on October 8, 2002
I have worked for both development banks and for Wall Street, and have been heavily involved in Russia for the last ten years, and a more than interested observer in the financial crises of the emerging markets since 1991. I also have a decree in economics. I haven't read much economics since I left university, and the first think I want to point out is that this book is highly readable if you have a little economics knowledge, and has rekindled my interest in the subject. I read it on the beach, and at no point does it drag.
I think that there are two main points that Stiglitz makes. The first is that standard IMF policy has tended to approach countries in financial crises with the same rather crude economics as that used on Wall Street, which leads them to think like bank managers rather than economists. If you force a country with a fiscal deficit to reduce government spending, then this will reduce aggregate demand, which will reduce government income, and make the deficit worse, inflicting more pain on the population. The reason that the IMF does this, is that it is meant to restore confidence in the markets, but once a crisis starts, foreign investors tend to bail out anyway, so all it buys you is breathing space. You should accept that the foreign investors are gone, and focus on growth.
The other thing that I got from the book is the hypocrisy of the US administration, which forced policies on emerging markets, which it would not itself accept. In fact, the IMF more or less took instructions from the US Treasury during the 1990s, and certainly my sense at the time was that the actual IMF staffers were very frustrated at the policies that the US government forced them to follow. The point though, is that while the US government was battling the balanced budget amendment at home, on the reasonable grounds that it limited their freedom to manage demand, they were essentially forcing a balanced budget amendment on the emerging markets via IMF conditionalities. I remember attending a Paris Club meeting, where the Fund said that they were aware that budget deficits could be beneficial - this was never reflected in the lending policies that the Treasury forced on them. Other examples are forcing central banks to focus only on inflation, and forcing emerging markets to open their markets, while protecting US farmers from imports.
The above is an oversimplification of the whole book, and others may get a lot more on other subjects, such as the political process of crisis management, and the specifics of the East Asian economies, which are less of a priority for me. When you are a specialist in a subject, you always find that non-specialist books tend to be wrong about your own subject. I certainly found plenty to disagree with in the sections on Russia, which is my special subject. However, the arguments were cogent (he is a Nobel prize winner, after all) and I found myself looking at my own subject in a new way, and it was interesting to read a broad brush view, which helped me to ignore the trees, and look at the wood.
I'm reading Skidelsky's biography of Keynes, and to some extent, Stiglitz's book reads like WWJMKD (What would John Maynard Keynes do?). What this means is that Stiglitz is a virtuoso economist, and this is a set of well-known events, reinterpreted by someone who is really good at it.
One criticism of the book is that I would have liked to have seen more raw data to support Stiglitz's arguments - he tends to just refer to studies supporting his argument, without showing as much data as I would have liked, but there is a decent bibliography. Another criticism is the veiled suggestion that Rubin (US Treasury secretary), Fischer (deputy head of IMF) and Summers (deputy Treasury secretary) were merely serving their masters in Wall Street, and were subsequently rewarded. This is a little ignoble, as these people were following their convictions, however wrong, and the political climate at the time supported them. But these criticisms should not detract from a really excellent book of popular economics.
