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Date: 2024-11-06 Page is: DBtxt003.php txt00011753

Economic Performance
Joseph E. Stiglitz

Globalization and its New Discontents (see TPB comment)

Burgess COMMENTARY
I read engineering at Cambridge before I read economics and subsequently qualified as a Chartered Accountant. I have never been impressed by the understanding of how things work being demonstrated in the economics establishment, something that may well be worse now in the age of big data than when analysis was far less sophisticated. There are just too many myths in conventional economics that should have been debunked decades ago, not least of which is that we have to have consumption growth which drives GDP growth in order to have a better world ... or that profitable corporations and especially small businesses are job creators. Economists don't differentiate enough between good spending and bad spending whether it is at the personal level, or at a corporate level or at a government level. Economists don't seem to understand that profitable corporations have reached their levels of profit performance by being job destroyers ... that is what productivity is, but that is not important as long as profit goes up and stock prices soar to record levels. Economists will continue to get it wrong as long as the measures are dysfunctional ... a better world needs better metrics ... http://truevaluemetrics.org
Peter Burgess

Globalization and its New Discontents

NEW YORK – Fifteen years ago, I wrote a little book, entitled Globalization and its Discontents, describing growing opposition in the developing world to globalizing reforms. It seemed a mystery: people in developing countries had been told that globalization would increase overall wellbeing. So why had so many people become so hostile to it?

Now, globalization’s opponents in the emerging markets and developing countries have been joined by tens of millions in the advanced countries. Opinion polls, including a careful study by Stanley Greenberg and his associates for the Roosevelt Institute, show that trade is among the major sources of discontent for a large share of Americans. Similar views are apparent in Europe.

How can something that our political leaders – and many an economist – said would make everyone better off be so reviled?

One answer occasionally heard from the neoliberal economists who advocated for these policies is that people are better off. They just don’t know it. Their discontent is a matter for psychiatrists, not economists.

But income data suggest that it is the neoliberals who may benefit from therapy. Large segments of the population in advanced countries have not been doing well: in the US, the bottom 90% has endured income stagnation for a third of a century. Median income for full-time male workers is actually lower in real (inflation-adjusted) terms than it was 42 years ago. At the bottom, real wages are comparable to their level 60 years ago.

The effects of the economic pain and dislocation that many Americans are experiencing are even showing up in health statistics. For example, the economists Anne Case and Angus Deaton, this year’s Nobel laureate, have shown that life expectancy among segments of white Americans is declining.

Things are a little better in Europe – but only a little better.

Branko Milanovic’s new book Global Inequality: A New Approach for the Age of Globalization provides some vital insights, looking at the big winners and losers in terms of income over the two decades from 1988 to 2008. Among the big winners were the global 1%, the world’s plutocrats, but also the middle class in newly emerging economies. Among the big losers – those who gained little or nothing – were those at the bottom and the middle and working classes in the advanced countries. Globalization is not the only reason, but it is one of the reasons.

Under the assumption of perfect markets (which underlies most neoliberal economic analyses) free trade equalizes the wages of unskilled workers around the world. Trade in goods is a substitute for the movement of people. Importing goods from China – goods that require a lot of unskilled workers to produce – reduces the demand for unskilled workers in Europe and the US.

This force is so strong that if there were no transportation costs, and if the US and Europe had no other source of competitive advantage, such as in technology, eventually it would be as if Chinese workers continued to migrate to the US and Europe until wage differences had been eliminated entirely. Not surprisingly, the neoliberals never advertised this consequence of trade liberalization, as they claimed – one could say lied – that all would benefit.

The failure of globalization to deliver on the promises of mainstream politicians has surely undermined trust and confidence in the 'establishment.” And governments’ offers of generous bailouts for the banks that had brought on the 2008 financial crisis, while leaving ordinary citizens largely to fend for themselves, reinforced the view that this failure was not merely a matter of economic misjudgments.

In the US, Congressional Republicans even opposed assistance to those who were directly hurt by globalization. More generally, neoliberals, apparently worried about adverse incentive effects, have opposed welfare measures that would have protected the losers.

But they can’t have it both ways: if globalization is to benefit most members of society, strong social-protection measures must be in place. The Scandinavians figured this out long ago; it was part of the social contract that maintained an open society – open to globalization and changes in technology. Neoliberals elsewhere have not – and now, in elections in the US and Europe, they are having their comeuppance.

Globalization is, of course, only one part of what is going on; technological innovation is another part. But all of this openness and disruption were supposed to make us richer, and the advanced countries could have introduced policies to ensure that the gains were widely shared.

Instead, they pushed for policies that restructured markets in ways that increased inequality and undermined overall economic performance; growth actually slowed as the rules of the game were rewritten to advance the interests of banks and corporations – the rich and powerful – at the expense of everyone else. Workers’ bargaining power was weakened; in the US, at least, competition laws didn’t keep up with the times; and existing laws were inadequately enforced. Financialization continued apace and corporate governance worsened.

Now, as I point out in my recent book Rewriting the Rules of the American Economy, the rules of the game need to be changed again – and this must include measures to tame globalization. The two new large agreements that President Barack Obama has been pushing – the Trans-Pacific Partnership between the US and 11 Pacific Rim countries, and the Transatlantic Trade and Investment Partnership between the EU and the US – are moves in the wrong direction.

The main message of Globalization and its Discontents was that the problem was not globalization, but how the process was being managed. Unfortunately, the management didn’t change. Fifteen years later, the new discontents have brought that message home to the advanced economies.


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JOSEPH E. STIGLITZ Joseph E. Stiglitz, recipient of the Nobel Memorial Prize in Economic Sciences in 2001 and the John Bates Clark Medal in 1979, is University Professor at Columbia University, Co-Chair of the High-Level Expert Group on the Measurement of Economic Performance and Social Progress at the OECD, and Chief… READ MORE


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Things are a little better in Europe – but only a little better. Branko Milanovic’s new book Global Inequality: A New Approach for the Age of Globalization provides some vital insights, looking at the big winners and losers in terms of income over the two decades from 1988 to 2008. Among the big winners were the global 1%, the world’s plutocrats, but also the middle class in newly emerging economies. Among the big losers – those who gained little or nothing – were those at the bottom and the middle and working classes in the advanced countries. Globalization is not the only reason, but it is one of the reasons. Under the assumption of perfect markets (which underlies most neoliberal economic analyses) free trade equalizes the wages of unskilled workers around the world. Trade in goods is a substitute for the movement of people. Importing goods from China – goods that require a lot of unskilled workers to produce – reduces the demand for unskilled workers in Europe and the US. This force is so strong that if there were no transportation costs, and if the US and Europe had no other source of competitive advantage, such as in technology, eventually it would be as if Chinese workers continued to migrate to the US and Europe until wage differences had been eliminated entirely. Not surprisingly, the neoliberals never advertised this consequence of trade liberalization, as they claimed – one could say lied – that all would benefit. The failure of globalization to deliver on the promises of mainstream politicians has surely undermined trust and confidence in the 'establishment.” And governments’ offers of generous bailouts for the banks that had brought on the 2008 financial crisis, while leaving ordinary citizens largely to fend for themselves, reinforced the view that this failure was not merely a matter of economic misjudgments. In the US, Congressional Republicans even opposed assistance to those who were directly hurt by globalization. More generally, neoliberals, apparently worried about adverse incentive effects, have opposed welfare measures that would have protected the losers. But they can’t have it both ways: if globalization is to benefit most members of society, strong social-protection measures must be in place. The Scandinavians figured this out long ago; it was part of the social contract that maintained an open society – open to globalization and changes in technology. Neoliberals elsewhere have not – and now, in elections in the US and Europe, they are having their comeuppance. Globalization is, of course, only one part of what is going on; technological innovation is another part. But all of this openness and disruption were supposed to make us richer, and the advanced countries could have introduced policies to ensure that the gains were widely shared. Instead, they pushed for policies that restructured markets in ways that increased inequality and undermined overall economic performance; growth actually slowed as the rules of the game were rewritten to advance the interests of banks and corporations – the rich and powerful – at the expense of everyone else. Workers’ bargaining power was weakened; in the US, at least, competition laws didn’t keep up with the times; and existing laws were inadequately enforced. Financialization continued apace and corporate governance worsened. Support Project Syndicate’s mission Project Syndicate needs your help to provide readers everywhere equal access to the ideas and debates shaping their lives. LEARN MORE Now, as I point out in my recent book Rewriting the Rules of the American Economy, the rules of the game need to be changed again – and this must include measures to tame globalization. The two new large agreements that President Barack Obama has been pushing – the Trans-Pacific Partnership between the US and 11 Pacific Rim countries, and the Transatlantic Trade and Investment Partnership between the EU and the US – are moves in the wrong direction. The main message of Globalization and its Discontents was that the problem was not globalization, but how the process was being managed. Unfortunately, the management didn’t change. Fifteen years later, the new discontents have brought that message home to the advanced economies. inShare 459 CONTACT USPOST COMMENT READ COMMENTS (116) PREVIOUS Putting People First in Europe Jean-Paul Fitoussi NEXT The IMF Still Misunderstands the Euro Crisis Anders Åslund Hide Comments COMMENTS POST EXPERTS USERS Click to the left of a paragraph to pin your comment to it Reply


