In your recent essay “The Overselling of Globalization,” you point out some of the failures of globalization.
The main point is that a lot of the discontent with globalization in places like the United States arises from the fact that it was oversold. It was pretended that everybody would benefit, that there would only be winners, and in fact there are a lot of losers. The problem was made worse by the way we managed it. But even if it’s well managed, there will be losers, and it’s important to recognize that so you can design policies that respond to those problems.
You argue that today’s world has a greater need for collective action to provide global public goods and that such initiatives could be funded through the sale of global natural resources. How would such a plan work?
There’s a recognition that there are a lot of global public goods — like fighting against AIDS — that need to be provided globally. Now, some of that is being done informally in joint research programs through voluntary contributions. But without taxation, there would be a tendency for the underprovision of public goods nationally, and the same argument holds internationally for global public goods.
There are also a lot of global natural resources, like the oceans, that really don’t belong to any country. The fish in the oceans can be thought of as a global resource. It’s a resource that we are overusing, and most economists now say that we ought to sell the right to use this scarce global natural resource. So the proposal is to link these two ideas: we ought to be using market mechanisms to ensure that our global natural resources are well used; that will generate revenues, and some of those revenues can be used for financing global public goods.
You propose raising the world’s money supply by issuing a global reserve currency, which would be distributed primarily to poor countries. How would this plan contribute to the stability of the global financial system?
What we argue is that not only is the system inequitable, it is also unstable. And we see that the huge deficits of the United States are giving rise to a lot of anxiety. Can the United States really continue to run these deficits? Is the dollar a currency that can be relied upon? And that uncertainty about the value of the dollar has contributed to global instability. So our idea is that you would create this global reserve currency, which would eliminate or at least reduce the reliance on the dollar.
You attribute China’s success to its strategy of managed globalization — it opened its markets gradually instead of adopting the rapid liberalization policies advocated by the IMF. What advice do you offer to countries that are looking at China as a model?
Well, elements of China’s policy are relevant to all developing countries, but obviously China has some distinctive characteristics. So its strategy could not be imitated precisely, but many of the things it has done provide important insights to other countries — for instance, its rural-based development strategy, where a lot of the development occurred in the rural sector so that you did not have the wrenching migration of labor that has been a problem in many developing countries. And it had industrial policies where it promoted a particular industry, just like Korea did. Not all countries can manage those kinds of industrial policies, but Brazil and many other countries can.
In your new book Fair Trade for All, you propose that all WTO members commit to providing free market access in all goods to all developing countries that are poorer and smaller than themselves. Briefly describe the benefits of this plan.
Fundamentally, everybody recognizes that one of the great problems of the 21st century is the problem of poverty in the developing countries. There’s a lot of discussion about resources — more aid — but they also need more opportunities, and that’s what trade does. The cost to the developed countries would be minuscule; in fact, they would benefit, because they would be able to get the goods more cheaply. Obviously there are some special interests in the United States that would suffer, but the country as a whole would actually be better off.
Versions of this have already been adopted by Europe. They have opened up their markets to the poorest countries of the world unilaterally [through the Everything But Arms initiative]. What we are proposing is to extend this so that it’s not just Europe but also America and Japan, and extending it to more countries. So it’s not just the very, very poorest, but some of the other low-income countries.
What kind of response has the book received in policy circles?
The book has gotten a very strong response, especially from the developing countries, but even from policymakers in more-developed countries. The book was launched at the Hong Kong ministerial meeting on trade in December, and it was very positively received. Coverage in Asia was enormous. It obviously spoke to concerns that many of these countries have.
What the book points out is that trade can be an important element in promoting development but that the development round that was begun in Doha [in 2001] is not a true development round. A lot of the discussion is focused on agriculture. We show that there’s a broad agenda that goes well beyond agriculture and that would be of benefit to more countries. Eliminating [agricultural] subsidies would actually hurt some of the poorest countries, because they are food importers. We point out that, in fact, there is a broad agenda and one which is in some ways more intellectually coherent than the kind of trade position that the United States has maintained in these negotiations, where it has been trying to go so far as to claim that cotton subsidies are not trade-distorting.
One of the disappointments at Hong Kong is that while there’s a broad agreement on the principle of Everything But Arms opening up markets, the United States wants to carve out exceptions so that some of the poorest countries, like Bangladesh, would not be able to export to the United States their key commodity, textiles and apparel. So what [the U.S. government says] is they can export to the United States aircraft — things that they can’t produce — but things that they do produce, that are their comparative advantage, we want to restrict those. And obviously the developing countries see right through that kind of duplicity.
Can you comment on the process of multilateral trade negotiations? You make the point in the book that the system is inherently disadvantageous to developing countries because it’s based on the principle of reciprocity.
One of the seminars in Hong Kong concerned the strategy of the United States and a few other countries of signing bilateral agreements, which are clearly undermining the multilateral system and are even more unfair than the multilateral system. So yes, the multilateral system is complicated and in some sense disadvantages the developing countries, but they are even more disadvantaged in the bilateral agreements. One of the points, though, that we do emphasize is that because of this inherent unbalance, it’s important that trade negotiations focus on the core issues of trade and not extend into areas like intellectual property.
Joseph Stiglitz is university professor at Columbia University and executive director and cofounder of the Initiative for Policy Dialogue. He received the 2001 Nobel Prize in economics for his pioneering research on the economics of information.
Professor Stiglitz accepted a joint appointment to a chaired professorship at Columbia Business School, the Graduate School of Arts and Sciences (in the Department of Economics) and the School of International and Public Affairs in the spring of 2001. He was the first Joel M. Stern Faculty Scholar at Columbia Business School from Fall 1999 until Spring 2001. From 1997 to 2000, he served as the World Bank's Chief Economist...
Read the Research
Joseph Stiglitz, Andrew Charlton
"Fair Trade for All: How Trade Can Promote Development"
"The Overselling of Globalization"