Global economic fairness is a laudable aim, but the ideas proposed by a Nobel laureate are 'daffy', says Winston Fletcher.
Joseph Stiglitz's previous book, Globalisation and Its Discontents (2002), received a flurry of laudatory reviews. Will Hutton called it "a massively important political as well as economic document... we should listen to him urgently", and James Galbraith said it was "compelling... everyone's guide to the misgovernment of globalisation". But a glance at Amazon's website shows that not "everyone" was as captivated by Discontents as the reviewers. Amazon critics complained that the book's economics were far too complex for the general reader, that it was tediously repetitive and that it retold too many well-worn stories. The wider public, however, voted with its purses. Discontents - an economist's No Logo - unexpectedly hit the jackpot, selling more than a million copies worldwide. Its success no doubt encouraged Stiglitz to write Making Globalisation Work .
There can be no doubt about Stiglitz's qualifications for writing books on globalisation. He held economics professorships at Yale, Stanford, Oxford, Princeton and Columbia prior to his present position as chair of the Brooks World Poverty Institute at Manchester University. He was a member of President Bill Clinton's Council of Economic Advisers, and was its chairman from 1995 to 1997. He then became chief economist at the World Bank until January 2000. In 2001, he won a Nobel prize for his work on "asymmetric information" - the precept that market participants do not necessarily operate on the basis of perfect information, a key tenet of classical economics. It is a formidable CV, although an unkind sceptic might wonder how he came to run through quite so many professorships at so many universities.
Stiglitz's humanitarian qualifications for writing these books are equally impeccable. He was born in Indiana into a Roosevelt New Deal-supporting family and his mother was the only white teacher at a local all-black school. When he was 20, he took part in Martin Luther King's great 1963 civil rights march on Washington.
Throughout his career he has been a radical hell raiser, and even when he moved into the international economic establishment he did so on his own terms. He joined the World Bank with high hopes, saying he would act as a spokesperson for developing countries only, not for the World Bank.
Unsurprisingly, when George W. Bush became US President, his presence in so powerful a position was less than welcome - and, as the World Bank is largely an American lickspittle, there was a parting of the ways. This is when he started to write about globalisation, with insider knowledge that was bang up to date.
Manifestly, he cannot have looked at the Amazon readers' criticisms of Discontents before writing Making Globalisation Work - or, if he did, he ignored them. Much of the economic theory in this new book is again far too complex for the general reader, is tediously repetitive and again retells too many well-worn stories. Worse, it contains far too much self-justification. The first half of the book, in particular, contains many phrases such as: "The issues I raised during my tenure at the World Bank received a warm reception by many of the economists there" and "What happened in Russia and elsewhere was even worse than I had feared." Stiglitz loves saying "I told you so", which does not make him lovable.
None of these criticisms, however, is fundamental. The fundamental problem with Making Globalisation Work is that while it is strong on analysis - in effect repeating the disadvantages of globalisation highlighted in Discontents - it is weak on solutions. When Stiglitz attacks the appalling levels of poverty and sickness in the world, every humane reader will cheer him on. But whether the solutions he proposes have a cat in hell's chance of coming about, and whether, if they did come about, they would work, is altogether more questionable.
Last month, the UN's Food and Agricultural Organisation reported that 852 million people are still going hungry, and this figure has increased from 824 million 15 years ago. Six million children a year die from malnutrition. Meanwhile, the world produces enough food to provide every human being with at least 2,720 kilocalories per person per day. And each year the rich countries lavish £1.78 billion in subsidies on their own producers - while giving one sixth as much in aid. Decisions on debt forgiveness taken at the G8 summit last year, though welcome, will do little to resolve these sickening and intractable problems.
In theory, globalisation - free trade between countries with each country providing the world's economy with those things it supplies best, from raw materials to technical skills - should by now have alleviated most of those problems. This has not happened, insists Stiglitz, because the wealthy countries have rigged the international financial institutions - especially the World Bank and the International Monetary Fund - to protect their own interests, to the disadvantage of poor countries. This, Stiglitz says, is both immoral and untenable. The immorality goes without saying. But whether the situation is untenable is more debatable. Stiglitz believes that the rich countries' selfishness will eventually rebound on them in a host of ways, from global warming to volatile and uncontrollable currency markets. But things are not as simple as that.