Comment David Barth, CFA,MBA,BBA AUG 10, 2016 globalization without real growth must hurt developed countries per capita income. Denominator growing while numerator stagnant. Reply


Comment Pepy Sakellariou AUG 10, 2016 When things get complicated, ask simple questions. Who gets the lion share of any process. in our case of globalization? Did Chinese or Indians or Pakistani or Africans got the fair share of the profits of expatriated West corporations and companies? Or they just have been exploited by speculative capitals to make only few people super rich? How much do they get paid for their services? Is it fair when compared with payments in West World and if not why? How big is the pay gap between CEOs and workers and how big between companies owners and people who make a company big? How many hours employees work, is there any child labor allowed? Why? Do we really need to blame globalization process for these inequalities or a very specific elite and some really bad World Organizations for not implementing global rules to ensure peoples prosperity allover world? Why simple steps like : Banning tax havens allover world. Limiting pay gaps globally no higher than 10 fold for everybody involved in production. Limiting working hours to no more than 4-5 hours per day allover world. Banning labor under 18 allover world. We all know that severe sanctions have been implemented, even wars have been waged for much less important reasons as for ensuring profits of some very unbridled and risky investments (see toxic derivatives) transferring the losses of the few to the many. What Institutions, Organizations, States and every other powerful actor in the decision making process do and why? Simple questions not very difficult to be answered, certainly very annoying to be asked! READ LESS Reply


Comment yw yap AUG 10, 2016 guess the Discontents are mostly on the Western 'front'. Only about 3 decades ago Globalization was the sunrise thingy, with huge load of biz corps going global and Western societies enjoying plentiful of goods at low prices (in $ & cents). The world continues to spin and the Western 'front' now finds itself relegating to a backseat. The other day, I saw a foreign worker sitting on a small excavator in an urban setting, starring on his smartphone. Guess he could send money home to his village. Some time ago he might still be' a frog living under a coconut shell'. Globalization has likely widened his Perspective. I am sure if he should complain? READ LESS Reply Comment Jacob Alhadeff AUG 9, 2016 Rules don't need to be written to tame globalization, but to regulate it to benefit more people. The growth of global trade is already slumping, so I don't know if taming is the word you were looking for. I couldn't agree more that the primary winners of globalization have been the wealthiest .1%, but so have the hundreds of millions of previously impoverished Chinese. It is not black and white and the answer is certainly not populist protection, the flames of which you're stoking. I recently read a great analysis by Dani Rodrik about the competing forces of the nation-state, global economic integration, and democracy. I think that what we're seeing in the wake of the Great Recession is inflamed nationalism lead by populist democratic politics. What we should instead attempt is global federalism that incorporates more democratic economic policies and continues global economic integration. READ LESS Comment David Chipping AUG 10, 2016 Perhaps you may have noticed that EU federalism is not high on anyones agenda, much less global federalism. Reply


Comment Ed Hollison AUG 9, 2016 'Under the assumption of perfect markets (which underlies most neoliberal economic analyses) free trade equalizes the wages of unskilled workers around the world.' and '[Neoliberals] claimed – one could say lied – that all would benefit.' So which is it? Did 'neoliberals' acknowledge that wages in some sectors would go down? Or did they 'lie' and tell us everyone would benefit? You have to pick one assessment of what these economists actually said. Here's what happened: Economists never told us there weren't going to be losers. They were very clear. I learned Heckshire-Ohlin as a sophomore in intro to international trade. It's the failure of politicians to compensate losers that created this mess. You kind of touch upon that towards the end of this piece. But somehow the heaviest criticism of the piece is preserved for economists who are accused of promising something they never did. READ LESS


Comment Steve Hurst AUG 10, 2016 @Ed Politicans are not interested in losers unless they become a big enough voting bloc to kick them out. As long as they are a containable minority they can go hang. Politicans knowingly leave people stranded every year, there is nothing accidental about it. If losers complain to loudly the answer is denigration and that machine runs endlessly usually loaded with faux READ LESS Reply


Comment G. A. Pakela AUG 9, 2016 The U.S. has traditionally allowed its trading partners nearly unlimited access to U.S. markets without a corresponding symmetric access to their markets. The Chinese can leverage their low-cost labor tied to a fixed exchange rate and wreak havoc on existing U.S. firms, forcing them to go out of business or move their production to China. In the meantime, the Chinese restrict access to their own markets and require significant technology transfers. Maybe it takes a crude individual as President to dictate our terms and conditions to countries that want to sell their goods to the U.S. to provide similar access to their markets, and to require labor and environmental conditions roughly commensurate with our own. READ LESS Reply


Comment Paul Wakfer AUG 9, 2016 The writer should be more careful to distinguish the effects of free trade under current Statist societies from the operation of totally free choice trade between people and organizations in fully free societies (ie voluntary, fully unregulated transactions), which as part of free choice in general cannot logically be negative. For how such societies could potentially operate see: http://www.selfsip.org/fundamentals/socialmetaneeds.html Reply


Comment george jonisch AUG 9, 2016 'Populist and rightwing politicians' vs 'us enlightened sophisticates' has been a major intellectual theme of late. I find myself needing to review the old definition of populism. For instance is it possible that Richard Haass' weekend article in WSJ.COM has some realistic concerns: 'The world is not self-organizing. An invisible hand may help to guide the markets, but no such force is at work in geopolitics. For the past 75 years, the visible hand of the U.S., more than any other factor, has created and maintained conditions of stability'' 'The benefits and influence that the U.S. derives from its longstanding alliance commitments far exceed the costs.' 'We do not have the option of becoming a giant gated community. Sooner or later, we would feel compelled to step in to restore stability and to right the balance of power.' Concerns on an international geopolitical level, may contradict a more local-oriented approach? Is that local concern to be called 'populism'? If the western urban definitions of cleanliness or decorum and deliberate restraint of emotional expression is suddenly confronted in 'changed' neighborhood grocery stores or in local parent teacher meetings and if that disparity causes communal disharmony and approbation; is that populism? Are people reaonably entitled to expect maintenance of 'social values' and 'a way of life'? The constitution says we must let people choose their own religious behaviors. Does it guarantee third world agrarian village values in an industrial urban neighborhood? Does it guarantee minority religious law to usurp majority courts in secular populations? Is that populism? For the majority of middle class western neighborhoods the sudden and unacknowledged insertion of these and other 'subtle' ways of being, takes away years and generations of 'investment' in a person's most valuable possession; the home and 'quality of life' around that home. Are these 'populist' concernsbecause they are not expressed in dollars, cents and GDP? Really? > Sent from my BlackBerry 10 smartphone. READ LESS Reply


Comment Guido Brandt Corstius AUG 9, 2016 Now we learn that the meaning of Globalizations differs in Time, Place and Group (#TPG). Not in a linear way but graphical. We then have a triangle with Time on top and Place and Group in the downcorners. We call this Conceptual Blending. Reply


Comment george sos AUG 9, 2016 oh how far from the targets(of globalisation) we are indeed!But this is not the main issue. The problem in reality is what globalisation did to society in the years passed ,what ethical destruction took place ,on the basis of non ending profits at all costs. People are angry ,and maybe this was the target all along.To make everyone so hatefull of all others ,in order to apply the clean version of free market,big fish eats small fish and consequently stronger men ,kill weaker ones.(or women ,kids ,whatever,greed doesnt have boundaries)). And since people are angry ,there is no way we will reach a good solution.Because as the ancient greeks said,'there s no happiness without balance'... And today's unbalanced world can only have one ending.Destruction.(self). Angry mobs dont think,just react.And the greedy few knew that all along,and used it against the common ethos and the average man/woman.They knew that humans (mostly) have boundaries that they wouldnt violate even if in mortal danger.This use to be a value appreciated by all humans on earth,to sacrifice your own interests in order to help others ,this was a honour,something those who did,were really appreciated for. Instead of this ,today we appreciate the vultures who make most money.They sell the dream of 'anyone can get it' to humans,and this way they keep society under their control. People need to stop being angry and start thinking.Start boycotting those who kill them,start objecting in taking part in their wars,their companies their profits.we need to stand up for all humans.And if the few greedy do not want to stop their perverted actions,ther s always physical destruction.I d rather if we do not resort to that ,but when you re faced with total annihilation ,your only way out is the possibility that if you attack first you might win,you might survive..This is what will happen eventually.those who pretend not to see it,are only telling lies to themselves.We will go through rough times in the near future,we can all tell the signs already.Instead of the peace for all and food and water for all of the 80s we are engaged in nationalist racist wars,religious wars,all kinds of stupid wars.And all for profits.Oil or other.So i say lets stop consuming their stuff.Lets start making our way in life only with the bare minimum,only to see the rich and famous greedy melting away .Without your contribution ,no vulture,no corporation or nation can take over.If you do not assist the few ,you will never have to fight them.Because all the cents you give today to buy the useless stuff,will eventually pay for the bullets that will kill you ...So stop buying crap.!!!Stop expecting more profits,or better lives.You will never have a better life if you dont first do away with this ,messed up one.Same goes for all systems.If you cant fix it,demolish it and start fresh.thats my 2 cents.good luck to all . READ LESS Reply Comment Armchair Economist AUG 9, 2016 @Steve Hurst Off shoring by itself doesn't have much meaning to me. Off shoring oil production? Off shoring call centers? Off shoring computer coding? Off shoring x-ray analysis? Off shoring data entry? Without being specific off shoring would be a good example of a US company severing a limb to remain competitive both at home and abroad. It even underscores my point that the hybridization of across the border labor with US management has delayed the decline of some US industries. READ LESS Comment Steve Hurst AUG 9, 2016 @armchair And if you sever too many limbs? Or are you thinking like a lizard these limbs regenerate? Every industry relies on a support network of its own usually 5x the size of a key player, remove the key industry players and the network disappears, the industry can not then return because the network knowhow it relies on to function has gone Unless you are careful what you are left with is the stuff which is difficult to offshore, no technolgy advantage and head to head on labour cost and expanding guvnt debt to try and maintain living standards. Oops better not say where we are heading READ LESS Reply


