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Sat

25

Aug

2007

Stiglitz – a book with major flaws that reveal much truth - Jim Miles Book Review
Saturday, 25 August 2007 00:59
by Jim Miles

Fair Trade For All – How Trade Can Promote Development. Joseph Stiglitz and Andre Charlton. Oxford University Press, Oxford, U.K., 2005.

In 2003 Joseph Stiglitz published his much acclaimed and critically popular book Globalization and it Discontents. Its overall thesis, arguable particularly to those hidebound within the ‘Washington Consensus’, simply stated that following International Monetary Fund (IMF) rules and regulations – the combination of trade rules, loans, and ‘structural adjustments’ required to receive financial assistance – “the result for many people has been poverty and for many countries social and political chaos. The IMF has made mistakes in all the areas it has been involved in.”

These allegations have become more apparent as truths as time has passed since the publication of Stiglitz’ first book. It is a book that is readily accessible to the public. Stiglitz’ writing is clear and well argued. He does not slip into a frenzy of economic jargon and presents concise historical examples of the different situations that unfolded globally due in part to IMF ministrations (along with other non-governmental organizations and other governmental interference, especially with the EU and the US.). At the end of his arguments he presents what he sees as reasonable ways and means to help correct the faults of the IMF, the World Bank and the World Trade Organization (WTO).

For the WTO he argues that “Reforming the WTO will require thinking further about a more balanced trade agenda – more balanced in treating the interests of the developing countries, more balanced in treating concerns, like environment, that go beyond trade.” He follows by saying that “so long as globalization is presented in the way that it has been, it represents a disenfranchisement…” and “…of equal concern is what globalization does to democracy.”

With those positive concerns in mind, it was with positive anticipation that I read his subsequent work, Fair Trade For All. Unfortunately I was fully dismayed by the faults of the book, both of its writing style, and its lack of insightful arguments.

To be fair, Stiglitz is writing in companionship with Andrew Charlton, who has wonderfully impressive credentials as professor at the London School of Economics, but with equally unimpressive results. Also to be fair, the book was written on “behalf of the Initiative for Policy Dialogue (IPD), a network of some two hundred economists and development researchers throughout the developed and developing world” and was then presented to various high level economic meetings (World Bank, IMF, WTO, UN Commonwealth Finance Ministers). That perhaps explains it first major flaw: the lay reader will become lost in the economic jargon, research papers, and suggestions of “empirical evidence” that overwhelm the book.

Fair Trade For All certainly is not accessible for all, quite ironic in that Stiglitz and Charlton along with the major groups involved are continually asking for more “transparency” – this book delivers opacity instead. If this work is typical of the trade papers that travel throughout the world of economics, it is no wonder that we are in significant trouble – lots of jargon and rhetoric, very narrow perspective, (although there are some superficial attempts to be more broadminded with a paragraph or two on the environment and labour), and not much real wisdom and intelligence.

There are a few gems contained within, short summary comments, almost like diamonds in a slag pile of kimberlite. The forward indicates, “The world trading system has protected the interests of the rich countries, at the expense of the poor, and entrenched inequalities.” Describing the situation six years after the Doha talks with the WTO, those promises “…lie discarded at the base of a trading system whose credibility is crumbling.” The first chapter, “Trade Can Be Good For Development” says that the few successes over the “…last fifty years have pursued inventive and idiosyncratic policies. To date, not one successful developing country has pursued a purely free market approach to development.” Another gem is their argument that “None of today’s rich countries developed by simply opening themselves to foreign trade,” a relatively well-known position that is historically supported.


Few new insights are contained concerning how the system needs to change, in particular the WTO that is the focus of this book. There are some common sense statements that seem terribly obvious yet may not be to the economists targeted initially by the authors, or perhaps they were thrown in for lay people to feel that they could actually understand what was going on. This ‘duh’ factor stands out significantly in two areas: fairness and costs to the poor countries.

Stating that “It seems self-evident…” the authors say it anyway, “Any agreement should be fair” and “Any agreement should be arrived at fairly.” It seems economists are also in need of reminders of what they should have learned in grade school, with the ever increasing “life’s not fair” mantra creeping in more and more as education becomes higher and higher, until it becomes the dog-eat-dog world of free market capitalism. Unfortunately, it is the WTO that is being discussed here and “fairness” is not exactly something it cares about.

The asymmetrical costs to the poorer developing countries also should seem self-evident, though they are presented as discoveries from “empirical evidence”. The fourth reason in particular is classic, “…developing countries are home to the world’s poorest people and weakest credit markets.” Well, surprise, surprise. Equally unsurprising is the third reason for these unequal costs, as biggest distortions occur “…in the industries of importance to developing countries.”

Common sense would tell me that “fair trade” would encompass many other issues: labour rights and protections; environmental protections and responsibilities; military projections (and not just complaints about poor countries “wasting money” on their militaries); social services support; and, ‘it seems self-evident’, democracy.

Labour receives a page or two in arguments about the movement of labour (a good point as free trade is hardly free without free labour movement), but the arguments are confined to rules and regulations that will assist immigrants to work where the lower paying positions are not filled by the local people. To be truly fair, labour also requires the freedom to establish unions, the rights of a safe work environment, and fair remuneration for work performed.

The environment receives short shrift, the main example being a trade clause restricting trade on tuna that endangers turtle species in international waters. There are no true insights offered nor any real concern expressed for the increasing need to protect all environments against the over-consumptive development demands of the west and the overall growing global population. No discussion is made of the need to preserve fresh water and promote sustainable lifestyles in a finite world.

