula instead of breast milk. The list of companies that have inflicted costly damages, especially in the developing countries, for which they have not had to pay, or for which they paid a fraction of what they should have paid, is long.

In 1988, a court in the United States levied a hefty fine on a baby food manufacturing company, a subsidy of Nestle, for manufacturing and marketing spurious apple juice. The representative of the company admitted before the court that what was marketed as apple juice—in Puerto Rico, Taiwan, Japan, Saudi Arabia and 20 states of the U.S.--was actually a concoction of beetroot juice and maize sugar. The explosion at the Union Carbide plant in Bhopal (India) led to the death of more than 20,000 people and caused lifelong health damages to more than 100,000 people. The company was forced to pay an estimated $500 per person, which was too meagre compared to the terrible damage (p. 195).

Western pharmaceutical companies have a monopoly over certain drugs. The prices these companies charge are many times higher than the cost of production. Pharmaceutical companies often indulge in illegal and clandestine drug trials, unethical marketing and drug dumping. Modern research has recognised that there is a wealth of potential cures in the world’s flora, particularly in tropical countries. A number of traditional medicinal plants are taken from the developing countries by pharmaceutical companies and used to synthesize chemical substitutes with little or no compensation to these countries. This has been described as “bio-piracy.” The drug used for the treatment of childhood leukaemia, which was developed by the American-based company Eli Lilley, used the rare genetic trait of the rosy periwinkle plant found in Madagascar. Eli Lilley’s sales of these drugs amount to approximately $100 million per year worldwide. Ironically, Madagascar receives nothing for the use of this valuable resource.

The drug used for the treatment of childhood leukaemia, which was developed by the American-based company Eli Lilley, used the rare genetic trait of the rosy periwinkle plant found in Madagascar. Eli Lilley’s sales of these drugs amount to approximately $100 million per year worldwide. Ironically, Madagascar receives nothing for the use of this valuable resource.

In the international biodiversity agreement signed in June 1992 at the UN conference on Environment and Development in Rio, the right to compensation was recognised, but partly under the influence of drug companies, the United States has not ratified it. Almost half of the 4000 plant patents granted in recent years by the U.S. pertain to traditional knowledge obtained from developing countries (p. 125-126). One of the most notorious cases of bio-piracy was the attempt by the United States to patent turmeric—extensively used in South Asia—for medicinal purposes in 1993. The patent was eventually overthrown, but not without expensive litigation.

The global pesticide market is dominated by a small number of MNCs with the top ten companies controlling more than 70% of the world market. In recent years there has been a growing concern about the use and misuse of pesticides, environmental contamination and pesticide residues in food.

In sophisticated economies, such as that of the United States, outright bribery has largely been replaced by political campaign contributions. Forty-one companies (including General Electric, Microsoft and Disney), which contributed $150 million to political parties and campaigns for U. S. federal candidates between 1991 and 2001, enjoyed $55 billion in tax breaks in three tax years alone. Pharmaceutical companies spent $759 million to influence 1400 congressional bills between 1998 and 2004. The U.S. government has made the interests of pharmaceuticals paramount in international trade negotiations (p. 191).

The important question, according to Stiglitz, is what can be done to minimize the damage caused by MNCs and to maximize their net contribution to society (p. 188). He suggests a set of reforms by aligning private incentives with social costs and benefits. These include corporate social responsibility, limiting the power of corporations, improving corporate governance, having global laws for a global economy, and reducing the scope for corruption.

Development

Until quite recently, development was equated with an increase in GDP. Stiglitz rightly points out that development is meaningless in the long run unless it is sustainable, equitable and participatory. He emphasizes that it is not just income that matters but overall standards of living. In other words, development encompasses economic as well as social, cultural and environmental dimensions. The discourse on development cannot be divorced from issues such as social justice, equality, cultural diversity, environmental safeguards, universal access to health care and consumer protection. Stiglitz emphasizes that it is important for countries to focus on equity, on ensuring that the fruits of growth are widely shared. This is necessary if there is to be sustained growth. If economic growth is not shared throughout society, then development has failed. In Latin America, from 1981 to 1993, while GDP went up by 25 percent, the portion of the population living on under $2.15 a day increased from 26.9 percent to 29.5 percent (p. 45).