Comment One Ditau AUG 9, 2016 Indeed the new discontents have brought the message home. This article by Prof. Stiglitz perfectly points out blatant ignorance of the mainstream policy makers to the real world problems - we are yet to see if there will be a change of policy direction in the the advanced countries following the a new wave of public discontent in recent times. Reply


Comment Yoshimichi Moriyama AUG 9, 2016 As the devil speaks from the Scripture, so capitalist greed speaks from liberalism. Capitalist greed wears the attire of cosmopolitan, liberal internationalism. But as Samuel Huntington says, in Who Are We?, it poses problems. He says multinational corporations are most cosmopolitan in American society. Liberalism makes very little, if not nothing, of political power. It is derisive of it. But even democracy cannot work without political power, which needs to be absolutitst in the sense of binding every citizen. Absolutist power is what has been handed down from absolutist monarcy to democracy in both theory and practice. What if the United States had two Congresses and two Supreme Courts, one in Washington DC. and one in Atlanta? We must think well and take care so that economic liberalism will not go out of its bounds and impair or destroy democracy. READ LESS Reply


Comment D. V. Gendre AUG 9, 2016 Biased and ideological as everything that comes out of Mr. Stiglitz. Blameing some sort of 'neoliberalism' that never existed since most economists and certainly all politicians praise and live Keynesianism! Reply Comment Mona Sultan AUG 9, 2016 It is true that globalization might be linked to unemployment and pose a threat to low skill workers. However, these dangers could be mitigated by two solutions, which are different for their own reasons. The first is education (very expensive and not an immediate response). The second is social protection or redistribution (does not receive political support even though it would be one the best solution and the least costly for those who are about to retire or leave the job market. READ LESS Comment Tonu Pavel AUG 9, 2016 I think the definition of low skill worker is discriminatory considering that they are the once to do the real work in economy. High skilled economist and financiers have made it possible for 2008 crisis to happen. High skilled lawyers are implicated in the off shore scandals and high skilled politicians tend to destroy the democratic system. The treat from high skilled groups is immensely higher than the perceived advantage they bring while for low skilled group is vice versa. READ LESS Reply Comment Paul Wakfer AUG 9, 2016 The writer should be more careful to distinguish the effects of free trade under current Statist societies from the operation of totally free choice trade between people and organizations in fully free societies (ie voluntary, fully unregulated transactions), which as part of free choice in general cannot logically be negative. For how such societies could potentially operate see: http://www.selfsip.org/fundamentals/socialmetaneeds.html Reply Comment jeff miles AUG 8, 2016 It is difficult to delineate, but declining wages and increasing unemployment probably has more to do with automation than globalization - but globalization is an easier thing to target and malign. In the future, automation is a much more difficult challenge to address - and one that may put virtually everyone except those who are doing the automating or investing in it out of a job. In the past automation has just led to changes in employment, but increases in robotics and cognitive machine learning are destined to create widespread structural unemployment - which will create massive issues that no one is prepared to address. READ LESS Comment Steve Hurst AUG 9, 2016 @Curtis I think the answer probably is that offshoring or shuttering lock stock and barrel entire large facilities therefore causing local community economic implosion is more obvious to people than automation which is todate more of a creeping effect. When wholesale largescale localised replacement of labour developes it will move main stream as an issue. Corporations will do their best to keep impact creeping for PR reasons. If you automate an entire retail banking industry but only onion peel it stage by stage it has less impact in the media than shutting a major steel works. Whichever way it is packaged has no less impact on people as shown by Brexit voting READ LESS Comment Curtis Carpenter AUG 8, 2016 But don't you think that, so far at least, the transfer of jobs to low-wage environments has had a much greater impact than automation on wages and employment in the West? I suspect that the gathering global labor surplus can be put down more to exponential population growth and rising expectations than it can to automation and technology. Reply Comment jeff miles AUG 8, 2016 It IS true that people are better off, despite the statistics. Assuming one can afford housing, 1960's era cars, electronics, and appliances can be purchased for nearly nothing today - but now every high school drop out believes they are entitled to $120/month cable packages, smart phones, and big screen TVs as well as state of the art healthcare and large wardrobes of trendy clothing. Advances in everything compromise all the statistics and no one wants to go back to living like they did in the 60s - which would be quite affordable now. READ LESS Comment A Mayo AUG 9, 2016 LIfe ('the cost of living') was more affordable in the 1960s compared with today. That being said, it is difficult to compare the 60's with today's version of living. Access to email via computer or smartphone is an absolute necessity, especially for job seekers. The cost of a minor illness will literally put a middle income person in the poor house and that is with having health insurance. Your off the cuff remarks didn't resonate with me. Reply Comment Norm Winn AUG 8, 2016 Given the track record of 'economists' of every stripe over the past several decades, one needs to take their 'projections' with a very large grain of salt. These aren't stupid people, either. Could it be that their models are seriously flawed or that supply-side vs. demand-side economics is a false choice? Comment A Mayo AUG 9, 2016 The science of Economics is known as a backwards looking science. It's prognostications (even by well educated economists) often miss the mark. Reply Comment Steve Hurst AUG 8, 2016 You know, I am struggling to recall the last time I heard anybody say - 'Lets make this a more expensive way', other than possibly in the vanity market which is quite small and typically oriented towards the 1%, or would-be 1% aspirants. Hence globalisation and shortly AI. The problem is that unless you replace redundant activity you end up with nobody to sell stuff to. Hands up who thinks politicans can sort this business conundrum, excluding tax spend which is not their money but is forcibly collected. Thought not READ LESS Comment Steve Hurst AUG 8, 2016 @Curtis I tend to buy local if possible but it is often impossible so it is not even a matter of paying a premium Comment Curtis Carpenter AUG 8, 2016 'The more expensive way' though, is open to a great deal of interpretation isn't it? There are social, environmental and political costs that some will want to weight differently than a corporate CFO (who is almost duty-bound to ignore such things altogether). A world view that is focused exclusively on return on assets is blind to a broad spectrum of issues that impact human well-being in both the short- and long- and individual and aggregate terms. All of the questions philosophers like Nozick and Rawls explored pertaining to economic justice are tossed out as 'externalities' in the current global corporate melieu. READ LESS Reply Comment Procyon Mukherjee AUG 8, 2016 Stiglitz is making a very important point that one of the signs of prosperity is social protection; the world's most advanced nations have the highest levels of social protection. This for U.S. may need a re-look. Reply Comment Armchair Economist AUG 8, 2016 I completely disagree. Even without globalization those developed economies that have seen their working class lose their bargaining position and earnings power would have suffered worse. Ask yourself first what is the main driving force behind globalization and you will come to the same conclusion as me in that it was driven mainly by slowing growth in their own economies and the search for higher growth in other parts of the world. Your notion that by tapering or even removing globalization completely will help the working class maintain their relative wellbeing is just barmy. You believe too much in the utopian idea that when a nation achieves economic nirvana i.e. total equality and flat income distribution then everyone will be well off and happy in merry land. Instead, I take the opposite view that it is globalization that has in fact delayed the natural course of those economies to decline from their economic heights. For a minute let’s put some of your anti-globalization idea into real practical terms: Let’s say like what Trump is advocating in that he wants to move manufacturing back to the US. Let’s say he penalizes imported iPhones so that it makes more business sense to have them manufactured in the US instead of China. Let’s say this puts 10,000 additional Americans in factory work. They produce iPhones for the domestic market of 340m Americans. What happens when the domestic market is saturated? OK you say, the US will trade iPhones for cheese. So you need to import enough cheese to export enough iPhones to the world. This leads to the complete destruction of cheese manufacturing in the US. By the way if you were to ask me which I would prefer, a finicky product like iPhones with its extremely short lifespan and thin margins of 5% or cheese which has a more stable lifespan and probably better margins I would take cheese. What it all reduces to is you are advocating a central controlled economic model where you decide which industries are the winners and which are the losers something China is doing with its state run organizations and making a complete utter hash of it all instead of letting capital decide where to find the best returns. How you distribute that wealth is a social contract between the government and its people and something that is decided upon at election time. So your real argument then is that the Swedes have a better social contract with its government than Americans do with theirs. But a diminishing middle class in the US and Europe has nothing to do with globalization, in fact quite the opposite. READ LESS Comment Steve Hurst AUG 9, 2016 @armchair Please explain why offshoring occurs , as the industry still exisits. These industries have not declined, just relocated. As such the industries are very healthy and the new facilities very busy Comment Armchair Economist AUG 9, 2016 @Steve Hurst If you take the position that labor cost differentials between the US and the rest of the world is the reason for the discontent in the middle and lower classes then you