on May 24, 2002
I could not put this book down after I got my hands on it! Mr. Stiglitz is a Nobel Laureate in Economic Science who had the chance to serve both in the Clinton Administration and also in the World Bank. He therefore had much insights and experiences to impart to the readers. This book did not disappoint. It is packed with fascinating anecdotes and his interpretations of the events relating to the global economy, global finance and global institutions during his tenure as an economic adviser to the White House and the Chief Economist at the World Bank. He articulates the original roles of the public institutions such as the IMF, the World Bank and the WTO and shows how they do not live up to their supposed mandates. He exposes the disastrous policies of the IMF which had led countries after countries, on its crusade to impose the Gospel of Market-Fundamentalism, into desolation and devastation. Martyrs made out of the IMF's ideologically-driven zeal and unaccountable behaviors littered the trail on which the IMF carried out its missionary programs. Dr. Stiglitz also highlighted how the IMF and U.S. Treasury, and the Wall Street embellished their misdeeds with tricly phrases, chopped logics and misinformation; how the U.S. decision-making bodies pushed the developing countries to open up for trade while erecting trade barriers themselves to protect the vested commercial interests in the U.S.'s constituency. The chapters on the East Asian Crisis and the Russian situation are especially fascinating. One inevitably gets drawn into the stories as they unfold in the book. However, this book is far from being a cynical and unconstructive compilation of complaints and indictments. Building a more just, more equitable, and sounder global economic and financial arrangement is in the front and center of the book. Dr. Stiglitz points the way forward with a unique vision and a touching passion. His compassion and his belief in how globalization and economic science can improve the welfare of the poor and the disadvantaged shine through. As a trained economist, I highly recommend this book to all those who are concerned or simply curious about the excesses and the potentials of globalization and its future. This book is full of insights and gems of economic reasoning. For those who have trainings in economics, it is a very good book to show how economic thinking is applied to real world situations. For those who do not know much about economics, read this book slowly will also yield significant dividends in understanding our world and the huge stakes involved in the process of globalization. Five stars!!!
on January 17, 2004
The thesis of this book is important and compelling, so it's worth summarizing before I explain why I can only give it a three-star rating.
The International Monetary Fund (IMF) was the post-war brainchild of John Maynard Keynes, who thought future economic downturns could be reduced by establishing a source of funds to stimulate the economies of countries without the resources to provide stimulus packages from their own reserves. As an international institution, the Fund would provide impartial aid and offset the protectionist beggar-thy-neighbor policies that had made the Great Depression a global phenomenon.
In the 1980's, however, the Fund's mission was derailed by the new brand of market fundamentalism that marked the Reagan/Thatcher years: the market always knows best, and the best thing a government can do is to stay out of it as much as possible. Subsequently, the Fund's loans have come with a number of restrictive conditions, forcing recipient governments to balance their budgets and keep inflation down, quite the opposite of what Keynes had initially intended.
The evidence through the 1990's, particularly with respect to the Asian financial crisis of 1997, and the transition to capitalism of the former Soviet bloc countries, is that the IMF's market fundamentalism has been a terrible mistake. Stiglitz argues convincingly that the IMF has not only failed to prevent the disasters in Asia and Eastern Europe, but that its policies have been a leading cause of the disasters in the first place, and its subsequent actions only made matters worse. Sending huge aid packages to Russia to hold off devaluation of the ruble only meant that the super-rich oligarchs had a little more time to pocket their cash, ship it out of the country and transform it safely into hard currency.
The IMF looks only at the limited set of numbers, like inflation and deficit, that affect the lives of Wall Street financiers, and pays no attention to figures like unemployment that matter to the poorest citizens in the countries the IMF is supposed to be helping. As a result, the rich are getting richer, and the poor are getting angrier. Globalization has unprecedented potential to raise the standard of living of people across the globe, but as it is presently being handled it is ravaging the developing world.
These are all points well worth making, and I'm glad I read the book to come to a clearer understanding of them. Despite its good intent, however, it's hamstrung by poor writing and presentation, and worse, by a vindictive righteousness that leads Stiglitz occasionally to ignore or distort the truth if it will help him to make his argument sound more convincing.
The problems begin with the title. The book isn't really about globalization per se; it focuses on the aspect of globalization with which Stiglitz is intimately familiar: international financial institutions like the World Bank and the IMF. "Globalization and its Discontents" is a catchy title, and I suppose it must have been hard to resist. But to be clear: this book is essentially an invective against the IMF, where Stiglitz stops short of accusing the Fund of outright malice, preferring to emphasize its dogmatism, stupidity, narrowness, and occasional venality.
