From Socialist Worker, No.1808, 13 July 2002.
Copied with thanks from the Socialist Worker Website.
Marked up by Einde O’Callaghan for the Marxists’ Internet Archive.
ONE SINNER come to repentance is worth 99 righteous men, says the Bible. One economist who used to be at the centre of running the supposedly “free” market system can provide criticisms of its functioning even more damning than those who have never trusted it.
In the 1990s Joseph Stiglitz was chair of US president Bill Clinton’s Council of Economic Advisers, and a member of the US cabinet. He then went on to be chief economist and vice-president of the World Bank. Now he has produced a sharp attack on the present version of “globalisation” (often called the “Washington Consensus”) and the institutions that oversee it-the International Monetary Fund (IMF), the World Trade Organisation (WTO) and even the World Bank, in which he was a key figure:
“A growing divide between the haves and the have-nots has left increasing numbers in the Third World in dire poverty living on less than $1 a day. Africa plunges deeper into misery, as incomes fall and standards of living decline. The hard won improvements in life expectancy gained in the past few decades have begun to reverse. If globalisation has not succeeded in reducing poverty, neither has it succeeded in ensuring stability. Crises in Asia and in Latin America have threatened the economies and the stability of all developing countries. The introduction of a market economy has not produced the promised results in Russia. Instead, it brought unprecedented poverty-in many respects, for most of the people, the market economy proved even worse than their Communist leaders had predicted.”
If this message is the opposite to what we hear every day from media commentators and New Labour politicians like Clare Short, so too is his response to the chain of protests that began at Seattle:
“International bureaucrats, the faceless symbols of the world economic order, are under attack everywhere. The protests at the Seattle meeting of the World Trade Organisation in 1999 were a shock. Since then the movement has grown stronger and the fury has spread. For decades, people in the developing world have rioted when the austerity programmes imposed on their countries proved to be too harsh, but their protests were largely unheard in the West. What is new is the wave of protests in the developed countries. When there is no alternative way to press for change, people riot.”
Stiglitz’s harshest attacks are centred on the way the International Monetary Fund has reacted to the economic crises besetting the Third World and the former Communist countries over the last decade.
He tells how the IMF creates the conditions which inevitably lead to repeated crisis by insisting that countries “liberalise” capital movements, so giant companies and the rich can easily move their wealth from country to country. This leads to flows of wealth into countries and so raises the exchange rates of their currencies.
Banks encourage what is for them a profitable orgy of borrowing, and luxury imports surge. But exports are hit as the higher exchange rates makes them expensive for people elsewhere in the world to buy, and many workers lose their jobs. Suddenly everything goes into reverse. The excess of imports over exports creates a panic.
Giant firms and the rich begin moving their wealth abroad. The currency begins to lose its value, and the government, unable to pay its bills, turns to the IMF.
The IMF has a simple response which it gives to each and every request-we will lend you money providing you use it to stop the value of your currency falling, raise interest rates, make it even easier for wealth to flow in and out of your country, privatise industries and cut welfare benefits. These policies, Stiglitz points out, have three effects. They enable the rich and big companies to take their money out of the country without suffering from a falling exchange rate.
They devastate the conditions of the mass of people. And they reduce even further the demand for goods, causing a crisis which tends to spread to hit other countries:
“The IMF money ... enabled the countries to provide dollars to the firms that had borrowed from Western bankers to repay the loans. It was thus, in part, a bailout to the international banks. And rich people inside the country took advantage of the opportunity to convert their money into dollars at the favourable exchange rate and whisk it abroad.”
This happened in Mexico in 1994-5, in several Asian countries in 1997 and, most spectacularly, with the IMF loan to Russia in 1998. Today it is the turn of Turkey and, most painfully, Argentina to bear the consequences of such policies.
STIGLITZ IS just as scathing about the World Trade Organisation, which is presented by people like Gordon Brown and Clare Short as a friend to Third World countries:
“In the most recent Uruguay round of trade negotiations markets opened mainly for the services exported by the advanced countries-but not for the developing countries. The United States bragged about the benefits it received. But one World Bank calculation showed that sub-Saharan Africa, the poorest region in the world, saw its income decline by more than 2 percent as a result of the trade agreement.”
Why do these things happen? In part Stiglitz attributes them to the ideology of neo-liberalism, which over the last quarter of a century has displaced the old “Keynesian” view that governments had to intervene to deal with the “mistakes” of the market.
But he also sees powerful forces backing the neo-liberal ideology. These are the “interests” of “the financial community” – in other words, the great banks. Stiglitz is not a “conspiracy theorist”, he insists. But he argues that the “mandate” of the IMF has changed “from serving global economic interests to the interests of global finance. Capital market liberalisation may not have contributed to global economic stability, but it did open up vast new markets for Wall Street.”
It is such interests that Stiglitz sees as behind an ideology that has brought about such a disastrous form of globalisation:
“The workers who are thrown out of jobs as a result of the IMF programmes have no seat at the table, while the bankers, who insist on getting repaid, are well represented through the finance ministers and central bank governors.”
This does not mean that Stiglitz has become a revolutionary, or even a socialist.
His attacks on the IMF, the World Bank, the WTO and international finance do not extend to the capitalist system as a whole. He believes it can be reformed and made to work if only people like himself can weaken the grip of the financiers. This leads him to extol certain governments for ignoring the IMF approach – the Malaysian government, the Chinese government, the Polish government, even though two of these are dictatorial and the third has run into a deepening economic crisis since Stiglitz’s book was written.
With unemployment now running at 20 percent in Poland, even the Financial Times business paper was forced to admit last week, “Many Poles are wondering what happened to the promised benefits of the market economy. Popular resentment is rising.” Privatisation, “liberalisation” and globalisation are acceptable to Stiglitz, providing they are carried out more slowly and with more concern for people’s well-being than at present.
Centrally, he nowhere recognises that the great non-financial corporations – Monsanto, News International, Boeing, General Motors, Chiquita – are just as ruthless and just as damaging to humanity as the banks and the IMF. There is no point in challenging one lot without challenging the others. And you cannot successfully challenge either without taking much more forceful, revolutionary action than Stiglitz contemplates.
For all that, his book is a fascinating account from the inside of the rottenness and destructiveness of the system.
Last updated on 11 December 2009