Joseph Stiglitz, winner of the 2001 Nobel Prize in Economics, gave a
lecture titled "Globalization and Public Policy" at Hamilton on April
8. Stiglitz has served as a member of the Council of Economic Advisors
and as Chief Economist and Senior Vice President of the World Bank, and
he is currently a professor at Columbia University. His lecture
addressed the ways in which globalization and public policy have
interacted in recent years, as well as the continuing debate over who
benefits from globalization. His appearance was part of the Arthur
Levitt Public Affairs Center's spring 2005 speakers series. Ann Owen,
Hamilton professor of economics and director of the Levitt Center,
introduced Stiglitz by saying that he is an ideal speaker to bridge the
gap between academic economics and public policy for students.
Stiglitz
began his lecture by discussing the riots at the December 1999 round of
trade talks in Seattle, WA. Before this event, public attention was not
as focused on the issue of globalization and its potential drawbacks.
In fact, said Stiglitz, the dissent surprised proponents of
globalization who believed that the process was making everyone better
off around the world. The controversy generated at the Seattle round
increased public and media interest in investigating what globalization
was actually doing. After this, Stiglitz said, it became clear why the
protesters had concern about the trade talks -- globalization had
certainly made some richer, but statistics show that the poorest
countries have gotten poorer as well. They have been made worse off, in
Stiglitz's opinion, because of the asymmetrical nature of the trade
agreements that have grown out of globalization.
The
current trade agreements in agriculture are a prime example of this
asymmetry said Stiglitz. "The US maintains agriculture subsidies
greater exceeding the total income of sub-Saharan Africa. How can they
compete?" Subsidies, such as the $3-5 billion given to US cotton
farmers, lower the global price of cotton and hurt 10 million
sub-Saharan cotton growers. The asymmetry also occurs in the trade of
manufactured goods, with escalating tariffs on industrial products
targeting the poorest countries, Stiglitz said.
Intellectual
property rights have become important because of a change in global
economic architecture, Stiglitz continued. Currently only 13-14% of US
production is in manufacturing, with much more production in the
service and information sectors. Intellectual property rights interfere
with economic efficiency and create monopolies, which Stiglitz pointed
out is not usually a goal of trade. However, these intellectual
property rights are maintained because they provide an incentive for
research and development. During the 1994 Uruguay round of WTO talks,
Stiglitz and the Council of Economic Advisors opposed a policy of
unbalanced intellectual property rights called TRIPS because it would
deprive lesser developed countries of life-saving medicine and
technology. However, the US trade representative has the final say on
the trade negotiations. These trade reps are accountable to
multinational corporations and banks and understand profitability and
market access, Stiglitz said. This issue continues to be controversial
in the area of AIDS medications for Africa.
Developed
countries have not followed up on their promises to promote development
through trade liberalization. Since 1994, US subsidies have doubled,
Stiglitz said. He called the 2003 Cancun round of negotiations, at
which developing countries began to demand more fair trade agreements,
a "victory for democracy." These talks had greater transparency and
press coverage, less hardnosed bargaining on the part of developed
countries, and a greater awareness of what globalization is doing to
lesser developed countries.
Stiglitz continued by talking
about the effect of globalization on America. While the US as a whole
has benefited enormously from globalization, he said, not everyone in
the nation is experiencing the benefits, and the winners are not
compensating the losers. The US also has a large trade deficit, which
Stiglitz called a problem of macroeconomic mismanagment.
Stiglitz
finished his lecture by talking about global financial markets. The
global reserve system in which countries hold US dollars as reserves
essentially mean that all countries are lending money to the US at a
very low interest rate, while the US is often lending them money at a
much higher rate. Essentially, Stiglitz said, in a sense the United
States is getting more foreign aid than it gives out, and this system
will eventually have to break down. This is particularly true now that
the US dollar is not as reliable a store of value as it once was.
The
rule of law is beginning to make its force felt in international trade
and globalization now, Stiglitz concluded. At least today, he said, the
powerful are now being held accountable for the effects their economic
behaviors have on others, and 2-3 billion new people are being
integrated more equitably into the global economy.
-- by Caroline O'Shea '07
