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VOICE OF ELECTRICITY WORKERS
SOCIAL DIMENSIONS OF GLOBALISATION
Key players like the IMF and World Bank must become
more transparent and their voting structures must be changed to reflect the
current distribution of economic power, says Joseph E Stiglitz
The war on terrorism and in Iraq has distracted much of the world's attention
from the pressing issue of how globalization should be managed so that it
benefits everyone. A new report, issued by the international Labour
Organization's Commission on the Social Dimensions of Globalization, reminds us
how far the Bush administration is out of line with the global consensus.
The ILO is a tripartite organization with representatives of labour, government
and business. The commission, chaired by the presidents of Finland and Tanzania,
has 24 members ( of whom I was one) drawn from different nationalities ,
interest groups, and intellectual persuasions, including members as diverse as
the head of Toshiba and the leader of the AFL-CIO. Yet this very heterogeneous
group was able to crystallize the emerging global consensus that globalization,
despite its positive potential, has not only failed to live up to that
potential, has not only failed to live up to that potential, but has actually
contributed to social distress.
The fault lies with how globalization has been managed - partly by countries,
but most importantly, by the international community, including institutions
like the World Bank, World Trade Organization, and the IMF, which are
responsible for establishing the "rules of the game". The commission even
reached a consensus on a number of concrete measures to help put up a "human
face" on globalization - or at least mitigate some of its worst effects.
The gap between the emerging consensus on globaslisation, which this report
reflects, and the Bush administration's international economic policies help
explain today's widespread hostility towards America's Government.
Consider two issues that have been part of recent bilateral trade agreements
pushed aggressively by the Bush Administration. The crises in East Asia and the
recent recessions in Latin America show that premature capital market
liberalization can result in enormous economic volatality, increasing poverty,
and destruction of the middle class.
Even the IMF now recognises that capital market liberalization has delivered
neither growth nor stability to many developing countries. Yet, whether driven
by narrow ideology or responding to the demands of special interests, the Bush
administration is still demanding an extreme form of such liberalisation in its
bilateral trade agreements.
The second issue concerns the unbalanced intellectual property provisions
(TRIPS) of the Uruguay Round of Trade talks, dictated by America's
pharmaceutical and entertainment industries. These provisions restricted
countries from making generic imitations of drugs, making many critically
important medicines unaffordable in developing countries.
Spearheaded by worries about AIDS, activists around the world demanded that
something be done. Just before last year's trade talks in Cancun, the US made
some concessions, so that it was no longer the only handout. In its bilateral
trade agreements, however, the US is demanding what is becoming known as "TRIPs
plus", which would strengthen intellectual property rights further, to ensure
that countries only have the right to produce inexpensive generic drugs during
epidemics and other emergencies.
The global consensus, reflected in the Commission report, calls for more
exceptions, so that, say, drugs can be made available in any case where to do so
could save a life. To those confronting the prospect of death, what matters in
access to life-saving drugs, not whether what is killing the person is part of
an epidemic.
Bilateral agreements from the basis of enhanced ties of friendship between
countries. But America's intransigence in this area is sparking protests in
countries facing the "threat" of such an agreement, such as Morocco, and is
forming the basis of long-lasting resentment.
The commission highlights other issues that have received insufficient global
attention- such as tax competition among developing countries, which shifts more
of the tax burden from business to workers. In still other areas, the
Commission's report argues for more "balanced" perspectives. On exchange rates,
for example, it is more sympathetic towards mixed systems - in contrast to the
traditional belief that countries must choose between the extremes of a
completely flexible system and a hard peg (of the kind that contributed so
importantly to Argentina's woes).
As this example shows, bringing different voices to the table in discussions of
globalization brings new perspectives. Until now, the main worry for most
experts on globalization has been excessive government intervention in the
economy. The Commission fears just the opposite. It argues that the state has a
role to play in cushioning individuals and society from the impact of rapid
economic change.
The way that globalization has been managed, however, has eroded the ability of
the state to play its proper role. At the root of this global political system-
if such it can be called. Key players like the IMF and World Bank must become
more transparent and their voting structures must be changed to reflect the
current contribution of economic power - as opposed to that prevailing in 1945 -
let alone to reflect basic democratic principles.
Whatever one thinks of the many concrete suggestions made by the Commission,
this much is clear: we need a more inclusive debate about globalization, one in
which there is more focus on the social dimensions of globalization. This is a
message the world would do well to heed, lest discontent with globalization
continue to grow.
(The Author is professor of economics at Columbia University and a member of the
Commission on the social Dimensions of Globalization. He received the Nobel
Prize in Economics in 2001. (C) Project Syndicate, March'04)
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