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Summary Readings GPE 2nd half (final)
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Readings week 7Joseph Stiglitz: “Introduction.” In Globalization and Its Discontents Revisited.
- World economy after 1945 characterized by integration
- However, many are unhappy with globalization
➢ The global south + middle and lower classes of advanced industrial countries
- Trump and his voters feel disadvantaged by the rules of globalization and
management of international organizations while the US and other advanced countries
themselves set up the rules of the game
- David Ricardo and Adam Smith argued that globalization is beneficial to all countries
- But then why are so many people discontent?
➢ Neoliberalists: people are better off under globalization (open markets, free
trade etc) they just don’t know it. Their discontent is a matter for psychiatrists
not economists
- However, there are many reasons that explain people’s discontent in advanced
countries
➢ Stagnant income
➢ Numbers in poverty are increasing
➢ Trying to do better (moving up the ladder) comes with a lot stress => health
consequences. This combined with inequality and absence of adequate health
safety nets => high mortality rate of middle-aged white males in the US while
this number elsewhere in the world is decreasing (caused by social strains)
➢ Middle and income classes have experienced stagnation
- Global south victims of the ‘unfair’ rules of globalization
- The only winners are the global 1 percent and the middle classes in India and China
- The liberalized, globalized free market economy has not been delivering for large
parts of the population
- Globalization could have benefitted all but has been mismanaged + the outcomes are
not inevitable
➢ Could’ve led to more growth, stability and equality
- Benefits of global economic order
➢ Creating the fastest rate of economic growth ever
➢ A lot of people have moved out of poverty
➢ Rule of law has been key in the success of advanced economies => this also
holds internationally
➢ UN succeeded in reducing conflict and protecting children and refugees
➢ Global diseases have been reduced
=> Remarkable achievements in a relatively short period of time and in which
globalization has played a key role
- Mismanagement of trade globalization
➢ Big corporations only concerned with increasing profits => while it was good
for the country as a whole (GDP up) it wasn’t good for everyone within that
country
➢ So agreements were unfair: in favour of big corporations and against workers,
whether in advanced or developing countries => within each country there are
winners and losers => growing inequality
➢ Benefits could’ve been shared among everyone but the rich were selfish
, ➢ Weakening communities => before, when companies grew executives and
workers prospered together, however now, split management and segregated
living
➢ Globalization came with outsourcing which increased separation
➢ Communities relying on manufacturing decayed => cheaper sources elsewhere
- Common themes in discontent with globalization (both prominent in developed and
developing countries)
1. The benefits of globalization have been less than what the advocates claimed
2. Because globalization had been oversold, when reality differed from promises
confidence in globalization waned
3. Globalization has huge distributive effects on income and wealth
4. Failure of globalization as the result of deficiencies in governing globalization
5. Particular ideology of only a small group of people; the financial and
corporate interest
6. Globalization has large effects on the distribution of power, both within and
between countries
7. Globalization put a greater burden on governments to offset its adverse effects
on many on the bottom. But at the same time it reduced their capacity to deal
with the problems = race to the bottom among countries offering low tax rates
to corporations
➢ It would’ve been no more difficult to have international agreements
circumscribing global tax avoidance than to have international
agreements over trade. But it was in the interest of corporations to have
global trade agreements.
- To make a change is difficult because corporate forces that have facilitated
globalization are not going to willingly give up their power
- Scandinavian countries managed well
➢ Shows that inequality is not just the result of laws of economics but also of
government policies
- Washington Consensus: directed at developing countries but imposed by developed
countries that didn’t face the negative consequences of globalization
- Key difference of globalization’s impact on developed and developing countries
1. Rules of the game have been set by advanced countries so globalization has
largely benefitted these countries
2. Advanced countries have the resources and and capabilities to ensure that all
within their borders benefited. Developing countries typically have less
capabilities to do so.
