The pact with the devil by Joseph E. Stiglitz


The Nobel prize-winner for Economics, Joseph Stiglitz has sent me a letter and given two interviews. One is on globalisation and is published below. The other is on video and is about work and poverty.

"Dear Beppe,
maybe we need a RESET; before that we can try to put a grand of sand in the machine. This is what I'm trying to do as an economist.
For much of the world, globalization as it has been managed seems like a pact with the devil. A few people in the country become wealthier; GDP statistics, for what they are worth, look better, but ways of life and basic values are threatened … This is not how it has to be.
We can make globalization work, not only for the rich and powerful, but for everyone, for those that live in the poorest contries too. The task is difficult and requires time. We waited too much: the time to get working has come.

1. In your book you suggest a non-Washington consensus approach to globalization. How can it be applied if the "powerful" institutions (FMI, Treasure etc) are against this approach?

First, developing countries are working to achieve independence from the IMF—and trying to make sure that they do not again become subjected to its dictates. Almost all have paid back was owed, earlier than required, simply to get the IMF off their backs.
Secondly, Argentine has shown that strong willed governments can stand up to the IMF. It simply refused to be cowed. It said that it wanted to have an agreement with the IMF, but it recognized that a bad agreement was worse than no agreement. Not only did it succeed in negotiating a better deal with its creditors than it would have done, had it listened to the IMF, it managed to grow, and grow rapidly, for the first time in years; and for the first time in years, it managed to balance its budget—bitter irony for the IMF who had subjected Argentina to all kinds of misguided policies, all in an attempt to get rid of its deficit.
Finally, there is a drive to reform the IMF itself, a drive which is bearing some fruit. At its meeting in September in Singapore, the IMF admitted the flaws in its governance (though it itself has severely criticized governance in developing countries), and gave more voting power to four of the most underrepresented of the developing countries. But some of the most important flaws remain—the U.S. remains the only country with the veto power, the way its head is chosen does not accord with the kinds of democratic procedures that we take for granted in our own democracies, and it is still not conform to principles of transparency that are accepted in the United States, Sweden, and other democracies.

2. Do you foresee a role for a consumer-network via internet? (e.g. boicott strategy of polluting firms etc)

Global civil society has already managed to show its effectiveness, for instance in getting debt relief (in 2000, the Jubilee 2000 movement) and in the Lands Mine treaty. The internet is an important tool for organizing across the world—and so I do for see a potential role for a consumer-network via internet, to help organize and mobilize consumers on subjects of their concern. Consumers are one group in our society whose voices are not heard, or at least not heard as much as they should. For instance, in government, there are several ministries devoted to looking after producer interests, but in few countries is there a ministry to look after consumer interests.

3. Can capitalism self-correct its behavior? After all, your asymmetric information approach discarded the mainstream economics (which justifies the Wash. consensus), but it is still dominant in the economic profession.
The theories that I (and others) helped develop explained why unfettered markets often not only do not lead to social justice, but do not even produce efficient outcomes. Interestingly, there has been no intellectual challenge to the refutation of Adam Smith’s invisible hand: individuals and firms, in the pursuit of their self-interest, are not necessarily, or in general, led as if by an invisible hand, to economic efficiency. The only question that has been raised concerns the ability of government to remedy the deficiencies of the market.
Within academia, a significant fraction of economists are involved with developing and expanding on the ideas of imperfect information (and imperfect markets) that I explored. For instance, Edmund Phelps, this year’s Nobel Prize winner, belongs to this “school” of thought. But in political discourse, simplistic “market fundamentalism” continues to exert enormous influence.

4. When US refuse to apply the Kyoto protocol, one may say there is a Government financial aid in action?

In my new book Making Globalization Work, I devote a chapter to the question of global warming. As with so many other aspects of globalization, it is the poor that are most vulnerable, the most likely to suffer. For instance, a third of Bangladesh will be underwater, and the country will suffer from increasing flooding—an already impoverished country will become even poorer. It is not a question whether the American economy can afford to take actions—indeed, it is increasingly clear that the question facing the world is whether we can afford not to take action. But by not forcing American firms to take account of their global pollution, American firms are given a financial advantage over firms from the rest of the world. This is unfair, and I show in my book how the WTO—which is suppose to create a level playing field—can be used to force America to withdraw what are in effect unfair subsidies to its polluting producers.

