« Ethnic goes Exurban | Main | Spite »
Making Globalization Work, or Joe Stiglitz watch, part II
Joe Stiglitz's new book claims the main problem is that "we" have not "managed" globalization very well. It has benefited mainly the rich and not the poor. Funny me, I thought the main problems were tyranny, dictators, corruption, and low-quality and weak governments.
On p.144 Stiglitz seems to defend Putin's jailing of Khodorovsky; after all it did bring money back to the Russian people.
Here is one snitty but not altogether inappropriate review. Here is a New York Times review.
Posted by Tyler Cowen on September 3, 2006 at 08:30 AM in Books | Permalink
Comments
Yes, the Times reviewer attacks Stiglitz on his leftist excesses, but, wow... has the spectrum of belief shifted so dramatically in the last decades....'til now the most famous academic guardian of leftist economics can preach a development doctrine that's often as free market as Friedman's?
The reviewer suggests Stiglitz often exhorts thusly: “Rich countries...should simply open up their markets to poorer ones, without reciprocity.” and
"Developing countries, after getting their “fair share,” must “use the money well,” he writes. So they’ll need nonkleptocratic governments, uncensored media, enforced property rights, the rule of law." (from the NYTimes review)
Posted by: Dave Meleney at Sep 3, 2006 10:19:34 AM
Mmmh Tyler,
"tyranny, dictators, corruption, and low-quality and weak governments" are endogenous outcomes of economic and social processes which can be influenced.
Economists are doing themselves and society a disservice by reflexively defending globalization based on some form of over-simplified comparative-advantage intuition, without seriously acknowledging that we are looking at non-Pareto improving changes in peoples' well-being. Cheerleading for globalization without offering substantial redistributive policies that help the many losers from globalization is imho a cop-out. Stiglitz, even though I disagree with him on many issues, at least takes the distributional and environmental problems associated with globalization serious and tries to find solutions for them.
More broadly speaking, I’d recommend the following for any economist who thinks that Stiglitz is just some kind of stupid lefty: go have a look at Stiglitz's CV. Compare to your own. Understand that this guy has figured out ten or twenty times more things in economics than you and I combined will ever figure out. Then lay off the snark and try to understand why he disagrees with your view of globalization.
Posted by: Commenterlein at Sep 3, 2006 12:31:58 PM
Benefited "mainly" the rich yet fewer people are in poverty today than ever
before. How many of those rich people were poor in the first place?
Posted by: Sandy P at Sep 3, 2006 1:03:24 PM
Sandy: here in Latin America we've moved a lot of people out of poverty. Yes, some of the formerly poor have even become rich. But that doesn't mean that things couldn't have been done better. And that, I believe, is Stiglitz's main point. I don't think he completely wants to turn back the clock on globalization, just do a better job from here on forward (at least that was my take before reading this new book).
Posted by: DanK at Sep 3, 2006 1:10:00 PM
Acccording to the Times review at least, it seemed that this quote has a lot to do with his thinking..
“It seemed terribly unfair,” he writes, “that in a world of richness and plenty, so many should live in such poverty.”
But i'd think that he, along with many other folks, need to remember that the natural state of the world is not shiny happy and equal creatures all on God's green earth holding hands and whistling show tunes.
The default state of society is to be poor and miserable and to scrape by every waking day just for sustenance. To accomplish what mankind has accomplished in first world countries by raising the standard of living to where it is today is some feat that is probably as random and difficult as finding the proverbial pot of gold at the end of the rainbow. Mankind is not entitled to live in prosperity, it must find it and strive for it and fight for it every day even when it seems plentiful..
This problem involves many different circumstances and many different issues at every place and every time. There are no blanket solutions and there are no magical elixirs. Top down solutions such as green accounting, debt forgiveness, global greenbacks and international tribunals sound nice and all but don't address any of the "real" problems that people in developing countries face.
People need the will and power to fight for whats theirs, to fight the bureaucracy and the tyranny and the oppression that keeps them from being able to achieve better for themselves. When the people in developing countries and those of us who would propose to help them find out how to do that than we'll be well on the way to actually solving their problems.