will always conclude that it is globalization that is the reason for the decline. I argue this is a fallacy and in fact globalization has helped delay the decline of certain industries which should have died off much earlier. READ LESS Comment Steve Hurst AUG 8, 2016 @Armchair Your argument totally ignores the labour cost differential of 10:1 which is driving globalisation. You will find that both US iphone production is not high and US cheesemaker suppliers aka US dairy farmers are in trouble. How could this be when land is available and cows are the same the world over Reply Comment Michael Public AUG 7, 2016 Globalization dramatically increases productivity of the human race as it allows whole nations to specialize in certain trades. However, it is of no use if it guts local areas of any jobs. It needs to be quid pro quo. If we offshore our manufacturing to China then China needs to start paying us big bucks for high grade design services rather than just copying or stealing our IP. The money and jobs need to flow both ways. Globalization is worth saving as it has much to offer. To do that it needs a revamp. Globalization 2.0 needs to protect the jobs and lives of people who do the offshoring. READ LESS Comment Steve Hurst AUG 7, 2016 @Micheal You know this isnt going to happen. China is ahead in some areas, eg batteries, thats where some of Warren Buffets money went China and India are on track to produce 40% of the worlds grads by 2020 http://monitor.icef.com/2012/07/china-and-india-to-produce-40-of-global-graduates-by-2020/ READ LESS Reply Comment Linda Jamin AUG 7, 2016 So President Obama is pushing these new nocive trade agreements because he's stupid but well-meaning or because hes bought and sold by the corporations? Or is he just smarter than you are and should be trusted to do the right thing? Which is it? Because if he's so smart, why would he do the wrong thing instead? But of course, the first two explanations aren't politically correct are they? When a politician does things against the common good for his own reasons nobody EVER says of him (or her} 'S/he's dishonest and self-serving'. Why is that? He can't sue you for expressing ypur opinion of his character. He won't send the Mafia after you. But ordinary people who never hear him challenged, who never hear a journalist ask him WHY he's pushing measures that are unpopular and on the face of it undesireable cannot but decide that he must know what he's doing. After all, he's a good, smart man and would never do anything to hurt ordinary people, right? Arrrrrgh.... In America, bad things only happen by accident. There are no power hungry, ambitious, greedy, politicians. Just good honest men {mostlty} making honest mistakes. Or not ...How lucky we are! READ LESS Comment Barry Rosenfeld AUG 8, 2016 Bill Clinton sold out the American people and cashed in big. Why shouldn't Obama? Comment Greg Feigel AUG 8, 2016 You hit on the fundamental fallacy of all macroeconomics. Economists are the loving philosopher kings who advise the equally loving, wise and intelligent government. The problem is the private sector (aka the People) are stupid louts unable to think for themselves, are unable to make the 'right' decisions and are criminally selfish. The government has no such selfishness, stupidity or cynicism. More is better than less, so we need more government and more wise economist / counselors. The Holy Keynes tells us this is true. READ LESS Reply Commented Fabio Souza AUG 7, 2016 The TPP and TTIP agreements are not wrong moves, they are a result of economic dispute between continental countries and main economies in the globe. It's called capitalism, sovereignity, profit. Reply Comment Henry Rech AUG 7, 2016 Globalization works because of differential wage costs and compliant labour. Eventually, those economies benefiting from globalization will see their internal cost structures rise and remove the incentive for capital to be directed in their direction. So given time, the forces that drive globalization will attenuate. Japan is a prime example where rising living standards made the country less internationally competitive. Capital (even Japanese capital) was increasingly directed to other Asian countries and eventually China. The question is will all this happens before robotics captures industrial production? Robotics should return production to advanced countries in the first instance where there is a higher skills base. READ LESS Reply Comment Robert REYNOLDS AUG 7, 2016 This absurd experiment in laissez-faire economics was destined to fail from the outset. A moron could have predicted this. The only people to support it, were and still are, an assortment of right wing economic zealots and free market fanatics and the so-called 1%'ers who stand to make billions from it. This kind of economics existed in America and Europe in Charles Dickens' time. It was an unmitigated disaster then as it is now. Neoliberalism has cause me to revisit the Marxist leanings that I had in my youth. As I seem to recall it this trend to globalization by the capitalist class was something that Marx predicted in the 19th century. This trend certainly helps to explain the rise of more extreme politicians around the world. Unfortunately most of these seem to be from the far-right or lunatic fringe. READ LESS Reply Comment Jim Klein AUG 7, 2016 The reality is that in the last 25 years or so we have had +2 billion people dumped on the global labor market (China, India, ex- Soviet Union and Eastern Europe for example), none of these countries have traditional Western style of living and wages but have fast growing middle classes. Effectively this is partially due to a wealth transfer from the Western countries to these countries and it continues. As long as technology allows management to take advantage of labor cost arbitrage (NOT skills arbitrage) this wil continue until the labor cost base is relative OR, labor as a whole has been replaced. We are part way through a global resetting of the wage level, and the Western governments still didn't wake up yet. READ LESS Comment Tim Bowler AUG 8, 2016 Hi Jim, You make a very good point. China and India's entry in to theglobal marketplace is something that western governments could not and cannot control - and we just have to work out how best to deal with it. Stiglitz's point about the Scandinavian model is well-made. We need governments to act to counter the worst excesses of untrammelled global capitalism . Because the political consequences of NOT doing so will be bad for us all (Trump, Brexit could be considered as straws in the wind). Better by far to make sure that far more of us are 'winners' when it comes to globalisation and not just the 1%. Best Tim READ LESS Comment John Brian Shannon AUG 7, 2016 Hi Jim, Oh, they knew all along. However, they allowed it and continue to allow it in order to prevent something much worse from happening. Imagine the alternative. That alternative being 'the West getting richer and richer, while the developing world continued to stagnate' over the past 30 years. If you think we have had terrorism problems under the present 'share the wealth' paradigm, imagine what it would've been without. Not to mention adding MAD to the mix. I get you, and you made your point very well (and I agree with you completely) it's just that there is more to the story. Very best regards, JBS READ LESS Reply Comment john werneken AUG 7, 2016 Globalization be befits ME, and my country as a whole - fook the poor. Reply Comment Greg Feigel AUG 7, 2016 Did it ever occur to you that government itself is the problem? Extremely loose law and policy entitling every deadbeat to a home? Ineffective and excessive regulation and regulators? Cronyism and regulatory capture? The unholy, symbiotic alliance between government and the financial sector? The 'negative multiplier' of waste, fraud, abuse and poorly focused spending? Answer: No, you did not. The Keynesian Religion does not allow it. READ LESS Comment John Brian Shannon AUG 7, 2016 Hi Greg, The rise of the 1% (and concomitantly) the rise of inequality, began prior to 15 years ago. I'm certain an economist/statistician expert like Mark Thoma could pinpoint the exact day the 1% was created (he may well have written on the topic) but I'm betting it was well over 30 years ago. How do you explain that? Recent low interest rates may have added thrust to the 1% and comparatively added to the inequality of the last 15 years. But they didn't create the 1% nor did they create inequality. Cheers, JBS READ LESS Comment Greg Feigel AUG 7, 2016 Mr. Shannon: No, the 1% is the result of the unholy Central Bank-Government-Financial Sector alliance. Interest rates have been artificially low to one degree or another for fifteen years now. The Financial Sector benefits and grows. Portfolios benefit. The Real Economy and the people do not. Sorry - sweeping, factually suspicious 'Supply Side Bogeyman' explanations are more belief than reality. READ LESS Comment John Brian Shannon AUG 7, 2016 Hi Greg, Don't forget corporate welfare and outsourcing millions of jobs to Asia, so that the 1% could initially form, then rise, and grow even richer. Thanks to the Reagan and Bush tax cuts that created the 1% in the first place. (Although even I admit that the Reagan tax cuts were the right policy at the time, but should've been rescinded by 1990) The 1% now own more than half of the world's wealth, by 2030 they will own 76% of the world's wealth. Do you really think they 'earned' it? In 2030, some 8 billion people will be fighting over the remaining 24% of the world's wealth. And nobody, anywhere, is doing a thing about it. Regards, JBS READ LESS Reply Comment Ian Kiddle AUG 7, 2016 Excellent article. The lower cost of oil has also made the effects of globalisation worse as transportation of goods produced in low wage economies is lower. This makes manufacturing inhigher wage economies even less competitive. Comment John Brian Shannon AUG 7, 2016 Hi Ian, That is true, but the lower energy prices also allowed developed nations to operate with lower overhead -- which is much more effective as a cost-reducer than lower shipping costs (which are a very minimal portion of the cost of products) even for large items like cars and trucks. Cheers! JBS READ LESS Reply Comment Victor Morris AUG 7, 2016 Thus Trump! Reply Comment Emilio Zuniga AUG 7, 2016 Mr. Stiglish first wrote much against global trade. Now he acknowledge that in emerging countries the middle class has improved. Countries like Brazil that were prone to his ideas now suffer the consequence of this choice. Of course it is not the only cause By it is at the roots of the corruption as well. Now that we know By several studies on income and unemployment the costs for some of the largest develop countries, he continues to oposse the deepening of this process. Nobody denles that global trade benefits the population of the large trade consumers, but of course they are not the only ones. The multinationals have kept a large portion on the wage differential. But then this is a matter of making the benefits