According to Joseph Stiglitz, who visits Dublin today, the spread of global capitalism has not been balanced by a spread of democracy or values, writes Marc Coleman , Economics Editor
For some, a lecture this afternoon, organised by the Economic and Social Research Institute in Dublin, comes about a year too late. Last year Irish Ferries workers - who were threatened with displacement by cheaper workers from eastern Europe - stirred the trade unions into a nationwide campaign the likes of which had not been seen since the 1980s. Denouncing globalisation as a "race to the bottom", their viewpoint found little sympathy amongst economists.
They might wish that Prof Joe Stiglitz, one of the world's foremost economists, had been in town.
In Dublin to deliver the ESRI's Geary lecture this afternoon, Stiglitz is a leading critic of globalisation. A former president of Bill Clinton's council of economic advisers between 1993 and 1997, Stiglitz became chief economist at the World Bank until 2000, before winning the Nobel Prize a year later.
In his latest book, Making Globalisation Work, Stiglitz argues that globalisation is dangerously lopsided in a way that threatens world stability. Trade, information flows and capital and technology mobility may have grown more in the last 10 years and this may have benefited many. But "global governance" - the processes that might control globalisation - has changed little since the second World War. As the book reminds us, a prolonged bout of globalisation in the late 19th and early 20th century didn't stop the deep depression and two World Wars that followed. A failure of globalisation to benefit many in the Third World could combine with conflict in the Middle East to create a lethal blend of economic injustice and resentment against the West. Forwards is not the only direction in which the world can go, Stiglitz warns.
In his previous book, Globalisation and its Discontents, he gives good reasons why many Third World nations could be forgiven for resenting the West. To illustrate globalisation's democratic deficit, it lashes out at one of the bêtes noires of the anti-globalisation movement: the International Monetary Fund (IMF). Its role of advancing finance to developing countries gives the IMF tremendous power over developing nations and that power has been misused and possibly abused, Stiglitz contends.
Either a revolution is happening and no one is in charge, or those in charge don't know what they are doing, Stiglitz seems to suggest. According to Globalisation and Its Discontents, the financial crises of east Asia and Russia in the late 1990s occurred because the IMF sanctioned a liberalisation in the movement of capital before ensuring the existence of proper financial regulation in those countries. And by insisting on liberalising trade and markets during periods of recession and high interest rates, the IMF needlessly condemned African and Latin American countries to years of economic and political instability.
In these cases the culprit has been ignorance, in particular the IMF's innocent faith in the so-called Washington consensus: the view that free markets are always and everywhere good.
In other cases the problem has been less innocent, Stiglitz contends. The IMF forced some of its debtor nations to maintain their currencies at high levels that were not in their economies' interest. This was done on the insistence of the US Treasury, Stiglitz contends, to avoid a fall in the value of the debt repayments due to be paid by developing countries to the US.
Lately, his tone has shifted away from anger and more towards to hope. The opening chapter of his latest book is entitled "Another World is Possible".
It opens with a description of the first meeting of the World Social Forum in Mumbai in 2004. UN human rights commissioner Mary Robinson is rubbing shoulders with Indian peanut farmers and delegates from fair trade organisations. Across most participants, there is one overriding concern: for many, the promises of globalisation have simply not materialised. International wage competition has hurt industrial workers by closing factories in Europe and America, he says, before blaming a lack of competition in agriculture for keeping many of the world's farmers below the poverty line.
Looked at one way, this view is inconsistent. But looked at another way, it isn't: globalisation permits competition where large corporations benefit (manufacturing), only to strangle it where they or other interest groups might suffer.
Like some global Eddie Hobbs, Stiglitz cites successful lobbying by US cotton farmers to stymie a possible agreement on liberalising trade in agriculture at last December's Hong Kong ministerial WTO meeting. That deal would have ended poverty for millions of people, but would have ended lucrative subsidies to the US cotton industry, he contends. "There are some 25,000 cotton farmers in the US, of whom most subsidy money goes to 15 per cent who are in a position to put a hand grenade into the global trading system. How can so few have so much power?"
As a former Clinton adviser, Stiglitz wastes no time in linking his views on globalisation with a criticism of the Bush administration. "In the 1990s, people in developing countries were aware of the undemocratic nature of the way decisions were made in the IMF, given the veto of the US. The way the Iraq war was handled made clear that there were problems with this kind of unilateralism".
It also offers challenges, even to countries such as Ireland that initially succeed at the globalisation game. "A country like El Salvador benefited in the 19th century from globalisation from exports of indigo. Then the development of chemicals took their prosperity away. One of the questions of globalisation is the enormous vulnerability that countries face," Stiglitz said, when we talked last week ahead of his visit.
The central tenet of Stiglitz's case is unarguable. The spread of global capitalism has not been balanced by a spread of democracy or values.
Countries can compete for exports in way that may eventually benefit their citizens. But without careful implementation, globalisation will leave many behind: western workers in their 40s who will never recover jobs lost to foreign competition; Indian peanut farmers who cannot get the bank credit they need to compete with foreign imports; African dairy farmers who cannot compete with the artificially low prices of subsidised European imports.
Stiglitz also points to a more ominous danger. As the world's democracies become more dependant on emerging economies for cheap imports, particularly energy, their power to enforce democratic values declines. No one doubts that globalisation is good. But does it rest on sound foundations?