Global Policy Forum

By Caroline O'Shea

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, Chief Economist and Senior Vice President of the World Bank, and 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.

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