For vast numbers of people in previously undeveloped countries, globalisation is working a treat - so they might not take kindly to many of Stiglitz's draconian proposals. As Stiglitz says: "Asia today graduates more than three times the number of engineers and scientists that the United States does." Economic growth in India, China and other Asian countries has, Stiglitz admits, been fostered by globalisation, and has resulted in the fastest increase in living standards ever seen for more than a billion people. Incidentally, Stiglitz constantly refers to "hundreds of millions" in this context, but the number is much larger than that. For a Nobel-winning economist, Stiglitz can be a tad cavalier with figures, bending them to make polemical points.
But perhaps we should not expect even distinguished economists to be wholly immune to the lure of "lies, damn lies and statistics". In any event, Stiglitz does not always bother with data at all, an unusual lacuna in an economist. He bangs on endlessly about global warming - which is anyway only peripherally a consequence of globalisation, even though it includes the "global" word. But he seems unaware that if all carbon emissions were stopped tomorrow, global warming would continue for more than 30 years. He proposes partial solutions to the problem - the province of scientists rather than economists - without even taking a stab at quantifying the costs and benefits. Without such economic analyses, it is hard to see how Stiglitz's views on global warming carry any more weight than yours or mine. To be harsh, he is behaving a bit like a pop star: having achieved celebrity in one sphere, he thinks his opinions are equally important in lots of others.
Although he occasionally has a go at Europe, Stiglitz vents almost all his spleen on his mother country, casting the US as an irredeemable villain that protects its interests ruthlessly. But within years, the gross domestic products of the two Asian powerhouses will be on the US's tail. So the American Government has good reason - indeed an unequivocal responsibility - to protect its population's long-term interests. Stiglitz admits to having been seared by the inequalities of life in Indiana. It seems to have coloured his attitudes to the US for good. Still, he correctly recognises that he cannot keep moaning about America's selfish behaviour without putting forward alternative courses of action. And this is where he really comes a cropper. Throughout the book he argues, again correctly, that economic solutions to global problems must go hand in hand with political solutions - that economic advances cannot be achieved without the political will to make them happen. But, politically, many of his proposals seem to have flown in straight from cloud-cuckoo-land. It is impossible to believe that any government - least of all any American government - could enact them, because it is impossible to believe a majority of voters would support them. As a proponent of democracy, Stiglitz must understand this.
Here are just a few of his ideas that seem politically daffy. Wealthy countries must introduce progressive taxation so they can provide aid to less developed countries. (How could any country do this if it were to its own detriment?) As China needs no more US dollars, it should stop selling stuff to America and instead redirect its output to its own people. (Does Stiglitz really believe the Chinese are interested in such advice?) A new international reserve currency should be created - "global greenbacks" - which would be used to fund vaccines against malaria and Aids, to reduce greenhouse gases, to maintain biodiversity in rainforests and to increase international literacy. (How much would all this cost? Heaven knows, but Stiglitz does not even hazard a guess.) Only countries that support nuclear non-proliferation would be eligible for global greenback funding, which would be distributed either through existing international institutions or through newly created UN "special trust funds". If the Americans do not join the global greenbacks game, the rest of the world must go ahead without them. (Stiglitz does not identify "the rest of the world" here, but who does he think would join his greenback gig if America did not? Britain? China? No way.) And so the impractical ideas flow on, like the bath-time dreams of a well-meaning duffer.
The difficulty for the reader is to dissociate Stiglitz's ends from his means. In business jargon, he is great at talking the talk, less good at walking the walk. He is clearly a good man, and his heart is in the right place. Most of us sympathise with his objectives - who can refuse to support increasing global literacy, the development of antimalarial vaccines, reducing greenhouse gases and the rest? - so it seems churlish not to support his ideas for achieving them. But his ideas are so airy-fairy they cannot be taken seriously. Ditto, therefore, his book.
Winston Fletcher is chairman, The Royal Institution.
Making Globalisation Work: The Next Steps to Global Justice
Author - Joseph Stiglitz
Publisher - Allen Lane Penguin
Pages - 384
Price - £20.00
ISBN - 0 713 99909 8