5. Which kind of jobs for our kids: flexible and precarious?
Increasingly, life time employment will be a thing of the past. People will have to move from job to job over their life time, and one of the challenges of our educational system will be to prepare our young people for these transitions; and one of the challenges of our social system will be to enable people to make these transitions with as easily as possible. There will more precariousness than in the past, more risk, but we can reduce the social consequences. For instance, in America, individuals depend on their employers for health insurance; when they lose their job, they lose health insurance, and, if they should have an illness during these periods between jobs, it can have lifetime consequences. This should be intolerable. Globalization has been used as an excuse for weakening social protections; rather, the increased precariousness of employment is a reason we should be strengthening social protections. (Of course, we need to work to make sure that they are well designed, and sometimes, in the past, they have not been. But this is not a justification for doing away with social protections.)

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giuliana capo....
how ignorant can you be?
I can only assume:
a) you have not read much
b) you are like your president, don't like, don't know how to read
c) you are a stupid teenager
d) you do not what freedom is even if it bit you in your fat ass
e) you are retarded.
your views are obnoxious and arrogant...get a grip

Posted by: reniec | November 1, 2007 04:08 AM

Where can I lead medical health insurance companies, Blue Cross, Blue Shield, Aetna, Humana, Unicare, Anthem, Carefirst, and more! Thanks. WBR LeoP

Posted by: Leo | January 20, 2007 11:07 PM

The government should organize easy access to Medline and Health topics, medical dictionaries, directories and publications. WBR LeoP

Posted by: Leo | January 20, 2007 01:17 AM

Pretentious .....It is amazing that even Gore Vidal (I love him) , who has lived in Italy for a long while, at the question "what do you think of Italy" answered "cheos " to say caos . Maybe my remark looks a formality but it is not.The most people I know in USA don't speak even spanish ....I really don't know how they can afford it as the spanish component is everywhere and it is they best resource they have.
In our liceos we still have ( I got out from there a while ago so I hope it is still like this ) had(?) teachers who teach latin and greek .....of course a country which should live on tourism should throw all that old stuff away....? We could all have a nice vacatiuon in Dubai or in one of those nice resorts that some company is building around ....vacation is really one of the most funny business .

Posted by: giuliana capo | January 14, 2007 06:01 PM

Eres I did live in America,my experience has been very positive, but as far as to say that American are free I disagree with you,I do not know where you lived in the State, if you gone there in vacation, or else,because it makes a big difference,I for myself wouldn't live there even if I get paid,a country that spent billions to go to space and wars, and have his owns people living in cardboard box I think miss something,is not a society I like, there are country like New Zealand ,Australia where there are more freedoms and better society as a whole,by the way the Americans and Google in particular have a office where are recruiting young mathematician and computer whiz they are not the only one to provide genius mostly are imported,and by the way if you ask them where Australia is most of them do not know,great to be ally with them,cheers

Posted by: eva kulnura | January 14, 2007 07:46 AM

Querida Eres Unica,
That is a great little post. I just got back from wacthing the footie/soccer (I know, I know it's a weakness of mine) and I just read your post. You're right we have a disagreement. I wish I could have this kind of disagreement more often. Nowadays people are so preconceived that comunication has become almost impossible so I appreciate the way you expressed your different point of you. I also have to take on board what you said about the american education system, you seem much more informed than me about that. Said that, I remain of the opinion that real freedoms in america have been seriously undermined in the name of profit maximazition and a relentless pursuit of power. What you say about Cuba and other communist regimes(because that's what they are) is spot on. I despise any kind of authoritarian goverment and I am adamant that the soviet and cuban comunism negate basic freedoms that maybe are enjoyed by americans. I perfectly understand that free press is still allowed in the US (I immensely enjoyed CITIZEN BERLUSCONI from wide angle by the way) what bothers me most about americans is that they are so pretentious. They want to bring democracy everywhere and yet they are the most belligerant country on the planet. They want to declare war to Korea and Iran because they are building a nuclear bomb, Yet the only country that has ever used an atomic bomb on innocent civilians is The US. Comunism you may argue has undermined the basic freedom of millions of people and made the poor part of the population even poorer. The United States of America denyed the most basic and important freedom of all. The right to exist.
I strongly suggest you try this sardinian wine (if you can get hold of it) MANTEGHIA the producer is CAPICHERA you won't be disappointed darling! Besos

Posted by: piero sanna | January 14, 2007 02:16 AM

I have the feeling that the system which USA have diffused and of which they are the supreme expression does not work (as the video perfectly explain ) also for the USA in the long run.
So no greatness for anybody ......
What a dream if they could realy seat around a table and speak with the other countries ....

Posted by: giuliana capo | January 14, 2007 12:19 AM

Dear Piero,

We have a disagreement. In my opinion, America is a free nation; you think otherwise.

That's fine. This is exactly what free people do. They can speak their minds freely without fearing a government or police or political institution to punish us. In Cuba, for example, they simply cannot have access to internet and there is no free press... and dare to try to sneak info into the country (has anybody said "jail"?)