of globalization for rich countries to be share with the disposesed labor. What is lacking is the will to fight the monopoly power in these countries as well as the tax system they enjoy. That is the souce of income to provide with adequate policies for workers that become unemployed by global trade. READ LESS Reply Comment Steve Hurst AUG 7, 2016 'Men ought either to be indulged or utterly destroyed, for if you merely offend them they take vengeance, but if you injure them greatly they are unable to retaliate, so that the injury done to a man ought to be such that vengeance cannot be feared.' Niccolo Machiavelli Our leader(s) have offended too many, being unable to injure them greatly in a democracy. The retaliation is the ballot box READ LESS Comment John Brian Shannon AUG 7, 2016 Hi Steve, Never has a quote been used so appropriately. Brilliant! JBS Reply Comment Tom Shillock AUG 7, 2016 Is it true that the Scandinavians figured out long ago that if globalization is to benefit most members of society, strong social-protection measures must be in place? Stiglitz is suggesting that the Scandinavians understood an economic relationship that Americans have not. Perhaps the key difference between these countries and America in this respect is cultural not cognitive economic? Scandinavian countries are far more homogeneous than America. Genetic similarity provides a basis for altruism and social policies that reflect that. For example: Investigating the genetic basis of altruism: the role of the COMT Val158Met polymorphism http://scan.oxfordjournals.org/content/early/2010/10/28/scan.nsq083.full Biological Altruism http://plato.stanford.edu/entries/altruism-biological/ America has always vaunted individualism, which could be morally characterized as every person for himself. That's not a value that engenders trust or results in high levels of welfare economics. Even during the Great Depression Americans complained of people receiving basic government assistance (CF Freedom from Fear by David Kennedy). Saving capitalism from itself in America in the so-called 'progressive era” and again in the 1930s were not primarily expressions of altruism. READ LESS Comment Robbie Jena AUG 7, 2016 It is not 'genetic basis of altruism'...it should be 'Human based altruism' to START with. Our ancestors , running in UFOs these days for visit, had that....if you want to go outside the Planet, you need that heavily. Just think... Reply Comment Robert Wolff AUG 7, 2016 'The main message of Globalization and its Discontents was that the problem was not globalization, but how the process was being managed.' Stiglitz misses a most important point. The structure of Global trade means multinationals take the wage differential between China and America all as profits. That means the concept of 'Fair Competition' is broken and the multinationals are colluding to keep consumer prices high in America. Free Market competition should drive down the price for American consumers, allowing consumers to partake in the cost savings from cheaper labor rates in China. So one of the great inequities in Globalization is collusion among multination and international banks to keep American consumer prices high - which means the government must grow debt to subsidize that inequity. READ LESS Comment John Brian Shannon AUG 13, 2016 Steve Hurst for President! Yes, you said it so well. That's what we've created. Now to make it work for all 5 quintiles, instead of only the 1% and (less so each day) the top 10%. As always, very best regards, JBS Comment Steve Hurst AUG 8, 2016 @John And there John you have defined the whole corp model. Hey Guys, why dont we get stuff manufactured at a 1/4 of the cost it should be (actually I think I saw a report that said the iphone should be 3K USD but it all moves so fast, deliberately). Guys if we sell it at a 1/4 of the real price we will make a fortune and we can pile uip the profits. And Guys we can avoid tax with moving figures about This is why globalisation has fed inequality, raw opportunism and deregulation READ LESS Comment John Brian Shannon AUG 7, 2016 Hi Robert, Except that Western consumers *have* benefited. An iPhone costs +- $500. only because it's made in China. Were it made in the U.S.A. it would cost $2000. And that's just an iPhone. For decades, Americans got downward pressure on the price of cars and trucks, courtesy of Japanese imports (which also used far less gas) providing a double bonus for consumers. All electronics, all textiles, and other consumer goods have been cheaper for decades, thanks to globalization. The tradeoff -- millions of jobs leaving for Asia, cost America a lost decade -- at least. However, reported unemployment is now down to 4.8% (while the real unemployment rate is surely double the official unemployment rate, as usual) nevertheless, it's a relative gain for workers and the economy. Therefore, the only remaining (fundamental) item to address is the inequality caused by the Reagan and Bush tax cuts, which caused the creation, subsequent rise, and political power of the 1%. (They were the right policies at the time, however. Just that the Reagan tax cuts should've been rescinded by 1990, to prevent the worst of the inequality/rise of the 1% and .001% from occurring) You'll recall that the 1% presently own more than 50% of the world's wealth, and by 2030 they will own 76% of the world's wealth (leaving only 24% for the 99% to fight over) That will be some fight! By 2030, there will be 8 billion people in the world... The ancient Confucian-era quote: 'May you live in interesting times.' is a curse, not a blessing. It will be interesting times, indeed, by 2030... Best regards, JBS READ LESS Reply Comment E Walker AUG 7, 2016 Neoliberal economists, who are the main political advisers, measure economic success against the Parety Principle: it's just great if someone can do better while no one is made worse off. This leads to reliance on aggregate statistics. They ignore the political impact of the vast numbers of people who are not being made better off, and ignore the fact that in the short run no one is worse off but in the intermediate term, the effect of trade is to make many people worse off. READ LESS Comment Tom Shillock AUG 7, 2016 Good point. Pareto seems part of the 'neoliberal' dogma; it plays a key position in Rawls' A Theory of Justice Reply Comment george jonisch AUG 7, 2016 When I read articles such as this one and especially the 'comments' I think about certain firm but unaddressed facts and dimensions. Why does no one think to bring the following facts into the conversation? Japan, Taiwan, Switzerland and a host of Gulf countries are all deliberately injuring their present and future economic well being by not allowing any sort of real immigration. Not muslims, not Christians not anyone not native. The facts as wel!l as the absence of comment on the facts are significant. We seem reluctant to acknowledge that it's not just $ and income that motivates people. 'The failure of globalization to deliver on the promises of mainstream politicians has surely undermined trust and confidence in the 'establishment.” And governments’ offers of generous bailouts for the banks that had brought on the 2008 financial crisis, while leaving ordinary citizens largely to fend for themselves, reinforced the view that this failure was not merely a matter of economic misjudgments'. Trust in the system is negatively correlated with globalization because tribalism is our default setting. England didn't wnt German masters in 1939. They also didn’t want German neighbors on their street. The French were willing to die rather than speak German. List 100 places on the globe and discover people want to live their own way with their own familiar rules and way of life. Don't mess with mother nature. It's not just about $. READ LESS Comment Steve Hurst AUG 7, 2016 @Tom The differential in wages is too high for equalisation to occur, it is a matter of gross oversupply, furthermore emerging economies are focused on providing significantly more cheap labour. AI will provide more (synthetic) labour and will have just as much impact (and has already started to impact). AI will be adopted to provide low(er) cost substitute labour to combat undermining of Eastern cheap labour, this will lever the labour problem in the West. As free trade requires consumers an imbalance is building rapidly between those that have the capability to consume and those who wish to provide products for consumption. This is further compounded by dramatic population growth in emerging economies. It is not hard to see it getting bloody, hence all the agitation about emerging economies which has been ongoing now for sometime, hence ignoring Western citizen disquiet which is now on the boil READ LESS Comment Tom Shillock AUG 7, 2016 If what Stiglitz stated is true then trade is an economic form of immigration. 'Under the assumption of perfect markets (which underlies most neoliberal economic analyses) free trade equalizes the wages of unskilled workers around the world. Trade in goods is a substitute for the movement of people. Importing goods from China – goods that require a lot of unskilled workers to produce – reduces the demand for unskilled workers in Europe and the US.' READ LESS Reply Comment george jonisch AUG 7, 2016 'The failure of globalization to deliver on the promises of mainstream politicians has surely undermined trust and confidence in the 'establishment.” And governments’ offers of generous bailouts for the banks that had brought on the 2008 financial crisis, while leaving ordinary citizens largely to fend for themselves, reinforced the view that this failure was not merely a matter of economic misjudgments'. Trust in the system is negatively correlated with globalization because tribalism is our default setting. England didn't wnt German masters in 1939. They also didn’t want German neighbors on their street. The French were willing to die rather than speak German. List 100 places on the globe and discover people want to live their own way with their own familiar rules and way of life. Don't mess with mother nature. It's not just aout $. READ LESS Reply Comment Charles Van Schilt AUG 7, 2016 I agree with Joseph Stiglitz that globalization has been completely mismanaged by an elite that has little regard for the bottom 90% or the environment. Reading this week an article on Milton Friedman, the Pulitzer prise winning economics writer, who's belief in free trade is still undaunted even with all the data now showing that it's not working for the majority of people in the world makes one realize how biased he really is towards the wealthy he so easily cozy's up to. I mean he admitted that he agrees with all free trade agreements regardless of what is in them freely admitting that he doesn't really read them, should give us some idea of the depth of his prejudices. He is one of the richest economists in the US, lives in a 11 million dollar house, and is married to one of the richest woman in the world. For me his bias and objectivity have been so obviously warped that anything he says should be disregarded because it makes no long term common sense anymore. And how many other neoliberal economists haven't personally benefited from the same bias, which is not based on facts but on their own economic wellbeing? One gets tired of ignorance especially when it comes from intelligent people who's only interest is their own well being. They don't think at all of the common good somehow morphing it into something that back's their own wellbeing. READ LESS Reply Comment serge d'agostino AUG 7, 2016 2 e message à propos de la traduction.Le passage ci après, extrait de la conclusion, est incomplètement et mal traduit 'but how the process was being managed. Unfortunately, the management didn’t change. ' Tout ça traduit par 'mais son processus'. Pour la première phrase, c'est un peu trop résumé et la 2e phrase n'est pas traduite. Reply Comment serge d'agostino AUG 7, 2016 la traduction en français de la phrase suivante est à mon avis à revoir : eventually it would be as if Chinese workers continued to migrate to the US and Europe until wage differences had been eliminated entirely. 