Nigeria, which was ruled by a military regime through much of its oil boom, has earned almost a quarter of a trillion dollars in oil revenues over the past three decades. At the same time, however, the country’s economy decayed and its main commercial city, Lagos, became a dirty, dangerous place. Traffic clogs the streets, unemployment is high, and people stay home at night because crime makes it too risky to go out. In spite of all the oil, per capita income declined by over 15 percent from 1975 to 2000, while the number of people living on less than $ 1 a day quadrupled from 19 million to 84 million (p. 134). Saudi Arabia and Venezuela provide other examples of countries where oil wealth has not been widely shared.

Stiglitz says that GDP is a handy measure of economic growth, but it is not the be-all and end-all of development. You can increase the GDP by despoiling the environment, by depleting scarce natural resources, by borrowing from abroad—but this kind of growth is unsustainable. Papua New Guinea is cutting down its tropical rainforests, home to an enormous range of species, but in twenty years there will be nothing left to cut (p. 45). Stiglitz emphasizes that development is essentially about transforming the lives of people, not about just transforming economies. Policies for education or employment need to be looked at through this double lens: how they promote growth and how they affect individuals directly (p. 50).

Stiglitz says that GDP is a handy measure of economic growth, but it is not the be-all and end-all of development. You can increase the GDP by despoiling the environment, by depleting scarce natural resources, by borrowing from abroad—but this kind of growth is unsustainable.

Stiglitz emphasizes that a country’s most important resource is its people (p. 46). According to him, successful development strategy rests on four pillars: markets, government, individuals and communities. In many developing countries, much important collective action takes place at the local level. In Bali, as in much of Asia, irrigation for agriculture is provided by a network of canals. These are maintained by the local community, which ensures that the water is shared fairly between the villages and villagers (p. 51).

World Bank studies have highlighted the importance of community involvement and participation, finding that local participation in the choice and design of projects leads to a higher likelihood of success. The World Bank now has a programme that allocates $25000 grants to communities to spend as they please (p. 53).

The environmental crisis

One of the biggest challenges thrown up by globalisation is extensive environmental degradation around the world. Jared Diamond, in his best-selling book Collapse: How Societies Choose to Fail or Succeed (2005), presents a grim picture of the current environmental scenario.

Our world society is presently on a non-sustainable course……Because we are rapidly advancing along this non-sustainable course, the world’s environmental problem will get resolved, in one way or another, within the lifetime of the children and young adults alive today. The only question is whether they will become resolved in pleasant ways of our own choice, or in unpleasant ways not of our choice, such as warfare, genocide, starvation, disease epidemics, and collapse of societies. While all of those grim phenomena have been endemic to humanity throughout our history, their frequency increases with environmental degradation, population pressure, and the resulting poverty and political instability (quoted in Stiglitz, p. 184).

There is clear evidence that the world is warming—by about 0.6 degrees Celsius—in the last century, which is unprecedented. There have been huge increases in greenhouses gases in our atmosphere, to a level that is estimated to be the highest in at least 20 million years. There is a general agreement among scientists that greenhouses gases have contributed to global warming and rising sea levels, and most of this is a result of human activity (80% from burning fossil fuel, 20% from deforestation). There is likely to be a significantly more warming—between 1.4 and 5.8 degrees Celsius—by the end of this century, and a further rise in sea level of eighty centimetres to one metre, resulting in droughts, floods, cyclones and hurricanes (p. 166). Even small changes in sea level can have large effects. For example, a one-metre rise would inundate low-lying areas around the world, from Florida to Bangladesh (p.166).

Advanced industrial countries, especially the United States, bear a large responsibility for global warming. The United States, the world’s worst polluter, adds almost 6 billion tons of carbon dioxide to the atmosphere every year. The U.S. emits close to 25% of all greenhouse gases. Wyoming, the least populous state in the U.S., emits more carbon dioxide than 74 developing countries. The carbon dioxide emissions of Texas exceed the combined emissions of 120 developing countries with an aggregate population of over 1.1 billion people (p. 171). To make matters worse, the United States has refused to sign the Kyoto Protocol—which focuses on reducing emissions from 1990 levels. Stiglitz suggests that Europe, Japan and other countries which adhere to the Kyoto Protocol should restrict or tax the import of American goods that are produced in ways that pollute the atmosphere (p. 177).