Posted by: Perry at Sep 3, 2006 1:23:18 PM
So if i check my resume and find it weaker than some other ppersons then I should accept what they say uncritically?
Geddoudaheah...
Posted by: Stuart at Sep 3, 2006 1:33:35 PM
So if i check my resume and find it weaker than some other ppersons then I should accept what they say uncritically?
I don't think "lay off the snark" is quite the same as "accept what they say uncritically."
Posted by: bernard Yomtov at Sep 3, 2006 2:00:21 PM
Mr. Cowen,
In a system where things were settled in an arbitrary fashion, the Russian Government should take back what was stolen. STOLEN. If that hurts foreign investment, well sorry, the largest gas and oil reserves are more important than some FDI this year or the next. Time will heal investors' nerves.
It was economic advice by snarky Harvard economists that put Russia in the spot she was in circa 1996. Loans for shares was a direct result of ignoring political constraints on economic reforms.
My opinion; enough of western ideas in Russia. Since Peter they have caused lots of pain.
Posted by: RWP at Sep 3, 2006 2:41:46 PM
Commenterlein and bernard Yomtov,
A fabulous brain and a fabulous resume does not make one infallible and critique-proof.
Just as ad hominem attacks distract from the facts at hand and instead impugne the motives of one's opponent, similarly praising the credentials of someone and suggesting that his/her opponents back off doesn't advance the debate forward either. Instead their goal, unstated and perhaps (?) unintentional is to try to stifle debate by saying only the annointed ones may have permission to debate.
None of which is to say that I agree or disagree with any of the actual points under debate. It just means we ought to all prefer an actual debate instead of regressing to the merits and demerits of the debaters.
Posted by: happyjuggler0 at Sep 3, 2006 2:52:45 PM
HappyJuggler,
You completely misread what I said above - I am frustrated by the lack of substantive engagement with Sitglitz's arguments, and stifling debate is the last thing on my mind. If you re-read my post above you may notice that it is an attempt to contribute to that debate.
Pointing out that Stiglitz is an extraordinarily smart economist and that it is therefore worthwhile to spend some more time trying to understand what he says and why he says it is a sound argument, and is certainly not some kind of inverse ad hominem.
I have read quite a lot of Stiglitz writings on globalization, and my current thinking is that he is about 50 to 60 percent wrong and 40 to 50 percent right. I also believe that the aspects where he is correct are really important and are underappreciated in the current debate, especially so among academic economists.
Posted by: Commenterlein at Sep 3, 2006 3:14:26 PM
Pointing out that Stiglitz is an extraordinarily smart economist and that it is therefore worthwhile to spend some more time trying to understand what he says and why he says it is a sound argument, and is certainly not some kind of inverse ad hominem.
Exactly.
Please read my previous comment.
I clearly did not suggest that Stiglitz must be right because of his credentials and that therefore everyone else should shut up.
Posted by: bernard Yomtov at Sep 3, 2006 5:35:28 PM
Hmmm. I have not read Stiglitz's new book. I would disapprove
of him OKing the jailing of Khodorkovsky. If really says nothing
about corruption and tyrannical governments, he should be taken to
task, although these are far from easily dealt with problems. Most
of what I see reported as things he advocates, more free trade, seem
pretty reasonable.
It is true that "globalization" has come to mean many things to many
people, not all of them making much sense. However, it is also true,
Sala-Martin aside, that global income distribution is getting more
unequal if measured at the individual level rather than the country
level (the latter gives us China and India making things more equal,
even as inequality is massively increasing inside China; see studies
at the World Bank by Milanovic). Certainly income distribution in
the US is getting much worse, as it is in all but a few countries.
Getting huffy about Stiglitz does not help here much.
Wise defenders of free trade have long argued that adjustment
assistance to help the losers might be good public policy, and
this has been seriously done in some countries (in a certain part
of the world to remain nameless) to solid effect. More countries,
including the US, could follow this lesson.