'Ce serait comme si', ce n'est pas pareil que 'pourrait conduire les travailleurs chinois à continuer ' Reply Comment David Lloyd-Jones AUG 7, 2016 Globalization is the equalization of returns to factors of production. In you can run a machine and somebody drops an auto assembly plant next to you in Ouagadougou that's nice. You're not going to make Hamtramck UAW wages, but you're going to make a sharp uptick from adjusting camel saddles. Your Polish-American ex-auto-worker from the Buick plant might make good money in the camel saddle business in Detroit, but there's only a market for one or two guys there, and it's a somewhat recherché skill-set. Dr. Muhammad Jamal, the local G.P., is more likely to do it as an expensive hobby. American Honda and American Chevrolet can compete with each other, and Chinese Buick is doing pretty well, thank you very much, but in all cases they're using the local robots and the local workers. This means America's problem is that of the distribution of the marginal increase in the benefits of the new governmental policies. Remember it was FDR and GI Joe who created the Japan that makes so much physical wealth for the American household. G.I. Joe's kids aren't seeing their full share of the payoff yet. -dlj. READ LESS Reply Comment Douglas Leyendecker AUG 7, 2016 By it's nature, globalization diminishes nationalism. It's only natural. Advanced economy resources and infrastructure have to be focused on a new constituency (the global theater). That effort takes attention and resources away from domestic citizens. Globalization is a by product of the current technological disruption sweeping through everything. The new technological and communication systems made it possible to create such a sophisticated supply chain. Globalization was also made possible by having a policeman of the world, someone to ensure reasonable order. But that in itself is an example of resource allocation taken away from domestic citizens. One can't totally prepare for a new world order (globalization) until after it has been manifested. It's a bit like Nancy Pelosi's argument about passing Obamacare. 'We have to pass the bill before we know what's in it.' We can't know what we don't know (like the effects of globalization) until we know it. So the blame should likely go to the nature of human socioeconomic evolution. We step down a path. It seems to possess worthwhile possibilities. So we keep our nose to the grindstone until there's some kind of unexpected event. Then we adjust. The challenge is leveling the playing field. Sovereigns have their own unique attributes and needs. Just look how 'easy' it has been for the EU. There's a proper balance to everything but nothing is ever in perfect balance. The pendulum swings both ways. Brexit shows that the genie is out of the bottle for globalization. From centralized to decentralized to centralized to decentralized...this is the socioeconomy's pendulum swing. But the pace of change is generally slow because of infrastructure scale. The risk is reactionary policy, trying to satisfy the disaffected too quickly. But if the pendulum has swing too far in one direction it's return momentum could be substantive. READ LESS Comment stephan Edwards AUG 7, 2016 Globalization diminishes Nationalism ? Look around Nationalism is growing by leaps and bounds. The hatred in the industrialized west by the large and growing group that has been economically marginalized and reduced to poverty and subsistence level work is getting more and more virulent. They have no reason to love globalization it has made their situation worse and worse. They don't give a damn for improving the 3rd world at the cost of reducing them to poverty, much less improving the corporations bottom lines at their cost. And why should they? All is will take is a leader and the results will make Robespierre or Hitler look like school boys. Globalization has benefited damn few in the 'West' and the losers hate it and its symbols worse and worse every day. Nationalism isn't dying but is changing into something potentially very ugly. READ LESS Comment David Lloyd-Jones AUG 7, 2016 Doug, When you get two solecisms and a spelling error in a single paragraph, at the end of a long, meandering, but grammatically correct post, it's a fair bet your brain has gone to sleep. You write 'The risk is reactionary policy, trying to satisfy the disaffected too quickly. But if the pendulum has swing too far in one direction it's return momentum could be substantive.' I assume you mean compensatory, swung, and substantial. Having gotten that far, substantial compensatory action is obviously what is called for. Single payer health care would be a good start, accounting for maybe 13~16% of GDP if done competently, or 18~20% if done the American Way. For the bottom couple of deciles of income earners this would be a ver-ree substantial boost to both income and well-being. Education needs looking at. The countries with better overall education systems than America (and America's best, islands here and there, is still the world's best) are the countries with severe employment discrimination against women. America's commitment to employment equity has had the unfortunate side-effect of taking excellent homeroom teachers away into engineering, medicine, accountancy and administration. Oh, and senior positions in government... I think a two-pronged approach is needed. More money, and more open hiring, of teachers is needed to attract people back from the better paid professions. Some thought might be given, too, to curtailng the size of finance, public relations, and other utterly useless employments which nevertheless manage to take competent people out of education. My concern here is not with the income of teachers. My point is that better education for working class kids would be an increase in working and middle class incomes. Better infrastructure, and municipal and social services, would also represent increases in the well-being of the whole population, hence an equalizing-up for the middle. All of this is going to cost money. Where's it going to come from? Easy: tax the rich. I think it may be time to get over the fetish for merely Paretian equity. Might we not shoot for the real thing instead? -dlj. READ LESS Reply Comment Per Kurowski AUG 7, 2016 Stiglitz, with risk-weighted capital requirements for banks, there are no free neoliberal global markets. In free markets bank credit is allocated to whoever offer the banks the highest risk adjusted rates of returns for any particular size of exposure. That does not mean the free market gets it correct because what is perceived as 'safe” could be safer or riskier; while what is perceived as 'risky” could also be riskier or safer. And that is also because in a free markets a unit of capital invested in what is ex ante perceived as safe, is worth precisely as much as a unit of capital invested in what is perceived as risky. But the regulators, in 1988, with the Basel Accord put a stop on that, when they decided that the banks could leverage their unit of capital many times more if they held assets that were ex ante perceived as safe, than if they held assets perceived as risky. And so, from that moment on, banks would be earning higher expected risk adjusted returns on assets perceived as safe than on assets perceived as risky. And so, from that moment on the risk adjusted offers made by 'the safe” were worth t the banks much more than those same offers made by 'the risky” And the sovereign was decreed the safest, actually infallible, as it was assigned a risk weight of 0%. And we citizen who upon which a sovereign’s strength depends, we were decreed to have a risk weight of 100%. After statist had introduced the Basel Accord Trojan horse, they naturally cared much less about the Berlin wall falling in 1989.. they were winning anyhow. READ LESS Reply Comment Ian Maitland AUG 7, 2016 J'accuse. It's an elementary rule of intellectual hygiene. If Stiglitz is going to make sweeping claim that in the US, the bottom 90% has endured income stagnation for a third of a century, then he owes us a citation to his source. The most systematic analysis I have found is Scott Winship's. His conclusions flatly contradict the claims Stiglitz pulls out of the air. In his analysis ('What Has Happened to the Incomes of the Middle Class and Poor? ), Winship finds, for example, that 'the CPS trends for households broken down by the marital status of the head all show sizable income gains without any household-size adjustments. For all households, the increase in this measure of pre-tax, post-transfer income was 30 percent from 1979 to 2007. For households in which the head was married, the increase was 44 percent.' That's not all. Stiglitz does cite Case and Deaton's recent work which (he says) shows that 'life expectancy among segments of white Americans is declining.' But surely that is (at best) misleading. My recollection is that the decline was largely accounted for by middle-aged women, not men. If so, then the purported decline in 'median income for full-time male workers' seems to be an unlikely candidate for explaining lower life expectancy for women, since women have done well relative to men. No wonder that, whenever I read Joe Stiglitz's opinion pieces, I feel like I have been used. I think he owes the data, and his readers, more respect. READ LESS Reply Comment James Daniel Paul AUG 7, 2016 Economic policies need to synchronize with the political mood of the country. Nationalist wave and globalization do not go together. There are a few nationalist who endorse globalization Modi in India, Durte in Philippines Brexit and now Trump in US are examples of that it will be good for pro globalization teams not to speak of the benefits. It will fuel the nationalism better Reply Comment Lawrence Kramer AUG 7, 2016 'Trade in goods is a substitute for the movement of people.' This is a new thing. When Ricardo was teaching Econ 101, trade was a 'substitute' for