The military is mentioned just in passing with the Meiji restoration in Japan (“a wealthy nation and a strong army”) and does not even rate a mention in the index. Common sense should indicate, especially after the debacle in Afghanistan and Iraq and the many books on or related to military topics (Bacevich, Johnson, Greider, Galbraith, Grandin, Ritter among many others) that the military plays a huge role in the economic life of most of the world, if not all of it. Significantly, it has been called the “hidden fist” behind the economic prosperity of the U.S.

Social services are identified as being weak in developing countries and needing assistance, but again with only minimal mention and an emphasis on some kind of cost accounting for the losses incurred by the poorest workers. No mention is made of the “structural adjustments” (an IMF term) that requires downward ‘adjustments’ to the educational system, any welfare system, and health services, that result from revenue required to pay adjustment costs elsewhere (including, ironically, the huge economics bill for all the new economists and accountants and government bureaucrats required to track it all).

The largest fault in these common sense items is in a bizarre way the strongest positive – through the implications of its lack of attention. Democracy.

By now the world understands the end all and be all of all this free trade marketing rhetoric and the imperialistic wars waged against the ‘terrorists’ and ‘evil’ people of the world is to bring them democracy. Stiglitz mentions democracy twice – once in passing in relation to media control by conglomerates; twice as an adjective describing a poor country; and, whoops, a third time not mentioned in the index but significantly more important: the North America Free Trade Agreement [NAFTA]“...contains provisions that would probably never have been accepted by a democratic parliament with open discussion in a deliberative process.”

As a Canadian living under NAFTA I can attest to that view. Canada is supposedly democratic, but both major political parties, the Liberals and Conservatives, Chretien and Mulroney, favoured NAFTA, lied about their intentions, and went against the clear majority of Canadian opinion and signed on to it anyway, presumably as always because of corporate interests lining the political pockets. Canada lost sovereignty over its energy resources (and possibly later, water), social services are increasingly under attack, the rich are getting richer and the poor poorer (admittedly still well off in comparison to the majority of the world), economic integration with the U.S. is almost complete, and we are producing far more greenhouse gasses per capita than any other country. Great.

But that is it for democracy; it is never discussed otherwise throughout this work, and does not come under discussion, as it often does in government spin, when discussing trade and international relations. In a weird macabre way that is a good thing, because if nothing else it highlights that Stiglitz and Charlton do not see democracy per se as being in any way related to free market liberalization. In other words, by deliberate omission, they are saying that free markets and market liberalization do not have anything to do with democracy.

Can I say that more clearly? Free market neoliberal capitalism does not equate with democracy.

That leads into the largest major fault with the work, the World Trade Organization itself that is the centre-piece for this document. The WTO (along with its compatriot think-tank, the OECD) is arguably one of the least democratic institutions in the global arena today. It is set up as a negotiating unit comprised of government financial representatives, bankers, economists, CEOs, lawyers et al who have no interest in the democratic workings of the world as long as the money is allowed to flow freely into corporate coffers.

As for the manner in which those involved – the CEOs, the MBAs, lawyers, economists, and financial “experts” - perform their duties in secret and for their own wealth creation against the true forces of any popular citizens’ democracy is summed up in the wonderful frequently quoted phrase by a WTO official that “This is the place where governments collude in private against their domestic pressure groups”, those nasty people like labourers, environmentalists, health care workers, and farmers. An earlier Director General of the WTO Renato Ruggerio boasted, “We are writing the constitution of a single global economy”[1]. Ruggerio is on record with his environmental concerns as well, stating, “environmental standards in the WTO are “doomed to fail and could only damage the world trading system.”

Wonderful! This is the system Stiglitz and Charlton expect to reform? A highly unlikely project and one that will only provide another sheen of democratic pretence while they continue the business of business.

Another fault of all these arguments is that of growth and development. It is never defined, never described as ‘this is what it looks like’. Ultimately, in all the arguments I have read it comes down to being the dollar value of the GDP, either gross or per capita. Growth and development, in all the materials I have read, never mention the environment, the health of the people, the safety and security of the workers, nor the education system as having any relevance to growth and development as a definition. Unfortunately, the GDP is a highly fallible argument and can be a very simplistic misleading statistic.

The ultimate positive from this book then is the recognition by omission that democracy is not related to free market liberalization. That should come under the common sense ‘it seems self-evident’ category of results, nothing original with that statement either.

The rest is mostly negatives. Fair trade and globalization could be a positive, but not as presented by the authors, and not under the rules and regulations of the WTO, who still insist on a top down (even though they say items are to be discussed and adjusted with governments, knowing that many governments do not truly represent the majority of the people of the country, Canada included) bureaucratic formula to aid the poor. It cannot work, not unless they ask the people of each country what they want and then effectively respond to those requests. Most of the answers, perhaps, should be ‘self evident’, but until the people themselves are actually consulted and responded to effectively, no true progress on fair trade will be achieved.

If done as suggested by Fair Trade For All, the world will continue to be enveloped in a corporate sponsored, non-democratic, militaristic, environmentally, social, and labour unfriendly regime. As well as being a poorly written book, it is not at all helpful either, and definitely not fair.

[1]These quotes are widely cited in a variety of sources active against the deservedly deceased MAI. Also quoted in Chomsky, Noam. “Hordes of Vigilantes”, Profit Over People – Neoliberalism and Global Order. Seven Stories Press, N.Y. 1999. p. 163.


Jim Miles is a Canadian educator and a regular contributor/columnist of opinion pieces and book reviews to Palestine Chronicles. His interest in this topic stems originally from an environmental perspective, which encompasses the militarization and economic subjugation of the global community and its commodification by corporate governance and by the American government.
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