Posted by: Barkley Rosser at Sep 3, 2006 5:37:05 PM
Commenter, Tyler and many others have read Stiglitz's excellent formal work, and are completely qualified to point out what lousy arguments he makes in his popular work.
Nowadays Stiglitz is a great source for leftist platitudes
and not much else. He is wholly predictable.
Posted by: Keith at Sep 3, 2006 5:47:04 PM
"completely qualified to point out what lousy arguments he makes in his popular work"
Awesome, so let's start doing that. I have seen rather little of it.
Posted by: Commenterlein at Sep 3, 2006 6:17:08 PM
... and kudos to Barkley for doing just that.
Posted by: Commenterlein at Sep 3, 2006 6:18:21 PM
Tyler writes:
"Funny me, I thought the main problems were tyranny, dictators, corruption, and low-quality and weak governments."
No, the main problems is that creating wealth is hard, and (alert: crimethink upcoming!) some people are better at it than others.
Mexico, for example, has lots of problems with corruption and the like, but it's hugely problem lately is that while Mexicans are pretty good at manufacturing, their Chinese competitors are great at it. Wal-Mart is opening stores in Mexico, but it's getting vastly more of its merchandise from China. So Mexico isn't benefitting from NAFTA the way it expected to back in the early 1990s.
Posted by: Steve Sailers at Sep 3, 2006 7:31:00 PM
Tyler is aghast that:
"On p.144 Stiglitz seems to defend Putin's jailing of Khodorovsky; after all it did bring money back to the Russian people."
Khodorovsky was hired by the Yeltsin administration to auction off Yukos, which owns 2% of the world's oil reserves. Khodorovsky set a minimum bid of $150 million. He accepted one bid for $159 million, and then announced the auction was over. Who was the bid from you might wonder? In a remarkable coincidence, it was from the auctioneer himself!
My wife asked "Why did he pay $9 million more than he had to?" My guess is that his commission for running the auction was 6% or $9 million.
Posted by: Steve Sailers at Sep 3, 2006 7:38:55 PM
2 Steve Sailers
YOu shouldn't be so sure about the things you know nothing about. The statement "Khodorovsky was hired by the Yeltsin administration to auction off Yukos" is a pure lie. Khodorkovsky or rather his company Rosprom simply bought Yukos on an open auction.
Yes the company was in total shit at the time no matter how many reserves they had the value was far below zero because of the loans it had to pay to workers and creditors.
Yes there were not enough big money in Russia at the time to compete. Everyone with such a sum could buy his own company without competition. And the government obviously did not want to sell a strategically important company to foreigners.
And yes there was a lot of corruption but strangely even Mr Putin's side does not still say there was anything wrong with that deal. All they say is that later he did not pay taxes which as they claim were larger than his revenue in some years.
It is easy to say that every rich man is pure evil and his wealth is a theft but do you homework first. I know the chances of meeting someone who knows more about Russia at MR are pretty low but globalization works and they are increasing.
Posted by: Mike Dubov at Sep 3, 2006 8:31:16 PM
Regarding Khodorkovsky and corruption in Russia, part of what got
Putin elected was anger at the corruption and inequality associated
with the oligarchs, of whom Khodorkovsky was one. The problem has
been selective busting of oligarchs: those who have supported Putin
have been allowed to proceed as previously. Those who have criticized
him have gotten into trouble, with Khodorkovsky the prime example.
Posted by: Barkley Rosser at Sep 3, 2006 9:38:45 PM
On the World Bank's website, Bruce A. Reznik wrote in 2001:
"Because the privatization laws that were in place in the 1990s left much to be desired, companies that were bought in allegedly rigged auctions are now open to attack Mihail Khodorkovsky bought Yukos, Russia’s second biggest oil company and the world’s fourth biggest, paying just $170 million for a majority share stake. With 11.4 billion barrels in oil reserves, Yukos is close in size to British Petroleum (about 12 billion barrels), which is worth some $180 billion. Khodorkovsky’s purchase of the company drew criticism, as the auction was held by Menatep bank, which he himself owned. Khodorkovsky is now Russia’s richest individual with a fortune of $8 billion."
http://worldbank.org/html/prddr/trans/julaugsep03/pgs11-12.htm
Posted by: Steve Sailers at Sep 4, 2006 1:31:35 AM
Some of the biggest thefts in history happened in Russia in the 1990s, and they were cheered on by many American economists.