Advanced industrial countries, especially the United States, bear a large responsibility for global warming. The United States, the world’s worst polluter, adds almost 6 billion tons of carbon dioxide to the atmosphere every year. The U.S. emits close to 25% of all greenhouse gases. Wyoming, the least populous state in the U.S., emits more carbon dioxide than 74 developing countries. The carbon dioxide emissions of Texas exceed the combined emissions of 120 developing countries with an aggregate population of over 1.1 billion people

Tropical forests not only reduce the level of carbon dioxide in the atmosphere but also help to preserve biodiversity. Many medicines are derived from this precious resource. Tropical forests, which are spread over 60 developing countries, are home to nearly 2.7 billion people and millions of plant and animal species. These countries deserve to be compensated for preserving the tropical forests and for their valuable environmental services. They should be given incentives to maintain their forests (pp. 178-179). Developing countries need to view their natural resources as their endowment, of which the current generation and the government are trustees for future generations (p. 150).

China and India

Stiglitz is firmly of the opinion that globalisation has great potential for transforming the lives of millions of people around the world and that this potential needs to be harnessed. The important point is to manage globalisation with prudence and far-sightedness. A positive lead in this direction has been taken by China and India.

Stiglitz points out that China’s economic growth, which was based on exports, has lifted several hundred million people out of poverty. But China managed globalisation carefully: it was slow to open up its own markets for imports, and even today does not allow the entry of hot speculative money. China avoided the boom-and-bust that marked other countries in East Asia and Latin America (p. 11). China’s average growth over the past three decades has been about 9 percent. This is an event of historic proportions. Even in the most successful years of the Industrial Revolution or the boom that followed World War II, growth in the Western world seldom exceeded 3 percent. These successes are partly due to globalisation (p. 23).

Even during the downturn of 1997-98, China continued to grow. It followed standard expansionary macro-policies and saw its growth slow down to a respectable 7 percent before resuming the higher levels of 8 percent and 9 percent. Incomes in China have increased more than eightfold since 1978 and poverty has fallen by three- quarters. If the provinces of China were to be treated as separate countries—with populations sometimes in excess of 50 million, they are far larger than most countries around the world—then most of the fastest-growing countries in the world would be in China (p. 31).

China and other East Asian countries realised that success requires social and political stability and that social and political stability in turn require both high levels of employment and limited inequality. Consequently, conspicuous consumption and large wage disparities were discouraged. At least in the earlier stages of development, senior management in China typically received no more than three times the salary of an ordinary worker, while in Japan it was ten times. By contrast, in recent years the compensation of senior managers in the United States has been hundreds of times higher than that of ordinary workers (pp. 45-46).

In China, government encouraged savings, so that it did not have to depend on volatile capital flows from abroad. Today, China has a national savings rate in excess of 40 percent of its GDP, in contrast to 14 percent in the U.S. (p. 33). In addition, China is receiving more than $50 billion every year in foreign direct investment (which amounts to nearly 4 percent of its GDP).

China faces a problem of growing inequality. Its farmers re suffering because of American and European agricultural subsidies, which drive down prices. China and other developing countries face a cruel dilemma: they can spend scarce resources to subsidize their farmers in order to offset the developed world’s largess to theirs, but that will mean less to spend on development and therefore slower growth for the country as a whole (p. 74).

The oil from India’s neem tree has long been recognised for its cosmetic, medicinal and pest control properties. Yet, in the 1990s, patents were granted for the neem oil in the United States and Europe. By 2000, some 90 patents had been granted in Europe alone. Finally, in May 2000, some of the European patents were withdrawn because an Indian entrepreneur was able to show that he had been producing an extract of neem oil for pest control for a quarter century (pp. 126-127).

