This book reads as something of a revelation or confession coming from bourgeois economist and Nobel Prize winner Joseph Stiglitz. Alas, it appears Stiglitz found that in government practice, officials ranging from Treasury to Labor to the IMF utilize a simplified dogma of the free market in their actual work--much to the detriment of their work, unless we accept "conspiracy" theories for why certain interests favored the collapse of the Thai currency and economy in 1997 and the subsequent fire sale in Korea that set back the East Asian economy several years.
Bourgeois internationalist competence
In contrast, we see in Stiglitz the perfect bourgeois internationalist--someone to carry out his economics profession regardless of nation. Everywhere he goes he assumes that economic growth and full employment are the goals and he believes he does not allow narrow national interests of say the united $tates to distort his advice to a country.
From Stiglitz's point-of-view there are two explanations for economic collapses and emergencies--one is incompetence and the other a "conspiracy" theory. Although he mentions what he regards as a few conspiracy theories, (e.g. p. 171) it is clear that this bourgeois internationalist believes confidently that the u.$. capitalists would uniformly like to see the Thai, Korean capitalists etc. succeed and not fall into crisis. If we start with the assumption that everyone wants the same thing in the capitalist world, then it becomes just a matter of competence in achieving it. Thus it is that Stiglitz uses his competence in the profession as a battering ram for bourgeois internationalism.
This attitude served him well as chief economist and vice president at the World Bank from 1997 to 2000. This book shows that he continues with the same attitude now. Bad guys shredded along the way include Paul O'Neill, Lawrence Summers, Anwar Ibrahim and sometimes Robert Rubin.
Stiglitz's greatest single achievement appears to be in advising and backing Malaysia in resisting IMF advice that wrecked other economies in the region. Stiglitz says that turning IMF prescriptions upside-down caused Malaysia to escape least harmed in the East Asian disaster of 1997. Contrary to Western liberal press darling Anwar Ibrahim, Malaysia did not submit to Western dictates and it did better for it.(p. 123)
Reforming globalization
Stiglitz gives us a bourgeois internationalist guide to how reform of globalization should go about. Like Stiglitz, we at MIM are unkind to those who oppose all global economic interactions. At MIM, we especially have no sympathy for those opposing GATT, NAFTA etc., because they fear a loss of Western industrial jobs. Opposing imperialism is good, but opposing individual economic treaties is bad.
Stiglitz says that the World Bank has undergone substantial effort at reform. Now it is the IMF and people in the U.S. executive branch who are the bad guys, ruining global economic growth and prosperity.
Along these lines, Stiglitz provides us a number of small and medium-sized factual insights into what is happening globally, with a good eye to intra-bourgeois fighting. For example, Stiglitz discovered that to obtain loans from the IMF, Third World countries typically had to lend money to the U.S. Government in the form of taking government Treasury bonds that pay 4% interest. These bonds held by the Third World country are called "reserves," but at the same time, the loan from the IMF will cost more than 4% interest, 18% in the case Stiglitz mentioned.(p. 66) It's easy to see how Marx's theories of surplus-value and accumulation apply here. Policy holds that the Third World has to loan the U.S. Government the money that the IMF backed by the united $tates then loans out at higher interest.
Equality and economic growth
One of the age-old shibboleths that Stiglitz addresses is equity versus growth. The standard bourgeois tripe is that one can have one but not the other. Stiglitz comes down on the side of the Japanese-oriented economists and bankers who long ago learned otherwise.(p. 79) They found that contrary to Western dogma, the lower the economic inequality the faster the economic growth in the capitalist countries. That is why the most prosperous capitalist countries have the lowest inequality. This was especially true because land reform both lowers inequality and provides the lynchpin for economic growth, which is still important to the majority of the world. (MIM will provide the reason for this: more and more rewards for a tiny minority can only do so much to motivate them to achieve more, but giving rewards to large numbers of people inspires greater work and economic development that a small minority simply cannot carry out. In other words, trickle-down economics does not work.)
As MIM has pointed out before, Taiwan, southern Korea and even Japan to some extent have Mao to thank for pushing the U.$. military to support land reform. The United $tates was afraid that without land reform in these places, there would be revolution with pressure from Mao in China. In the crucial period affecting Taiwanese, Korean and Japanese economic history both Stalin and Mao were alive, in power or close to it and most threatening to U.S. thinking. Without Maos and Stalins with enough power lately, many countries continue to languish in economic torpor generations after Taiwan, Japan and southern Korea took off. We Marxists are not surprised that once again it is the class struggle driving the economy forward. See our FAQ for more information on this subject.
Russia
Only a chapter of the book is about Russia. Stiglitz has gone to the major newspapers with article-length versions of it. The Stiglitz approach to Russia as with other subjects differs from other economists' treatment in that he actually concerns himself with data.
"Globalization and the introduction of a market economy has not produced the promised results in Russia and most of the other economies making the transition from communism to the market. These countries were told by the West that the new economic system would bring them unprecedented prosperity. Instead, it brought unprecedented poverty: in many respects, for most of the people the market economy proved even worse than their Communist leaders had predicted." (p. 6) (MIM would say that the "communist" leaders were not communist, just people with slight differences with Gorbachev and Yeltsin.)