The misleading title is symptomatic of the uncertain thrust of the book. The style is plodding--a couple of clichéd nautical metaphors hardly lift Stiglitz's style out of the mud--not to mention repetitive. The structure is unclear, so that Stiglitz returns to the same points in several chapters while never fully fleshing out other important points, all the while leaving the reader uncertain of where the argument is going. Besides the soporific style and sloppy structure, there are more than a few typos and inconsistencies in convention (is it the "Washington Consensus" or the "Washington consensus"?)
These shortcomings make for a tiresome read and weaken Stiglitz's argument at many points. What's worse is that Stiglitz seems willing to take a few steps beyond the truth if it helps him make his point. In one controversial passage, he all but claims that Stan Fischer, former deputy managing director of the IMF, was in the pocket of Citigroup and obediently took orders from Citigroup while planning the Fund's policies. He has since denied that he intended to smear Fischer, and I believe him. But sloppy writing is evidence of sloppy thinking: unintentionally accusing a respected economist of criminal venality is no small error.
In a similar vein, Stiglitz falls into equivocation where it serves his purpose. At the beginning of chapter 6, he first points to the number of former communist countries, including Russia, currently governed by former communists as evidence of Eastern Europe's disillusionment with market fundamentalism. In the following paragraphs, he attacks Yeltsin and Putin for the crony capitalism and corruption that's come from allying themselves with Wall Street's interests. Either the Russian leaders represent a rejection of the IMF's market fundamentalism or they don't; you can't have it both ways, certainly not in consecutive paragraphs. Nor can you insist that successful development relies on policies suited to intimate knowledge of the particulars of each individual country and then insist, as Stiglitz does early in the book, that the prime minister of Ethiopia is a responsible leader because Stiglitz chatted with him and he seemed like a nice guy. Stiglitz seems determined to make his point, and he won't let facts or logic get in his way. I want to agree with him, but he doesn't inspire my trust.
It's a shame that Stiglitz makes this book hard to like because I think it's an important one. The same argument could have been made in a shorter, clearer book that didn't stretch the truth in order to sound convincing. As it stands, the book provides plenty of easy targets for those who aren't inclined to agree with Stiglitz, and so it isn't likely to persuade many of the unconverted that the IMF needs to change its approach.
on June 20, 2003
As a consequence of the great advances mankind achieved in the fields of communication and travel; globalization was not a choice anymore as much as an actual reality. It was not a question of whether to accept globalization or not, but rather a question of how to channel its forces to serve the benefits of all those that are involved. Global institutions such as the IMF, the World Bank, and the WTO had to be brought into existence to regulate the process of globalization. Each institute was given a main directive to pursue, and that for the IMF was the difficult task of ensuring global economic stability.
Unfortunately, one does not have to be an economist to realize that the IMF failed miserably in its mission. The East Asian crisis of the late 1990's, the so-far failing conversion of Russia from communism to capitalism, and more recently, the Argentina crisis are exactly what the IMF should have prevented or, at least, significantly minimized.
However, The author tells us in this book that these failures did not happen in despite of the IMF, but , shockingly, because of the IMF. And in the cases that the IMF was not the cause of the failure, it caused that failure to bloat and metastasize.
What makes this book more remarkable is that the author, Joseph E. Stiglitz, is not someone to take lightly, but a Nobel prize co-winner in economics who served on the Council of Economic Advisers under president Bill Clinton and later became the chief economist and senior vice president at the World Bank.
Stiglitz begins the book by explaining the specific roles of the global institutions and especially the role of the IMF. From there he describes how many developing (and few developed) nations were let down by the promises of globalization and its institutions. But, he argues, these failures are not caused by the process of globalization itself, but are products of the policies of the IMF.