The oil from India’s neem tree has long been recognised for its cosmetic, medicinal and pest control properties. Yet, in the 1990s, patents were granted for the neem oil in the United States and Europe. By 2000, some 90 patents had been granted in Europe alone. Finally, in May 2000, some of the European patents were withdrawn because an Indian entrepreneur was able to show that he had been producing an extract of neem oil for pest control for a quarter century

A fine quality of rice grown in India, known as Basmati, has been eaten in the country for centuries. In 1997 an American company RiceTec, Inc. was granted patents on Basmati rice. India vehemently protested against this piracy and won the case against it (p. 126).

Globalisation and the Islamic world

Stiglitz briefly discusses how some Muslim countries, such as Malaysia, Indonesia and Bangladesh, have responded to the challenges of globalisation and benefited from it. He points out that Malaysia, like China and Singapore, invited foreign investment. At the same time, it made sure that guest firms transferred technology and trained local workers, so that they were contributing to the nation’s development effort. Malaysia did not just turn over its oil to foreign oil companies but persuaded them to help the country in developing its resources. Today, its government-owned oil company Petronas has become a global player and is providing training to other developing countries. By managing its own oil company, it was able to ensure that more of the value of the resource stayed in Malaysia, rather than being sent abroad as profits (pp. 33-34). Mahathir Mohammad, Malaysia’s former prime minister, once remarked that his country receives a larger fraction of the value of its resources than countries elsewhere which have privatized their resources, and a larger fraction than it would have received had it privatized its resources (p. 143).

Malaysia has wisely invested in the high-tech sector. Today, it is one of the major producers of electronics, computers and computer chips (p. 32). In 1960, Malaysia’s per capita income was $784. Today, it is over $ 4000.

Malaysia, like China and Singapore, invited foreign investment. At the same time, it made sure that guest firms transferred technology and trained local workers, so that they were contributing to the nation’s development effort. Malaysia did not just turn over its oil to foreign oil companies but persuaded them to help the country in developing its resources. Today, its government-owned oil company Petronas has become a global player and is providing training to other developing countries. By managing its own oil company, it was able to ensure that more of the value of the resource stayed in Malaysia, rather than being sent abroad as profits

For decades, the Malaysian government has carried out an aggressive affirmative action programme for the well-being of the ethnic Malays. The view that all groups would benefit from a more stable and equitable society was widely accepted, even though some members of Malaysia’s ethnic Chinese community may have lost opportunities as a result of this policy. However, because the government made sure that all shared in the fruits of development, ethnic conflict has largely been avoided (p. 49).

Bangladesh is one of the poorest countries in the world. Much of the country is a low-lying delta, which is ideal for rice cultivation but vulnerable to even small changes in sea level, and is frequently buffeted by deadly and destructive storms. In this gloomy scenario, two non-governmental organizations, Grameen Bank and BRAC, have done much to transform the lives of millions of people in the countryside. Grameen Bank, a country-wide network of micro-credit banks in Bangladesh, gives small loans to poor rural women—who have a far better repayment rate than rich urban borrowers. These schemes have been enormously successful because they entail groups of women who take responsibility for one another, ensuring that each pays what is due. Today, Grameen Bank and BRAC have branched out into a wide variety of activities. They build schools and even run a university, and provide cell phones, mortgage financing, and health and legal services (pp. 51-52).

As a result of their efforts, health standards have improved and life expectancy has gone up by 12 percent, to 62 years in 2002. The micro-finance model used by Grameen Bank and BRAC has been copied all over the world. The success of these programmes reflects the recognition that what is required is to change the power structure within the community by giving more economic resources to the poorest of the poor, especially to women who have for so long been on the margins of society (p. 53).

The micro-finance model used by Grameen Bank and BRAC has been copied all over the world. The success of these programmes reflects the recognition that what is required is to change the power structure within the community by giving more economic resources to the poorest of the poor, especially to women who have for so long been on the margins of society

A prudent management of globalisation in Indonesia has paid dividends. The poverty rate fell from 28 percent to 8 percent between 1987 and 2002 while health care and life expectancy improved and literacy became nearly universal.