Count Stiglitz as a fan of bourgeois leader Deng Xiaoping: "While in 1990 China's gross domestic product (GDP) was 60 percent that of Russia, by the end of the decade the numbers had been reversed. While Russia saw an unprecedented increase in poverty, China saw an unprecedented decrease."(p. 6)
While countless Russian intellectuals wrote "dissident" jokes, poetry, plays and literature, economic life passed them by and today the Russian people are completely ignorant of basics of economics and political economy, largely thanks to how these subjects stood discredited by phony communist teachers. It will indeed by painful for the ex-Soviet peoples to realize the mess they are in and then pull out of it. Too many people thought following the State Department's advice leads to Bloomingdale's.
"The magnitudes of the declines in incomes are so large that they are hard to fathom. According to World Bank data, Russia today (2000) has a GDP that is less than two-thirds of what it was in 1989. Moldova's decline is the most dramatic, with output today less than a third of what it was a decade ago. Ukraine's 2000 GDP is just a third of what it was ten years ago." (pp. 151-2)
"The devastation--the loss in GDP--was greater than Russia had suffered in World War II. In the period 1940-1946 the Soviet Union industrial production fell 24 percent. In the period 1990-99, Russian industrial production fell by almost 60 percent--even greater than the fall in GDP (54%)."(p. 143)
The pragmatist-empiricist able at least to follow these surface-level facts and who is thus much better than the free market dogmatists Stiglitz skewers, will respond with the joke about Brezhnev's funeral request.
Young comrade: "How would you like the honors of state at your funeral comrade Brezhnev?"
Brezhnev: "I would like to be placed face down in a coffin with my palms facing up."
Young comrade: "Comrade Brezhnev why do you want that? It's improper. It will be outrageous. We cannot have people paying their respects that way!?"
Brezhnev: "I want it that way, because after me will come great changes. There will be glasnost. Gorbachev will eventually run things. Then there will be perestroika. Free markets will come. After all that, I don't want to be disturbed when people come to kiss my ass."
This is the level of facts that Stiglitz likes to stay true to. In contrast, we at MIM would say already under Khruschev, Gorbachev and Yeltsin were on their way up through the party ranks and not only well-tolerated but promoted.
Although we do not agree with Stiglitz's conclusions, we do admit that his conclusions adhere closely to the facts, in this example and throughout the book. Our disagreements stem more from the questions he does not ask, deriving from his lack of theoretical interest. He goes through how various well-connected people stripped the assets out of Russia and enriched their own Western bank accounts. "Many of those who we allied ourselves were less interested in creating the kind of market economy that has worked so well in the West than in enriching themselves."(p. 168) On this point, we believe Stiglitz is fantasizing: it is typical bourgeois ideology to enrich oneself. The class of professional economists doing what is best for the economy is no where in the world in charge. The wealth of the West stems from wars of genocide and conquest followed by super-exploitation of the Third World going on today. It was not a matter of forming far-sighted institutions headed by PhDs and Nobel prize winnners.
Speculations on speculation
The most interesting part of the book is how Stiglitz regards the bond-holding bourgeoisie. Stiglitz seems to have picked up on how the IMF seeks to assuage the bond-holding bourgeoisie while questioning its strategy for doing so.
The real question is whether the standard IMF message of belt-tightening is the only message with the capability of calming the bond-holding bourgeoisie when doubts about most of the world's economies arise. Stiglitz starts from the good and expected place in the work of economist Keynes: "the animal spirits" of bond-holders. In other words, currently the unspoken justification for what the IMF does is that it calms capital markets. It hardly matters whether what the IMF does actually works in a particular country's case. What matters is that capital markets not go beserk. If lenders happened to get themselves into a mindset of loaning out money at say 10% higher than is necessary or 100% because insanity knows no limits, the economy will collapse and the political pressure to seize investor assets will increase hugely.
For the most part, Stiglitz simply raises the contradictions between IMF policy and economic growth. He does not do much to answer the real question regarding the ultimate nature of capital markets. On the other hand, like some other academics who consciously mention Lenin's theory of imperialism, Stiglitz recognizes that science does not usually require conspiracy knowledge and that what we would call Lenin's theory of imperialism is in fact a scientific proposition. "Looking at the IMF as if it were pursuing the interests of the financial community provides a way of making sense of what might otherwise seem to be a contradictory and intellectually incoherent behaviors." (p. 207) Other academics would do well to notice the "as if" reasoning. A prediction can be made with "as if" reasoning without knowing the details of the "conspiracy."
Stiglitz the Malaysia proponent says to take a tough line on the investor community: "Most important, there needs to be a return to basic economic principles; rather than focusing on ephemeral investor psychology, on the unpredictability of confidence, the IMF needs to return to its original mandate of providing funds to restore aggregate demand in countries facing an economic recession."(p. 240) Stiglitz ends with more ironic calls for accountability and transparency of the IMF/World Bank.
Stiglitz is a reformist, but because he does not focus on the imperialist countries and what he is talking about affects mostly the Third World, we shall refer to him as progressive, right on the boundary between progressive and reactionary. If we divide the bourgeois internationalist camp into a left and right-wing, then Stiglitz is the border for left-wing. We seek to ally ourselves with the left-wing bourgeois internationalists in many of the concrete battles of the day while turning back the inevitable voices from the national chauvinist labor aristocracy of the imperialist countries.
We recognize that capitalism in terrible crisis will most likely turn to a Stiglitz-type solution before it surrenders to communism. We are in favor of speeding up the process of political trial-and-error.