You would wonder though, how could the IMF with its access to profound expertise and its possession of vast wealth fail so badly in its job. Stiglitz explains that the problem with the IMF is not caused by poor knowledge or lack of funds. The problem is a fundamental one, which is caused by the fact that the IMF is not accountable to the people that are directly affected by its policies, bur rather to the US treasury who in turn is under immense pressure from the US investors. This unfair accountability lead the IMF to unconsciously replace economic science by an ideology that primarily served the interests of the US investors. This ideology is all about markets liberalization, which became an end to the IMF rather than a mean to accomplish economic stability. This change of goal, accompanied with high levels of secrecy, was the cause behind the IMF's failure.
After explaining this the author delves into the cases of the Asian crisis and the failed Russian transformation. He tells in painstaking details how these crises evolved and what role the IMF played at every stage. He gives interesting insights and intelligent suggestions to more sensible alternatives that the affected countries could have pursued. He also gives account of other countries that did not comply with IMF policies and succeeded because of that. Stiglitz is a very intelligent and knowledgeable economist, so you can be assured that you will have access to invaluable economic analysis of those affairs. His writing style is wonderful as well, so you don't have to worry about incoherence or experiencing boredom going through the book.
Finally, he provides more analysis into what causes the IMF to fail the way it does and extends suggestions to overcome its shortcomings and those of other global institutions as well.
This book is a treasure of economic science and analysis, and of economic history as well. It received a great amount of criticism mainly because it accused many influential bodies and persons of misplacing their priorities. This is a dangerous accusation since it makes the accused blamable for disasters that have affected billions of people and still do until this day.
In my opinion, the fact that Stiglitz was discharged from the World Bank after voicing his views in a World Bank report only proves his integrity and his genius. Some critics accused him of bitterness and are saying that it is the cause of him writing this book. But even if so, his bitterness is over a good cause and he has the knowledge and the experience to defend it better than anyone else.
This is a very valuable and interesting book. If you are interested in globalization and international finance then this is definitely a must-read.
on January 20, 2003
This book should be read by anyone interested in the impacts of globalization. With that said, not everyone will agree with Dr. Stiglitz's analysis. Nonetheless, to form an educated opinion it is essential to understand both sides of a debate. Stiglitz's provides the reader with a blistering critique on the current state of globalization, and particularly chides the International Monetary Fund (IMF) for their arrogance and cookie-cutter approach to crisis resolution. The East Asian financial crisis, Russia's rocky road to a market economy, and other recent examples are used to illustrate how the IMF's bailout plans are contingent on a country's agreement to rapidly adopt western ideologies (free market economics). This "conditionality" forces the expedient liberalization of capital accounts, imposes restrictions on the government's fiscal policy, and pushes up interest rates in the name of fighting inflation. The result is high unemployment, stunted growth, and an increase in the federal deficit.
Moreover, the probability of a major financial crisis is actually increased because the government is more leveraged and the liberalization of capital flows allows short-term, "hot" money to flow in and out of the county, which makes for more volatile markets. Stiglitz also points out the hypocrisy of U.S. in regards to free trade. In short, we tell countries to drop their tariffs and subsidies to allow free reign for U.S. exports while we keep our tariffs (on steel) and subsidies (for farmers), which restrains a less-developed country's access to our markets. The central theme of the book is that developing countries are adversely affected by the current state of globalization as they incur a disproportionate amount of the costs and long-term risks and well-to-do western bankers and U.S. corporations reap many of the benefits.
This book has opened the eyes of many to the discontents of globalization and in doing so helped Joseph Stiglitz win the 2001 Nobel Prize in Economics. However, it would be a tragedy if this were the only book someone read about globalization. For a less-biased account of recent events and future treads I would recommend reading any publication(s) by Barry Eichengreen or Peter Kenen on the "international financial architecture." They will provide a more balanced account and use a higher degree of technical analysis. Also, "The Commanding Heights" is excellent.
on January 26, 2003
I have no background in economics but found this book very readable. It becomes a tad repetitive as it recounts case after case of the ineptitude of the IMF. The IMF, rather than globalization, is really the subject. The cultural and environmental repurcussions of globalization are all but ignored in favor of strictly economic analysis. The author comes off as very credible. I highly recommend this book to people who want to understand the IMF and World Bank better even if they have little understanding of economic principles.
on January 14, 2003
Stiglitz has written an angry "insider" critique of the manner in which globalization was managed by the IMF and the US Treasury in the 1990s. In his view, developing countries were forced to privatize state-owned companies, cut government budgets, and open up their economies to imports and capital flows, even when these policies destroyed jobs and lowered national incomes. The result was poverty, inequality, and intensified suspicion of Western -- especially American -- motives.