- Changes in globalization is the twenty-first century
➢ Conflict not between workers in developed countries and those in the
developing but more between workers around the world and corporate interest
=> has lead to backlash against globalization
➢ Author: globalization as a positive sum game: workers in both developed and
developing countries gaining
➢ Trump and other protectionists: globalization as a negative sum game:
everyone is likely to lose, including the workers in the developed countries
➢ Author believes there are ways to reform globalization to ensure most, if not
all, citizens benefit
➢ Trade agreements have largely benefited developed countries
, ➢ American unipolarity
➢ 9/11: globalization: not only good things move more freely but also bad things
➢ 2008 crisis hit very hard
=> These factors gave rise to skepticism about globalization
➢ US lost much of its soft power due to hypocrisy @ trade agreements, the Iraq
War and how it treated the poor in its own country
➢ Uncertainty about what globalization is going to look like under Trump
➢ This uncertainty blocks trade and economic integration
- Inequality between North and South: several changes over the past years have
heightened the sense of injustice
1. Heightened awareness of climate change => rise in greenhouse gases coming
from the developed world while the costs are being borne by the developing
world
2. Unforeseen consequences of the East Asia crisis and the way it has been
mismanaged by the IMF => Asian countries saw the benefits of globalization
but also understood the risk that came with the openness => countries typically
hold reserves in US T-Bills (lending to the US at a really low interest rate) but
they borrow money from the US at at much higher rates: massive money
transfer from poor countries to the US. Solution: global reserve system:
however US opposed it because it wouldn’t benefit as much as current affairs
so nothing happened
3. Increasing importance of intellectual property and the payments that came
with it => most of the patents held by the North so rise in money flows from
the South to the North
4. The model of export-led manufacturing growth that had been the basis of the
success of East Asia may well be coming to an end => population growth in
Africa is huge but there are not enough jobs: immigration pressures
5. Increasing economic power of emerging markets
- Disconnect has grown between economic realities and the views that were hold at the
end of the end of WWII = need for economic rebalancing
➢ 2008 crisis: global problems need to be solved globally and not only by rich
countries
➢ As the crisis faded, disagreements about the direction the global economy
should take prevented much progress in redefining globalization
➢ Perhaps most important achievement was the Paris Agreement
➢ US has a hard time adapting itself to a world in which its relative economic
power has diminished
➢ Rebalancing globalization to give more voice to developing countries will not
be easy, especially so long the US maintains an ‘America First’ position
- Three ways forward
1. Doubling down on the Washington Consensus
➢ A form of the WC: a continuation of the structure of globalization
much as it has been, with rules set by large corporations in advanced
countries
➢ Author expected that this was going to be the way it would go
➢ Globalization as it’s being structured is unsustainable
2. The new protectionism
, ➢ Retreat into protectionism as another way to responding to the
challenges of globalization
➢ New protectionist policies (destructing globalization) will only lower
the living standards of those this should be beneficial for
➢ Nostalgia => the days that that the US dominated (right after WWII)
=> Trump is promising to bring this period back
3. Fair globalization with shared prosperity
➢ Managing the consequences of globalization within each country to
ensure that fewer lose as the result => globalization has not worked
well at the global level: repeating crises, declining food prices
pressuring farmers in the developing world
➢ Rewriting the rules of globalization in ways that are fairer to
developing countries and less dominated by corporate and financial
interest
- Scandinavia as a good example: too small to rewrite the rules of the game so they
turned inward and made sure no one as left behind
Martin Wolf: “The liberal international order is sick.”
The US and its partners built a multi-faceted and sprawling international order, organised
around economic openness, multilateral institutions, security co-operation and democratic
solidarity. This system won the cold war. That victory, in turn, promoted a global shift
towards democratic politics and free-market economics.
Today, however, the liberal international order is sick
- Democracy is in crisis
➢ Promising countries (in terms of democracy) are sliding into authoritarian rule
(e.g Turkey)
➢ US has withdrawn its moral support, Trump even shows sympathy for
autocrats abroad
- Under Trump, the fabric of international cooperation has been questioned
➢ US proclaimed its intention to look after its own interests
- World economy could be in better shape
- China controlling the flow of ideas
Why has this happened?
- Changes in the world
➢ Declining relevance of the West as a security community after the end of the
Cold War
➢ Diminishing economic weight, especially in relation to China
- Domestic changes
➢ Many in high-income countries feel that the liberal global order to which their
countries have been committed has done little for them. It is generating,
instead, the sense of lost opportunities, incomes and respect
=> The crisis of the liberal order is a crisis of legitimacy and social purpose
Trump’s program = pluto-populism = is a result of the factors mentioned above
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