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Globalization Guru: Nobel Prize winner discusses the dangers of the global economy

By Alexa Jenner
February 16, 2005 | Michigan Daily, USA

GN3 Editorial Comment: Much of economic analysis that makes it to the mainstream press emanates from a single mindset that has been schooled in economic orthodoxy. Not so with the likes of Joseph Stiglitz, the former World Bank Economist, who has made a name for himself challenging mainstream views. As the article below discusses, Stiglitz is much in demand as a speaker who adds a respected voice to those challenging an elite form of economic globalization that drives unsustainable development.

By 4:00 p.m. yesterday, the 400-seat Hale Auditorium was overflowing with people. Cramming into the aisles and the doorways, students, professors and members of the general public waited in anticipation to hear the 2001 Nobel Prize winner and famous economist, Joseph Stiglitz, speak.

"A lot of us have looked forward to this all month he's an amazingly sharp and intelligent guy," said Economics graduate student Farzana Afridi.

Stiglitz's contributions to the field of economics have allowed him to be recognized worldwide. He is well known for helping create a new branch of economics known as, the "Economics of Information" which is used by policy analysts. Stiglitz has written books that have been translated into many languages for an international audience, including his international bestseller "Globalization and its Discontents."

Stiglitz addressed the ideas in these books as well personal experiences in his speech on globalization last night. Hosted by the Gerald R. Ford School of Public Policy, Stiglitz's speech was part of a series of lectures funded by the Citigroup Foundation, honoring President Ford's long affiliation with Citigroup.
With opinionated rhetoric and good humor, Stiglitz explained to an intrigued audience potential problems with globalization and the free market.

"Economic theory predicted the capital free market should lead to stabilization, but in reality it did not lead to economic growth or stabilization," he said.
He said Third-World countries have instead been hurt by the opening of free markets, because they receive loans during good economic times and are forced to pay back loans during recessions.

"The general preset of banking is never lend to anyone who needs the money, so what happens is that when the economy is in a boom the bankers are shoveling money into the economy (of Third-World countries). But when the economy goes down they say we're not sure you're going to be able to repay us, we don't trust you." he said.

He went on to discuss problems with the International Monetary Fund the international organization that manages global finances and gives loans to struggling countries. Stiglitz's book "Globalization and its Discontents" argues that the IMF puts the interests of the United States over those of poorer countries, and he discussed this in his speech.

"The last head of the IMF said poverty was not his business," he said.
But he conceded that there had been a change in attitude and the IMF was working more toward recognizing poverty.

Along with discussing debt relief, Stiglitz talked about what he said are problems with opening up the markets to trade. "It is one of the most pretentious areas of globalization, but the theory is everyone should be better off," he said.

"Instead, it created anxiety everywhere in the world. Why were all these people better off and didn't know it? Because in reality they were worse off," Stiglitz said.

Stiglitz explained the problem with the trade market using cotton farmers. "The way you get subsidies is you grow more, so as these American farmers produce more, the price of cotton goes down and it hurts ten million cotton farmers in Sub-Saharan Africa. So the poorer are made poorer and the rich are made richer," he said. "In response, the U.S. Trade representative says to the Africans: 'Why don't you go into some other line of business?' This is an area where there is no other line of business," he said.

Stiglitz continued by discussing the Clinton administration's difficulties in improving access to life-saving medicine and problems with the North American Free Trade Agreement.

"The problem with NAFTA is it is hundreds of pages that no one has time to read so bills get passed in the agreement that would not normally make it through legislation," he said.

Stiglitz also talked about global stability. "The U.S. dollar is currently the most important reserve currency, but the system is unstable."

The dollar, he explained, is no longer a secure store of value. "The dollar continues to weaken, and countries such as Japan are losing money by keeping reserve in dollars," he said.

With a smile, he added, "We can convert our money to Euros, and I advise you to do so."

Stiglitz concluded by stating, "I remain hopeful that we will be able to make globalization work, and we will be able to reform. It will not be quick, and it will not be easy, and the process of reform may not in every respect be pleasant, but the alternatives are even worse."

Responding to his speech, Rackham student Andrea Jones-Rooy said, "I like his approach, and I think he's exposing problems which people may not have noticed before." She added, "If people read his books and agree with them, then the changes he's proposing may be realized."

LSA senior Amanda Altman, who is taking a class that centers around Stiglitz's work, said, "I thought it was very interesting when he was talking about access to medication and trade. It's a really important issue, and I was glad he discussed it."

RC freshman Jason Matney, who is also studying Stiglitz, said, "He is criticizing the system, but he is criticizing it from the perspective of someone who has previously served in the administration, and I think that makes it really effective."

Stiglitz was the Chairman of the U.S. Council of Economic Advisors under the Clinton administration from 1995 to 1997. He also served as the senior vice president of the World Bank from 1997 to 2000.

Stiglitz has been a professor at universities such as Yale, Princeton and the Massachusetts Institute of Technology and currently holds joint professorships at Columbia University's Business School, School of International and Public Affairs and economics department.

Rebecca Blank, Dean of the Gerald R. Ford School of Public Policy said, "Joe Stiglitz is always a fascinating and provocative speaker, and we are grateful to Citigroup for giving us the funds to bring people like him to campus."

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