Thailand, for example, was forced to keep interest rates high in order to reassure foreign investors. All this policy accomplished was to drive hundreds of Thai firms into bankruptcy -- thus scaring off the investors who were supposed to be reassured. In Russia, the government was forced to privatize state-owned firms even though the lack of corporate governance laws ensured that the firms would be looted by their new private owners. In these cases and others, IMF and the Treasury applied crude free-market formulas that ignored local conditions and failed to consider the pace and sequencing of economic reforms.
Stiglitz is not an anti-business crackpot: he is a nobel-prize winning economist who served on the Council of Economic Advisors and at the World Bank in the 1990s. Nonetheless, the reader should be warned: this is not a balanced or scholarly book. Footnotes are almost non-existent, the narrative is disorganized and repetitive, and Stiglitz never goes into the details of decision-making or economic analysis. He makes no attempt to give the viewpoints of Treasury of the IMF. As a result, his book comes off as one half of a two-sided debate.
Stiglitz' attacks on named Treasury and IMF officials suggest that he wrote the book to settle scores with bureaucratic rivals. With his economic expertise and firsthand knowledge of government and international institutions, Stiglitz could have written a great history of the 1990s. Instead he produced this super-polemical book, whose many valid points and insights get lost in the sheer volume of vitriol. A good read, though.
on April 10, 2007
1. This book is highly informdative about the effects of the IMF and the World Bank on the world's unequal economy, with a closer focus on the IMF.
2. It describes in detail the muddy mix of false beliefs, borderline corruption and gross incompetence that drive the international financial institutions and inform their ivory tower decisions which have such profound effect on the people of the world.
3. Stiglitz clearly explains economic theories that clearly rebut the policies of the IMF.
4. He gives in-depth case studies that illustrate the inextricable mess these lending institutions can make in attempting to control the macroeconomic processes of poor nations.
5. He is especially informative in his unpacking of the Asian Financial Crisis of 1998, its causes, and how the IMF contributed to large-scale economic disaster. He explains the speculation encouraged by the IMF and the subsequent scares that led investors to flee en masse from the region. Then he discusses how the IMF's policies of structural adjustment and budgetary restraint further harmed nations. Malaysia, who refused to listen to the IMF, suffered the least from the massive economic downturn.
6. He also enlightens the reader about why Russia fell into such disarray after its post-Cold War "freedom." Without a gradual transition to a market economy, as China has been successful in accomplishing, Russia found itself in a crisis where the powerful managed to gain the bulk of the wealth and those with little power descended into poverty without a welfare state to aid them.
7. He explains clearly the conflict between the IMF's Keynsian roots, which aim to support failing economies by extending credit to be able to continue functioning, and its present policies, which force failing economies to reduce its spending, thereby causing nations and people to suffer.
8. As an insider, Stiglitz is able to describe the callousness with which the IMF views - or doesn't view - the people most affected by their policies is part of the organizational structure.
9. The worst part is that we can get all of this information, but lending institutions are not accountable to us or to the people for whom they make such life-altering decisions.