Last time I checked, people gather anywhere to criticize President Bush; they fiercely show their disagreement with him. The free press criticizes him openly and subtlely... Nothing happens to them as a result...

You have formed an opinion against the United States... yet you forgot that most of Europe is free thanks to the same USA.

You repeat the same old negative and pessimist opinion about the education in American schools; yet you forget that the liberal educational system produces the most amazing professionals in every field of science. Not everyone knows Algebra 2, yet, in every high school in America, there are a few classes for advanced Honors pre-calculus (and other advanced classes in science, language, social studies) at college level for kids who are only 15-18 years old.... (thousands of high school across the land = you do the math)

Freedom is important. America's greatness is based on it. I know it is difficult to see it if:

1. you have not lived in America,
2. you belong to the blame-America-first crowd,
3. you have a marxist background (influenced by Soviet propaganda)
4. you are misinformed,
5. you are retarded...

I don't mean this an offense to you, by the way. You are very smart and I enjoy your wonderful points of view. We just have a disagreement. I know you value freedom as much as I do... we just see the same social phenomenon from different points of view...

And, in my book, that is marvelous as long as we don't silence each other!

Let's have some wine and some good Italian cheese!

Posted by: Eres Unica | January 13, 2007 06:43 PM

Eres unica I agree when you say that populist goverments are bad for democracy and what they are really after is seizure of power. What I totally disagree with is your point of view on The US. Let's not be fooled by appearences here! You define America like a beacon of fredoom and you suggest that americans can criticize whatever they want. Are we really sure about that? Don't you think that it is somewhat peculiar that in a country populated by hundreds of millions of people only a bunch of protesters gathered against the decision of sending 21.500 more soldiers in Iraq? Or that every single broadcasting service refused to show loose change or confronting the evidence? The FDA recently ruled that cloned meat won't need different tagging. Americans are so free that they need to stuff their children with retalin because the big pharma say that they are hyperactive! Let's not judge a book by its cover. Americans are not free, they are massively brainwashed on a daily basis by broadcasting company that are incredibly biased and closely connected to the white house. Americans are only free to consume and spend the way they want. The american goverment spends billions in making sure that the vast majority of individuals are discouraged from developing a critical and independent way of thinking. Their education is laughable, they 've got no sense of history and it is quite normal for teachers to instill a sense of superiority into their pupils. Let's never forget that the very few basic freedoms that americans can afford today are a privilege that derives from the countless number of wars that the US periodically embarks on. It is really difficult to define freedom but if history ever taught anything is that the US is an unlikely symbol of it.

Posted by: piero sanna | January 13, 2007 12:06 PM

The address is

I think that what you have said is reasonable and undestandable. Yet, freedom is too precious a commodity to be given away...

Once you let these populists like Chavez amasse so much power and talk about a failed socialism at the expense of free press and other individual and God-given freedoms (as stated by the Declaration of Human Rights), you are creating a monster like Fidel Castro who led a revolution to create a democratic state and later on (with sall his power secured) he simply recanted by saying: "Elections for what?" ... and we all know the rest of the story... an enslaved island with millions in exile and hundreds of thousands dead either in firing squada or the Florida Straits...

I don't remember seeing any American giving the order of "Fire!" in summary trials... it was Castro and his cronies...

It is easy to blame Americans... but it happens that the trigger is always pulled by others (Chavez, Fidel, FARC, Farabundo Marti, Noriega, Allende (remember the Cuban ship Playa Larga full of weapons in the port of Valparaiso before the coup in Chile 73), etc...

America shines as a beacon of freedom where its citicens enjoy the rights to criticize whatever they disagree with... while the populist governments of the world and enemies of the US tend to supress disidence.. (Chavez trying to close Radio Caracas Television calling it golpista (what he did in 1992) simply because they criticize him and tell the Venezuelan people a different version of his true intentions)

In the end, their populism is nothing more than a way to hide the seizure of power at any cost and, once again, l;et the poor people down... look at Cuba (not the propaganda)...

Posted by: Eres Unica | January 13, 2007 04:48 AM

Y toma una copa para mi tambien!Ok jokes aside I'll have to disagree with part of your post. I think that in order to create new skills you have to implement the technology required no matter what the cost is or where it comes from. What makes the difference is the project. As you said there's no easy way out and people like Chavez are selling cheap dreams of independence and ostracizing free press. It is true business relations in today's world are closely intertwined and one has to look at the big picture. Overall I think that what's happening in South America is good for democracy to some extent. At least they tring to create some sort of deterrent against the ubiquitous American superpower. It's a start. At the end of the day the US realized that they can't survive without us and that we (if well organized and united) can thrive without them. Is it only a coincidence that the US declared war to coutries that stopped trading in dollars?. The real enemy for americans it's not terrorism. That's bullshit. The enemy is you and me and a currency that is asking questions from the real strength of the american economy. Have you ever wondered why the chinese goverment is spending up to 45% of the national PIL in american bonds? they are scared shitless that the dollar will fall badly. The Chinese economy is based upon the dollar's strength, so they try to inject some kind of trust to the market and keep artificially high the value of a currency that is the symbol of an economy that has 1 TRILLION dollars of debt. What was the adrress where you get you wine from again? I think
I need a good red to cheer me up!