Global warming poses a serious threat to low-lying countries such as Bangladesh and Maldives. Rising sea levels may leave one-third of Bangladesh—and half of the rice-growing land—submerged, causing unspeakable hardships to the people. The Maldives, a small nation of about 1200 islands in the Indian Ocean, may be totally submerged in a short span of 50 years, if the existing predictions come true (p. 243).

Reshaping globalisation

In the concluding section of the book, Stiglitz points out that economic globalisation has outpaced political globalisation. He emphasizes that political processes, which have a close bearing on globalisation, need to be addressed in order to reform and reshape globalisation. He suggests that in order to make globalisation work, there should be a close linkage between the government and the market. Economic success requires getting the balance right between the two. Governments, according to him, should play a more active role in both promoting development and protecting the poor (p. 27).

Stiglitz points out that in countries like South Korea, China and Malaysia, globalisation was measured and paced, and government intervened carefully, but pervasively, in the economy. They expanded primary education and higher education simultaneously. They invested heavily in infrastructure such as ports, roads and bridges. They played a major role in planning, in advancing technology and in developing local industries. Investment in the high-tech sector helped Taiwan, Korea and Malaysia become major producers of electronics, computers and computer chips. In addition, they became among the most efficient producers in the world of traditional products like steel and plastics (p. 32).

Governments in China and Vietnam made sure that the benefits of growth did not go just to a few, but were widely shared. They focused not only on price stability but on real stability, ensuring that new jobs were created in pace with new entrants to the labour force (p. 31).

Stiglitz argues that we need to at least create a more level playing field. It would be even better if we tilted it to favour the developing countries. Greater stability and security in the developing world will contribute to stability and security in the developed world (p. 59). The idea that developing countries should receive special and differential treatment is now widely accepted and has been included in many trade agreements. At the Millennium Summit at the United Nations in New York, held in September 2000, some 150 heads of state pledged to cut poverty in half by 2015. At Monterrey, Mexico, in March 2002, the advanced industrial countries committed themselves to providing 0.7 percent of their GDP to help achieve this goal.

The idea that developing countries should receive special and differential treatment is now widely accepted and has been included in many trade agreements. At the Millennium Summit at the United Nations in New York, held in September 2000, some 150 heads of state pledged to cut poverty in half by 2015. At Monterrey, Mexico, in March 2002, the advanced industrial countries committed themselves to providing 0.7 percent of their GDP to help achieve this goal.

Stiglitz points out that there is a conspicuous lack of concern for social justice in global policies. Decision-making processes need to be infused with the democratic spirit. Stiglitz speaks about the democratic deficit in global economic institutions and suggests that there should be increased transparency in global institutions and that more weight needs to be given to developing countries in global institutions. The ability of developing countries to participate meaningfully in decision-making processes needs to be enhanced. NGOs need to ensure that voices other than those of MNCs get heard in the process of global economic decision-making. The monitoring and evaluation of global institutions should be entrusted to the United Nations. Stiglitz calls for a new global social contract between the developed and less developed countries (p. 285).

Stiglitz suggests a comprehensive set of reforms of the international trade regime. He points out that the current arrangements are far from fair. The whole intellectual property regime, for example, is unfairly tilted against the developing countries (p. 125). He suggests that we need to design an alternative trade regime that promotes the well-being of the poorest countries and that is, at the same time, good for the advanced industrial countries as a whole (p. 82).

Conclusion

As noted in the foregoing, Stiglitz mainly focuses on the economic dimensions of globalisation. As globalisation gathers momentum across the world, it is becoming increasingly evident that it encompasses not only the integration of the global economy and market liberalization but a whole set of processes, including international migrations and transnational diasporas, lifestyle and entertainment, global media and the information society. Similarly, the impact of globalisation on local communities, traditional cultural values, morbidity and illness, and family structure (especially the care of the elderly) is now the subject of much research and academic discussion.

Studies dealing with the social, cultural and psychological dimensions of globalisation seem to suggest that the costs and negative consequences of globalisation far outweigh its benefits. Many societies which are exposed to the pressures and challenges of globalisation seem to experience a widespread sense of insecurity and vulnerability and growing cultural fragmentation. In this connection, developing countries in Asia, Africa and Latin America can draw some lessons from the experiences of the United States, Canada, Europe and Japan.