By Hiroko Kono
Daily YomiuriAugust 21, 2002
Prof. Joseph Stiglitz of Colombia University, former senior vice president and chief economist of the World Bank, discussed the role of international financial institutions in eradicating poverty in an interview with The Yomiuri Shimbun ahead of Monday's opening of the World Summit on Sustainable Development in Johannesburg, where world leaders are expected to finalize an action plan for sustainable development.
The Yomiuri Shimbun: The summit meeting will discuss issues concerning the growing disparity between the haves and have-nots and the increasing number of people, now 1.2 billion, living on less than one dollar a day.
Joseph Stiglitz: One of the factors contributing to the plight of the poor countries is their lack of access to markets in the more developed countries. The more developed countries like the United States have preached the rhetoric of free trade and eliminating subsidies and free markets, but with respect to the goods that developing countries care about--agricultural goods and textiles--the advanced industrial countries continue to close their doors and provide huge subsidies.
And all of this has been heightened in the last year by what the United States government did with huge increases in agricultural subsidies and with the new tariffs for steel. The U.S. government claims that it needed to do that and that it is consistent with the WTO (World Trade Organization) under the safeguard provisions. But if the wealthiest country in the world, with very low unemployment even in a recession and with a strong safety net, needs to have safeguards to protect workers who might be thrown out of work, then of course every country would need to resort to safeguards. Because those countries have high unemployment rates and their prospects for job creation are low and their safety nets are nonexistent.
Regarding the inequities in the global trading system, what is your view of the Doha agreement (adopted in November 2001 at the WTO Ministerial Conference held in Doha)?
The positive aspect of Doha was the recognition of inequities of previous rounds of trade negotiations. A recognition for instance that the intellectual property agreement was an unbalanced agreement. Doha...made a commitment to do something about it. The uncertainly at this juncture is whether the advanced industrial countries, and the United States in particular, will live up to that commitment.
At the U.N. International Conference on Financing Development held in Monterrey, Mexico, in March this year, donor countries (including the European Union and the United States) promised 30 billion dollars in additional aid through 2006.
I think it was a very positive initiative. The real problem again is that the richest country in the world, the United States, is also one of the stingiest. As a percentage of GDP (gross domestic product), the U.S. contribution is far lower than that of Japan and Europe.
What is the ideal role of the International Monetary Fund and the World Bank?
The World Bank's mission is very clear--to reduce poverty and promote growth in developing countries. I think it has a clear vision of what that entails and that vision has changed dramatically over the last five years. There have been significant reforms.
The IMF's original mission was providing financing to countries facing an economic downturn and promote expansionary policies in the face of recession and to promote global stability. It has completely lost its mission. The IMF has put its lot on the side of capital market liberalization, which has opened up these countries to short-term speculators who do not lead to real investment.
Japan has recognized that the market fundamentalist ideology, that particular model of capitalism that the IMF advocates, is not the Japanese or Asian model of capitalism. The policies the IMF has pushed are markedly different than the policies that were the basis for success in East Asia. Japan can play a very constructive role in supporting alternative visions of development in a market economy.
Do you believe it is possible to make globalization work for the poor, for the environment and for the stability of the global economy?
Poverty has been reduced (in East Asia). So it can work. On the other hand, the way the rules of the game have been written and the way globalization has been managed in recent years have not worked for the interests of the developing world. The measures of capital market liberalization and the inequitable trade agenda has exposed many people in the developing world...to new risks. It has actually made people in the poorest regions of the world, such as sub-Saharan Africa, worse off.
What is your definition of development?
Transforming societies, improving the lives of the poor and enabling everyone to have a chance at success, and access to health care and education.
Ten years ago, the U.N. Conference on Environment and Development in Rio de Janeiro presented the notion of sustainable development.
Sustainable development focused on the notion that the environment must be maintained and that there is a certain level of social stability. Most of the discussion after Rio focused on the environmental side, but we are now realizing increasingly the importance of social sustainability as well. There has been a lot of progress in some way in terms of environmental sustainability.
I think whenever there is widespread despair within a society there is inevitably an attraction to populist movements, to terrorists, and in different societies it takes a variety of different forms. It provides a feeding ground for all of those who wish to exploit that kind of despair.
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