Posted by: piero sanna | January 12, 2007 01:59 PM

Wine is on the way... ( is the page I use....)

It is true that the IMF is ruled by the powerful and headed by the USA. I have a question:

If a country like Argentina pays off its debt rather than negotiate new loans, how do they obtain the funds to finance their progress?

Whatever they may obtain from Chavez buying bonds and whatever funds they can obtain from their exports will evetually be spent to buy the technology they need and that is produced in those powers like the USA...

In other words, they are trying to show "an independence" that is more populist than anything else... in the end, they will go to the powerful and developed nations to acquire what they need and whatever they didn't pay in interests, they will pay in services...

And Chavez's money can dry out as soon as oil prices go south...

I am not sure these populists governments know what they are doing economically-speaking... We'll see... The world is too intertwined to pretend populist independence without hurting the vulnerable: the poor people.

Posted by: Eres Unica | January 12, 2007 01:57 AM

Let me quote [It has been observed that high biodiversity is tied to high cultural diversity, as measured by the number of different local languages] while [The theory that a robust ecosystem is tied to high biodiversity (species redundancy) is gaining experimental support and wide consensus. This also holds for crop production,..].

Because the so called globalizationn is leveling cultural diversity and killing local languages, we must accept that it is also curtailing biodiversity and therefore the resilience of the ecosystem.

That's to say that there is another aspect of the so called globalizationn, not covered in Stiglitz's written interview, that will unavoidably plague humanity.

On the other hand [it would be hopeless to preserve our planet as we know it - which never happened in the past], while we can not ask people of Bangladesh to remain submerged, not building dams and roads, because this will endanger Ganges' life. Hence, I can easily accept that efforts of the kind expressed by Joseph Stiglitz are of the type of the best we can do. The point is, however, how much we can trust on nature's resilience. Beyond a threshold of threatening, which is being approached exponentially, nature could turn against man, whose disappearance will pass unnoticed. The current move of scientists toward what they call synthetic biologyy (I wonder how long we have to wait until a Journal of Synthetic Biologyy is founded) will not help.
francesco pietra
Quotations within square brackets are from my Biodiversity and Natural Product Diversity, Elsevier, Oxford, 2002, that I had to say for copyright reasons. Incidentally, the more appropriate angle brackets of my unix keyboard were not accepted: is the blog's owner a Gates' fellow?

Posted by: Francesco Pietra | January 11, 2007 10:49 PM

Enrico be afraid be very afraid!!!! I remember watching a video not long ago posted on google video where a fake journalist asked Americans this little genial and evil question: What country should the Us declare war next? Believe it or not the answers were so funny and utterly out of this world that I almost pissed myself. They were like... Italy, France, Australia and so on and when asked to show where these countries were in the map they got it all wrong and I mean seriously wrong. What a bunch of wankers!!!!!
Ehi! Eres Unica still waiting for that drink ...

Posted by: piero sanna | January 11, 2007 09:15 PM

Piero, I don't know where you live, but if you could tune into some of the American TV stations you would be flabbergasted at the chutzpah of most politicians and political commentators. These people talk with the certitude that the almighty God has given America the absolute right to dominate and exploit the planet. There is never any doubt about it. It is simply frightening.

Posted by: Enrico Rossi | January 11, 2007 03:57 PM

I don't want to sound cliche' but I really can't stand Americans anymore. Think about it 8 things out of 10 that come from that place seem to be specifically designed to destroy the planet. Enough! These guys are unbelievable, they've got an insatiable appetite for money and power. Americans have always been like that, but recently I have to say that they are exceeding themselvels. 9/11 has probably been their masterpiece(loose change Docet),but not content they are now declaring war to Syria and Iran given that their business venture in iraq (because that's what it is) proved so succesful. Are they ever going to stop ? no I don't think so. What do we expect from a country that has been organizing and funding coup d'etat for the past 40 years. I believe we ain't see nothing yet the best is still to come.In a couple of years time we will all be stuffing ourselves with OGM food and cloned steaks of meat in front of Snakes on the plane17. Pretty grim uh?
Damn it! after this post I need a drink. Eres unica where are you?

Posted by: piero sanna | January 11, 2007 01:07 PM

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