the otherwise impossible movement of things like sunshine and rainfall. Trading wine for cloth was not equivalent to sending workers instead. Now, trade is indeed a substitute for immigration. Instead of Americans importing workers to make sneakers, we import the sneakers themselves. That's not trade; it's just telecommuting. In Ricardo's day, workers participated in trade gains, because trade created jobs in their fields. Today, 'ordinary' DM workers participate in the trade gains primarily as customers, and that's not enough. Trade does not create new markets for our geographical endowments. Rather, as Prof. Stiglitz says, it just equalizes the wages of unskilled (i.e., having skills not easily replicated) workers. One can understand how some low-paid workers might find that troubling. The aggregate wealth of trading partners grows, but it is allocated almost exclusively to the capitalists who are trading the people, not to the people being traded. Populism repackages the unhappiness by oversimplifying it, creating scapegoats for it, and otherwise promoting self-defeating solutions to it. The ONLY solution is redistribution of globalization's gains, primarily by dropping purchasing power on citizens from helicopters. There is no economic reason to tax the rich directly, although that wouldn't hurt them much, at least not until inflation becomes unpleasantly high for everyone. But that's really a detail. The gains made by shareholders in the FANG companies - zero marginal cost enterprises - should be distributed to everyone who doesn't riot in the streets over the concentration of wealth. Otherwise, we will descend into a Hobbesian jungle, and our life is nasty, brutish, and short. READ LESS Reply Comment Borat Borat AUG 7, 2016 TPP and TTIP are just as much geopolitical as they are economic. They're good. Unless you want China to build ever more clout in global trade governance and dictate the terms rather than the US and EU. Or if you don't want to counter China's one belt one road strategy. Then sure, oppose them. Other aspects of this article are off too. I was expecting more from such a supposedly highly established economist. You cite the Nordic nations as being examples, yet fail to recognise that the US has the best projections of all major advanced economies. And that the U.S. has far higher purchasing power than the Nordic nations (i.e. they aren't nearly as rich as they appear), excluding oil rich anomaly Norway. Switzerland is a better example nation that the U.S. should aim to model. Switzerland is proof that low taxes can work also (just to highlight this). I can't stand this high tax vs low tax rubbish (that even Krugman is stuck in). I can't even take Krugman seriously anymore. Obviously there are far more important factors and influencers than just tax rates that determine how a economy performs. Why did I see Krugman post a graph just the other day then almost suggesting there isn't? Just to make a political point / for political point scoring? Perhaps, but if so I lost respect for that alone. It's obvious straight out wealth distribution isn't the answer either. I.e. one only has to study the implications of this on many nations also, including France. France, despite all heavy handed welfare state and large scale wealth distribution programs still has 1 in 5 children living in poverty according to the UN, and has been experiencing awful growth under Hollande and performs poorly in many measures. If the US is to implement only one program to counter globalistion then it has to be education and training (and I'll put capital infrastructure investment second). This is the most important factor by far in a ever globalised and fast changing world, and the US (and UK) really need to improve in this regard and are lagging far behind many other nations. This is a program I fully support. Not more handouts. Obviously there are many complexities and variables. An immense number. I could go on and on and talk for days. I'm only just getting started, but unfortunately I'm not trying to do a proper in-depth analysis here. Just mentioning a few gripes I have. On another note this whole article reminds me of another article I read on project-syndicate a few weeks back where the writer (a so called Harvard professor) claimed left-wing policies had failed. He then spoke in circles for a while, cited some widely inaccurate / suspicious understandings of political science (that from a non-US perspective, i.e. having been trained elsewhere sounded absolutely wrong) before concluding that the solution is more of the same old left-wing policies. Seriously? This website is losing its standard (or perhaps global economists have just run out of ideas and have lost their touch). A bit more in-depth bi-partisan analysis and less ideology would be a welcome change READ LESS Comment Allen Petrich AUG 7, 2016 Borat, Swiss model, as stated by themselves many decades ago, was to be a banking center (in a relatively low population country) which would insure anonymity and protection from the investors' home country taxes. The other 'tax havens' are the same, so much cash that the crumbs are sufficient for the banker country to have some prosperity to spread around. Take away the tax haven status (not much really chipped away) and you have a whole different situation. It's the secrecy and protection more than any internal tax policies. The Swiss to themselves have acknowledged this for a long time. It was their strategy. Look at Nevada when it was one of the few places in the US allowing gambling. Once everyone else allows it, the 'comparative advantage' is gone, no more inexpensive hotel rates nor buffet dinner bargains. READ LESS Reply Comment Borat Borat AUG 7, 2016 TPP and TTIP are just as much geopolitical as they are economic. They're good. Unless you want China to build ever more clout in global trade governance and dictate the terms rather than the US and EU. Or if you don't want to counter China's one belt one road strategy. Then sure, oppose them. Other aspects of this article are off too. I was expecting more from such a supposedly highly established economist. You cite the Nordic nations as being examples, yet fail to recognise that the US has the best projections of all major advanced economies. And that the U.S. has far higher purchasing power than the Nordic nations (i.e. they aren't nearly as rich as they appear), excluding oil rich anomaly Norway. Switzerland is a better example nation that the U.S. should aim to model. Switzerland is proof that low taxes can work also (just to highlight this). I can't stand this high tax vs low tax rubbish (that even Krugman is stuck in). I can't even take Krugman seriously anymore. Obviously there are far more important factors and influencers than just tax rates that determine how a economy performs. Why did I see Krugman post a graph just the other day then almost suggesting there isn't? Just to make a political point / for political point scoring? Perhaps, but if so I lost respect for that alone. It's obvious straight out wealth distribution isn't the answer either. I.e. one only has to study the implications of this on many nations also, including France. France, despite all heavy handed welfare state and large scale wealth distribution programs still has 1 in 5 children living in poverty according to the UN, and has been experiencing awful growth under Hollande and performs poorly in many measures. If the US is to implement only one program to counter globalistion then it has to be education and training (and I'll put capital infrastructure investment second). This is the most important factor by far in a ever globalised and fast changing world, and the US (and UK) really need to improve in this regard and are lagging far behind many other nations. This is a program I fully support. Not more handouts. Obviously there are many complexities and variables. An immense number. I could go on and on and talk for days. I'm only just getting started, but unfortunately I'm not trying to do a proper in-depth analysis here. Just mentioning a few gripes I have. On another note this whole article reminds me of another article I read on project-syndicate a few weeks back where the writer (a so called Harvard professor) claimed left-wing policies had failed. He then spoke in circles for a while, cited some widely inaccurate / suspicious understandings of political science (that from a non-US perspective, i.e. having been trained elsewhere sounded absolutely wrong) before concluding that the solution is more of the same old left-wing policies. Seriously? This website is losing its standard (or perhaps global economists have just run out of ideas and have lost their touch). A bit more in-depth bi-partisan analysis and less ideology would be a welcome change. READ LESS Reply Comment Kevin Remillard AUG 6, 2016 'It’s about a culture that increasingly encourages a social decay instead of counteracting it. Too many young men are immune to hard work. Good jobs impossible to fill for any length of time. More troublingly, thinking something is being done to you.” Comment Kevin Remillard AUG 7, 2016 @Steve - Stop being a victim. I have no argument with workers, only your polarization of issues where an argument doesn't exist. Comment Steve Hurst AUG 6, 2016 @Kevin Good jobs are hard to fill for any length of time because employers have abicated any serious role in training or career continuity and expect to turn on and off the supply of specialist workers as it suits them (including offshoring which is a big off). Stop blaming the workers and look at corporate behaviour Reply Comment Andrew Cole AUG 6, 2016 In the EU the problem is that the German led Eurozone elites have identified this issue and prioritized trade and Eurozone policies that concentrate on shielding the their middle classes at the expense of others in Europe. Hence no transfer payments or debt write offs for southern Europe, which is reduced to 3rd world status, causing mass migration to the UK which ironically triggered Brexit. Ironical because German leader have made it clear that opposition to a British Europe was their insurance policy against globalization (former German ambassador to EU and the Bavarian leader). The beggar your neighbour response of Germany (and in ad different way by France via the EU bureaucracy) has been the most divisive and callous responses to globalisation to date. There are so many examples, but one would be the EU tariff structure, its use for neo colonial purposes, and to bully - as in the case of Switzerland and the UK. READ LESS Reply Comment David Carlton AUG 6, 2016 One problem that may account for neoliberal obliviousness: Milanovic's global one percent includes an awful lot of well-off Americans. Using one of the 'How Rich Am I?' calculators on the 'net, this poster is apparently part of the global one percent--as a single householder with an income in the high five figures (US$$). A two-adult, one child HH in the US also makes the cut at $120,000--easily obtainable for a two-income professional couple. Basically, the global one percent