Making Globalization Work Paperback – September 17, 2007

Three years ago, I was a little freshman economics student at a small college. My World Politics professor assigned me this book to read halfway through the semester, and I am quite happy that I read it. Stiglitz is blessed with both brains and writing ability, something that too many economists do not have (I'm looking at you, Wall Street Journal), and puts it to good use. Although the organizations of the Washington Consensus that Stiglitz criticizes have taken efforts to mend their ways (and he does concede this), Stiglitz does an exceptional job of summarizing much of the baggage that international policy makers carry from their past mistakes.
The largest criticism that people have of the book is that much of what he says has been said by other people. This is true. But those other people can't write and aren't remotely as accessible as Stiglitz is. If you're looking for a good jump-in, read this book.

There is a breed of economists who have what can only be described as a mystical reverence for the market. To them Adam Smith's `invisible hand' is not a merely a literary conceit but an actual force like electromagnetism or gravity. Following the advice of Milton Friedman these economists would privatize literally everything from primary education to road maintenance to social security. The government would act as a modest referee deciding property rights as well as defending borders. This is the mindset under which the IMF and World Bank operate. It's the "Washington Consensus", a one-size-fits-all solution to all economic problems and it's been active for decades using the indefatigable wisdom of the "free market" to solve all the world's ills.

The problem is that the "Washington Consensus" as instituted by the IMF and World Bank has had disastrous results in many countries around the world most notably Russia. As the chief economist of the World Bank from 1997 to 2000, Joseph E. Stiglitz is probably a pretty decent source to go to for on why so many countries AREN'T booming after instituting IMF imposed "structural adjustments". The author offers Argentina as an example of a country which received an A+ rating from the IMF for following the Washington Consensus only to face financial calamity a few short years later.

As the author puts it, one of the main problems is that, "the Washington Consensus prescription is based on a theory of the market economy that assumes perfect information, perfect competition, and perfect risk markets". Mr. Stiglitz writes, "policies have to be designed to be implemented by ordinary mortals". Economists seem to have become so enamored by the blackboard theories behind pure free market economics that they ignore the reality of its results. Even worse, when economies follow the IMF's prescription and fail they're blamed for not adhering CLOSE ENOUGH to the IMF/World Bank dictates.

The other main problem is that the Washington Consensus is being instituted in countries that simply do not have the institutions necessary for a free market economy including strong property rights, an established tax base and the means to enforce the rule of law. The shock treatment in Russia allowed money to flow freely in order to stimulate foreign investment but all it caused was the money to drain right out. The IMF/World Bank are very inflexible for instance they admonish countries for deficit spending, in order to stimulate the economy, even when a country has accrued a considerable amount of savings. At the same time the IMF/World Bank encourages low tax rates meaning that even modest economic stimulants can push a country into deficit spending. The scary thing is that even if a country doesn't currently have loans with the IMF/World Bank they can still fear bucking the Washington Consensus given that a poor report from the IMF/World Bank can potentially scare away foreign investments.

The author wisely points out that economic growth is only real if it is sustainable. American neo-conservatives love to crow about their pro-growth support but growth is pointless if you destroy the environment and rip up all the natural resources in a few decades. Using GDP as the de facto benchmark of a countries economic progress can be very misleading. As a case in point the author offers up oil production. The faster a country can rip oil out of the ground the higher its GDP will rise but in truth the country may well become LESS valuable as its resources are depleted. Compounded that with environmental damage, that isn't being factored into the equation, and a country can become poorer as its GDP rises. This is not just some abstract case but a situation that occurs frequently.

The author discusses a lot more topics including the often anti-democratic nature of the IMF/World Bank, issues of asymmetric globalization between developing and developed nations, the stifling nature of over patenting, subsidies versus tariffs. For an economics book I found it to be very readable and extremely enlightening. Mr. Stiglitz is clearly on the progressive side of the political spectrum which is evident by his concern for the inequity in globalization. Fortunately the IMF and World Bank seem to be adjusting somewhat to the reality that strict adherence to the Washington Consensus isn't the end all be all solution. Hopefully this is a sign that the times are a changin'. Hopefully.

this is not only about economics, but about how the world could live together, the chapter on global warming is particularly illuminating, it exposes the hyprocrisy of u.s. politicians and businesses, and suggested effective way to combat it, WTO and other national leaders should read this chapter

Wow this book has some serious knowledge and insight that everyone should really take the chance to read.
I had to buy this for a class but actually learned a lot about how globalization has affected different parts of the world.

The book explained well why IMF or World Bank makes it worse when developing countries try to overcome economic hardship desperately following recommendations from these entities. It is so unfortunate to see similar economic approach is still taken to the problem solutions for Greece or Spain. Proud policy makers in the U.S. or Europe never learn how to regrow the economy of these countries as they are too busy to worry about credit holders. The writer clarifies well what is wrong with the traditional Washington economic policy believing in economic myth of the perfect market.

As some have stated, this is a somewhat "dry" read, in that Stiglitz is by no means an eloquent writer. He is, however, knowledgeable, intelligent, and seems to truly care for humanity. Making Globalization Work is an important overview of globalization and the problems it has created and continues to create. Stiglitz makes very reasonable suggestions as to how to improve a situation under the current global system, and his ideas ought to be considered seriously. It is not a "fun" read by any means, but it is certainly worth reading.