Globalization and Its Discontents Essay Example | Topics and Well Written Essays - 1000 words

Globalization and Its Discontents - Essay Example Stiglitz proposed a common explanation with realistic assumptions: agents on one side of the market have much better information than those on the other side. Borrowers know more than the lender about their repayment prospects; the seller knows more than buyers about the quality of his car; and tenants know more than the landowner about their work effort and harvesting conditions (Ibid). In Globalization and Its Discontents, Stiglitz referred to larger players than mere agents of the market, landowners, and tenants - and these are the multilateral institutions and their principal shareholders in pressing developing countries - supposedly to liberalize their economies. In this controversial book, Stiglitz argues that although globalisation should be a powerful force for good, it has been badly mishandled by the West, especially with its lead institutions, the World Bank and the IMF. As Stiglitz contends, those concerned with economic development have seen economic openness and liberalization as panaceas. Instead of progress however, he argues, the result has all too often been devastation. What happens, according to him, is that developing countries open themselves to trade, deregulate their financial markets, and abruptly privatize national enterprise but then experience more economic and social disruption than growth. Foreign direct investment is said to have destroyed potentially viable domestic companies. And liberalized international finance has made emerging-market economies "more vulnerable to erratic shifts in investor sentiment" without giving out any visible benefits. Stiglitz is a respected economist who actually worked as a senior official at the World Bank. In this book, Stiglitz recounts his experiences in some places including Thailand, Indonesia and some other Asian countries, Russia and Brazil, and Argentina. He finds repeatedly that the International Monetary Fund puts the interests of its "largest shareholder," the United States, above those of the poorer nations it was designed to serve. In the end, he said these countries which had enthusiastically embraced free-market policies have been "engulfed in catastrophic financial crises, leading to bankruptcies, unemployment and social unrest". He also strongly criticizes the role that has been played by the U.S. Treasury in many of these crises and occasionally also criticizes the World Bank, an institution where he was once affiliated with as Chief Economist. His main criticism of these institutions is based on their closed-door debates, hence involving precious little participation from the host countries outside of their finance ministries and central banks. While the policies made by these institutions affect billions of people in the developing countries, they have little voice in the whole process, he said. Another point which he labours about in the book is about capital market liberalization, and how he argues that it contributes to "volatility of capital flows into and out of a country." In general, he finds fault with the manner liberalization and privatization has progressed in several of the new and transitional economies because they do not have "the right institutions that are an