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Looking for an invisible hand

Statesman News Service | New Delhi |

Joseph E Stiglitz, who was awarded the Nobel Prize in 2001, for his theories in economics, worked for the World Bank from 1997 to 2000 as senior vice-president and chief economist.

Before he left, he wrote Globalisation and its Discontents and subsequently, Making Globalization Work. During 1993 to 1997, he was in the White House, as chairman of the Council of Economic Advisers, under President Clinton.

He described the years at the White House as “tumultuous,” because the 1997-98 East Asian financial crisis pushed a few of the most successful developing countries into unprecedented recessions. He asserted the developing countries did not always do their best to redeem the uncertainty and instability in an uneasy world.

In fact, Stiglitz was convinced that advanced industrial countries through international organisations like the International Monetary Fund or the World Bank were not doing all they could to help countries that needed them. He felt that IMF programmes “worsened the East Asian crisis.” The former Soviet Union suffered in its transition to shift from communism to a market economy.

In his books he wrote convincingly because Stiglitz had a unique advantage of seeing policies formulated within the White House and the World Bank where he worked alongside developing countries to make strategies to enhance growth and reduce poverty. As an economic theorist he spent nearly 40 years in understanding the strengths and limitations of the market economy.

During his years in Washington he travelled the world and interacted with many government leaders. Those interactions helped him assess the successes and failures . The essence of globalisation is the process by which businesses develop and in turn, start expanding on an international scale. President Clinton asked Stiglitz to continue working at the White House but he declined as he thought it was unfair that in a “world of richness and plenty, so many should live in poverty.”

He knew that the World Bank would provide a platform from where he could protect the interests of developing countries. He visited countries where poverty was increasing. China entered the global scenario as a major manufacturing economy and India succeeded in outsourcing; this has compelled changes in global policies and thought.

For example, we are well aware of President Trump’s stringent visa rules for India’s IT professionals wishing to work in the US. However, Stiglitz cautions that “Economic success requires getting the balance right between the government and the market.” He questions the service governments should provide.

Should there be public pension programmes? Should they encourage certain sectors with incentives? What regulations should they adopt to protect workers, consumers and the environment? But Stiglitz has observed that as globalisation has been pushed it has become more difficult to find the requisite balance.

He asserts that pushing its interests, globalisation need not be bad. It does not have to increase inequality or advance corporate interests at the expense of the well being of ordinary citizens.

Stiglitz recalled how the UN and different NGOs had gathered in Mumbai in January 2004, for the World Social Forum. There were debates about how to restructure institutions that “run the world, and how to rein in the power of the United States.”

The concern was globalisation and that change was imperative. It was summed up by the motto of the conference — “Another world is possible.” Activists at the meeting heard about the promises of globalisation — that it would improve the lives of everyone. Unfortunately the reality was something different.

Some were doing very well while others were“worse off.” Participants felt that globalisation was a part of the problem. Economic globalisation entails the combination of the international flow of ideas and knowledge, sharing cultures, and the concern for our environment.

Above all, the great hope for globalisation is that poorer countries will be given access to overseas markets, open borders for people to travel abroad to get educated and offered work, and to send home their savings to help their families and fund new businesses.

Stiglitz has defined these wonderful advantages of globalisation and its tremendous potential to benefit both the developing and developed world. But he asserts that proof is overwhelming that globalisation has failed to live up to this potential. He has expressed that the problem is not with globalisation itself but the way it is being managed.

He traced the first major protest against globalisation in Seattle, US in 1999. That brought about an awareness of globalisation’s problems. Factory workers in America sensed their jobs were being threatened by competition from China and farmers in developing countries saw their work threatened because of subsidised crops from the US.

At the end Stiglitz rationalises that “Democratising Globalisation” is essential. The international community can certainly create the environment for development but the benefits of development must be shared by all including developing countries themselves.

Adam Smith, in his book, Wealth of Nations, published in 1776, writes of “the invisible hand”, when he refers to an unseen mechanism that maintains equilibrium between the supply and demand of resources. That invisible hand could manifest itself if countries worked in harmony enabling globalisation to succeed.