Indeed, at least one American economist, Harvard's celebrated Andrei Shleifer, had all four trotters in the Russian trough too. His behavior while in Russia on an American-taxpayer paid contract cost Harvard $26.5 in damages in settlement of a federal suit, Shliefer $2 million, and, quite possibly, his best friend, Larry Summers, his job as President of Harvard.
And yet in the middle of the scandal in 2003, Shleifer was made editor of the Journal of Economic Perspectives.
Indeed, rather than police the ethics of their profession, Shleifer's influential friends in the economics profession have stooped so low as to play the anti-Semitism card in smearing his critics. According to Wikipedia:
"Shleifer's involvement in Russia was investigated by David McClintick, a Harvard alumnus and journalist for Institutional Investor Magazine. His 30-page January 2006 article claims to show that "economics professor Andrei Shleifer, in the mid-1990s, led a Harvard advisory program in Russia that collapsed in disgrace." The article drew considerable criticism among Shleifer's colleagues, collaborators, close friends, and students. According to the Harvard Crimson[2], the university's daily newspaper, Shleifer's colleague and economics professor Edward Glaeser said that the Institutional Investor article "is a potent piece of hate creation—not quite 'The Protocols of the Elders of Zion,' but it's in that camp." But Glaeser later apologized for his statement.[3]"
David Warsh has covered the Shleifer scandal at length on his website Economic Principals: http://www.economicprincipals.com/
Posted by: Steve Sailers at Sep 4, 2006 1:47:47 AM
Dubov,
So if you own the company that auctions an object or firm, and you own the company that puts forth the only winning bid, how is that not stealing? Btw, if buying Yukos was such a bad bet and Khodorkovsky such an astute business man then lets give him back his 159 million, god knows where that came from, and call it straight. Hey I don't like stealing either. Dubov, calling things lies doesn't win a debate. Got to have facts.
Posted by: RWP at Sep 4, 2006 5:09:29 AM
Dubov,
Dazhe na saite Khodorkovskogo, napisanno chto bank MENATEP kupil Yukos
http://www.mbktrial.com/about/mbk_bio.cfm
Posted by: RWP at Sep 4, 2006 5:15:19 AM
Stiglitz's cult status among anti-globalization leftists is amazing, beause he really isn't saying anything like what they are saying.
Stiglitz: Globalization isn't working for the world's poor. To really help them, we need to unilaterally open our markets to thrid-world imports.
The Left: Hear that? A renowned economist says globalization isn't working for the world's poor! To really help them, we need to impose first-world labor and environmental standards on third-world imports.
Posted by: David Wright at Sep 4, 2006 6:17:18 AM
Steve Sailers writes:
"Mexico, for example, has lots of problems with corruption and the like, but it's hugely problem lately is that while Mexicans are pretty good at manufacturing, their Chinese competitors are great at it. Wal-Mart is opening stores in Mexico, but it's getting vastly more of its merchandise from China. So Mexico isn't benefitting from NAFTA the way it expected to back in the early 1990s."
Well, yes, given that China makes up one-sixth of the world's population it's only natural that China will have a lot of visibility in the international economy. Incidentally, if China is so smart, why isn't it rich? As of 2000 [according to the Penn World Tables], China had a GDP per capita of $3850, less than Mexico ($9710), Peru ($4800) and Philippines ($4060). The answer is, er..., "tyranny, dictators, corruption, and low-quality and weak governments." Except for the "weak governments" comment, everything else applied until China began its rapid transformation into a capitalist economy and markedly improved the quality of its government.
Posted by: Mark at Sep 4, 2006 7:07:12 PM