10. Yet only by sharing this information will nations who do have to decide to accept that IMF loan or not be able to understand the consequences of their decision, will individuals be able to stage protest or other forms of dissent, and will change hopefully eventually come in the large institutions that control so much of what happens in the world.
on September 20, 2002
Had unwashed Seattle marchers said what Joseph Stiglitz says about the IMF, they'd be dismissed as economic illiterates. Pretty hard, however, to dismiss the World Bank's former chief economist and Nobel Laureate as hippie ignoramus. Yet his gentlemanly indictment of international outfits like IMF proves every bit as damning as the sloganeering from Seattle. Stiglitz distinguishes himself from the bean-counter pack by actually caring about what happens to people as a result of IMF policy. From eastern Europe to east Asia to Africa, he shows how havoc has generally resulted from IMF's one-size-fits-all diktats. Throughout, IMF mantra remains the same -- privatize, deregulate, open your veins to outside investors, and never mind the unrest that follows; things will work out in the end. Except they don't, at least not for the benighted populations. Countries like Maylasia, Botswana, and Poland trend upward, Stiglitz argues, not because they accepted, but because they refused IMF bail-out. In short, IMF is a flop unless it changes its ways. Oddly, all of this sounds vaguely radical, so one-sided has panacea talk about deregulation and free trade become. Yet his prescriptions for reform -- mildly Keynesian and participatory -- amount to little more than liberal alternatives to current right-wing monopoly. The dissent itself amounts to a barometer of the times.
Still, I question the prognosis of IMF, et. al. as a failure. Their "crisis management", it seems to me, has worked quite well for the moneyed interests who set it up. Speculators have had a field day. If Indonesia seems a risky investment, never mind, IMF policy guarantees you'll be paid back. Like the looks of that Russian steel plant, hold on, they'll privatize, then you can cherry pick. Worried about an inflated currency (the debtor's dream), sit still, never happen on IMF's watch. Despite the lofty rhetoric surrounding them, these international outfits were never set up to level a playing field for anyone. The results for developing countries are clear even when the talk is not -- a subservient role in a new world order that insists on funneling the riches upward. This is not about promoting democratic equality among nations; its about wealth and power and making sure the funnel stays where it is, in the hands of moneyed elites. And in that crucial regard, the bankers and economists of IMF have succeeded grandly. Of course, they may have to become warmer and fuzzier as a result of books like Stiglitz's, or send rock singer Bono on a pr tour, but nothing basic will change. I salute Stiglitz for trying to be a true scientist among a pack of ideologues, but he has yet to really size up the situation.
on April 1, 2003
"Globalization and its Discontents" is a great title for a book, and one can't blame Joseph Stiglitz for grabbing it. Unfortunately, the title is a bit misleading for the book he has actually written.
If you're looking for an overview of the latest round of worldwide economic integration ("globalization"), or the protest movement that has arisen in its wake (the "discontents"), you won't really find it here. There's very little discussion of the fundamental issue surrounding globalization--the pros and cons of vastly expanded international trade. You won't find more than a few passing references to the World Trade Organization, for example, or to the 1999 WTO conference in Seattle that marked the birth of the anti-globalization movement.
What Stiglitz does offer is a devastating critique of a different organization, the International Monetary Fund. "Write about what you know" is always good advice, and the author follows it here. As a former Clinton administration economic advisor and later an official at a rival organization, the World Bank, Stiglitz has a few scores to settle. He takes dead aim at the so-called "Washington Consensus"--the notion peddled by the IMF and U.S. Treasury in the 1990s that privatization, deregulation, open capital markets and balanced budgets would be a panacea for developing countries.
The Nobel Prize he garnered in 2001 for his work on market failures lends Stiglitz additional credibility as he rips to shreds the IMF's blind faith in markets--particularly free-flowing capital markets. He argues convincingly that IMF policies made the 1990s financial crises in Asia and Russia worse. And he raises many worthy questions about whether certain constituencies (namely the financial services industry) have a stranglehold over international institutions that should be serving the common good.
Most readers will emerge easily convinced that the IMF needs to be reformed and reoriented. What's missing from Stiglitz's book is any sense of whether that would be enough.
One suspects there is a need for a much broader agenda to address the defects of globalization, and to assuage its discontents. But one will have to look for it elsewhere.