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Globalization and its Discontents

J.E. Stiglitz

posted on 10 February 2003

reviewed by Joe McCauley

This is a very readable book by one of the authors of 'asymmetric
information'. The book is about the disastrous consequences of the
neo-classical equilibrium rules imposed on the world by the World Bank and
IMF, and their reenforcement by the US Treasury and the EU. The book is
written in measured, nonideological style by a theorist and practitioneer
who understands that the standard model is wrong. That theory,
neo-classical equilibrium theory or 'general equilibrium theory', teaches
that unregulated free markets are optimal, that they provide the highest
efficiency and the best of all possible worlds. To the contrary, there is
not one whit of hard empirical evidence that that viewpoint holds a drop of
water. The recent empirical evidence is instead that financial markets in
particular, and highly liquid markets in general, are dynamically unstable,
do not admit equilibrium of any kind: Adam Smith's regulating Invisible
Hand does not exist at all in liquid markets. Stiglitz provides us with one
practical example after the other of the instability of deregulated
markets. That is the value of this book.

Stiglitz could have begun better by explaining to us just who/what are the
supra-national, bureaucratic powers known as the IMF, the World Bank, the
World Trade Organization, how are they financed and who holds holds the
power. This would have been useful, especially as even Americans are now
told that their democratically-elected government should adhere to the
nondemocratically-imposed rules of the WTO. Stiglitz could also have
explained to us what exactly is the EU, aside from being just one more
globalizing, nondemocratic organization. Most Europeans, safe to say,
haven't the faintest idea what is the EU, and apparently the bureaucrats
who run it want to keep it exactly that way.