includes virtually the entire American upper middle class--including virtually every one who deals with economic policy. And the gap between their life experience and that of those below them has gotten enormous. READ LESS Comment Robert Beal AUG 6, 2016 The U.S. upper middle class (within U.S. that would be the upper 20%, the only ones whose prospects are improving, household income above $200K, assets about $1 mil) is more fearful of replacing capitalism ('global open markets'?) than of capitalism itself--for now. Of course, many of them--as well as the other U.S. citizens in the global 1% (thank you for that perspective) are largely oblivious and take their 'thinking' cues from the MSM. READ LESS Reply Comment Mirek Fatyga AUG 6, 2016 The problem is, that there are many problems. One left out by the author is the problem of unevenly distributed, yet explosive, population growth. It does not take particularly advanced math to calculate that present day industrial civilization cannot accommodate 7 billion people at the western standard of living. Consider that the US, with 5% of world population is still using ~20% of the global oil production, unconventional oil notwithstanding. This is not to say that future civilization cannot, but one somehow has to get in one piece from the present to the future. If the present day economy was to equillibrate rapidly through globalization (not there yet), it could only transform itself into the global Brazil. In other words, there is a nearly inexhaustible supply of labor that will work for food, while there are not enough readily deployable resources to promote this labor to some sort of middle class, even if said labor develops both ambition and political muscle to forcefully demand the promotion. The virtuous circle which was promised by the neoliberal economists cannot thus close. Meanwhile in the developed world, consumer markets cannot function without consumers and attempts to prop up consumers with fraudulent debt end in tears within couple of decades, which is where we are at. The beginning of the way out is to acknowledge this reality. Acknowledge the conundrum that we face, which is that one needs to stimulate the economy towards innovation that can extend high standards of living to larger numbers while counteracting the natural short term tendency of markets to balance supply and demand by impoverishing sufficient numbers of potential consumers. Once they are impoverished, social forces emerge to keep them there indefinitely. There is no shortage of oil if 80% of world population is prevented from using it. It is not a simple task, and requires new thinking. The first element of the new thinking is acknowledging that labor is not just another commodity. Labor is also your neighbor and the consumer that your business needs. One cannot conduct trade for the sole purpose of finding the cheapest labor. So, for instance, giving countries some freedom to impose tariffs which are rebated for taxes paid by the local labor could supplement trade agreements. All such experimentation is fraught with danger of doing damage rather than helping, so one should acknowledge that as well and avoid sweeping and sudden changes. Evolution, rather than the Revolution, particularly given the reality of nuclear weapons which can end the world as we know it if this world implodes in a populist spasm. READ LESS Comment Steve Hurst AUG 6, 2016 You will not find many wanting to talk about the population explosion and its very obvious likely outcomes, for some reason it is taboo Reply Comment M M AUG 6, 2016 With hindsight the real effects of the globalisation policies could not have been known or even anticipated correctly at the time, 15-20 years ago. The right tools were very simply not available then. The situation the world is in today is a culmination of factors and one must not blame it only on one factor. One may be able to compare Mayfair to Beverly Hills, but comparing the US or the UK to Venezuela and Cuba, who’d been shut out of globalisation all these years, is not sound. One only needs to look at Rio in Brazil to see the real extent of 'Inequality” and this inequality, globalisation had and has nothing to do it with it. It is demography and cronyism in all its forms and the deep rooted corruption among the political and financial classes, across the board and around the world, as JS knows very well after he resigned from the Panama Investigative Committee yesterday. READ LESS Comment Steve Hurst AUG 7, 2016 @M M Yes trade is historical. That is not just what happened in the 60s Traditional activity basically consisted of shipping local goods to distant markets. Hence the Silk Road supplying silk. Geo-local goods to Western markets In the 60s in the West - The intellectual part, the know how of Western activity was divorced from the manual part and that know how retained in the West with manual work offshored to the East. Factories in the West were cloned in the East. That has progressed now so that know how is not just held in the West It was a new game in the 60s and its another new game now READ LESS Comment M M AUG 7, 2016 Steve, JS is talking about the latest wave of globalisation. Globalisation, and following your rational, had started since Phoenician times (through international trade), then Alexander the Great and his conquests, followed by the Roman Empire, (all the chapters in between and leading up to) the Victorians, the New World (what is today the US), etc. It is all about power and dominance through Trade and Cheap labour. Nothing much has changed throughout the centuries. In old times, it was done through wars, occupation and forced slavery. In modern times, it is being done in excatly the same way, through wars (e.g. Iraq, Syria, etc.), financial strangulations (e.g. Cuba, Iran, Greece & Cyprus, etc.), and modern time slavery (zero hours contracts, minimum wage, breach of privacy and of human rights, mental & physical abuse, etc.). The actions of the current political leaderships through their central bank cronies have been a disgrace to say the least. Instead of continuing to bailing out the financial services sector and the Equity markets, they should have directed their attention at stimulating the real economies. This is where they all failed. One cannot keep on throwing good money after bad, at tax payers expense and say we are taking action to deal with this, that or the other. These actions are only creating more 'Inequality” across the board. The Governance model at the level of all governments must be revamped and any decision making process (at the level of all governments) must be truly and transparently segregated from the execution (ive) process. The top of the leadership pyramid is full of cronyism and corruption (circa the honours given by D Cameron, B. Obama, etc.). The problem today is where to find an 'Alexander the Great” or a 'Julius Caesar”? The best the world could find today are a 'Tsipras” and a 'Renzi” with no hope, yet again, of the 'New World” coming up with a sane leader. READ LESS Comment Steve Hurst AUG 6, 2016 @ M M Globalisarion commenced in the 1960s when the first experiments started on relocating monkey see monkey do facilities to O/S. The monkeys are just us, they are not monkeys, and they learn fast, they are now as technically qualified as us. They are genetically identical, you dispargae them and you disparge yourself. I know this because a member of my family was involved in the 60's experiment. Everything else follows. The job then was divesting or shutting down European operations. This article is correct at a basic level, beyond that it is cretinous. M M There has never been detente, it is one long war, who told you there was detente. China is not benign and I would not be benign in their position. EU policy is determined by naff geopolitics which is why it fails on the economic front and will weaken its structures. It is the egotistical behaviour of Western affluence in the belief affluence is god given not an accident of history. You are overplaying, as is the US, the influence of the US with its shrinking base in the world, it is egotistical derrangement by the US. US policy is one long train wreck hence its pyschological disorders aka Trump, QED, and strategic advantage due to WW2 was an accident due to geolocation. You do understand IBM was one of the main enablers and contractors to Germany in that glorious period. There is a peasants revolt brewing both in the West and in the East and the idea this can be controlled is an illusion, absolute arrogance. SImply, vassels are quiet when they are comfortable-ish, when the model fails and they are uncomfortable then the priests and their temples get attention they dont like, again QED evidenced by other prior civilisations. Drought is the failure point, whether it is water or debt, sorry credit, or energy. The current model is unsustainable hence all the wailing, demands for status quo. and the demands the beast be fed. Quite medieval dont you think. The US has doubled food stamps and nominal debt in less than a decade, China has near completed its penetration on consumerables and needs a new impetus, Russia is a giant gas pumping station and not much more, and the EU is trying to recreate the USSR. And we are supposed to buy this nonsense. You are kidding me right. A pox on their houses and a pox on those pretending their house is the way. You are correct establishment reaction is reactive rather then proactive as so ample displayed by the deputy guvnr of the BoE, Haldene, who has only just caught up with the idea food bank utilisation has romped away during his claims of recovery. Detached is the word. Now if the BoE is 8 years behind in understanding what is going on just exactly where does that leave us with trading at the speed of light, why light years behind I would say. This site is full of yesterdays men not living today. Sad READ LESS Comment M M AUG 6, 2016 Steve, JS is talking about globalisation from a US eye and globalisation started around the time of the fall of the Berlin Wall when the new Geopolitical landscape, e.g. Russia, China and the US decided to start talking to one another again. Your examples are relevant to the UK but not necessarily elsewhere and you yourself said it, there isn’t one jacket that fits all (Rio in Brazil is a good example, people outside the venue have been screaming asking for financial help and one could see the thousands of cheap makeshift homes around the Olympic venue that are housing people on very low or no income, this is inequality in its most blatant form). Politicians and their policy / decision makers tend to be reactive rather than proactive. Successive UK governments used different tools to keep the wheels of the UK economy running, such as utilising FOREX, high (back in the 80s’ & 90s’) or low interest rates (at the moment), high or low asset or commodity prices, etc. QE by the BOE of this week, which benefited only 5 to 10 companies in the UK, to keep these companies from going bust and the stock markets from diving, etc. Globalisation required different sets of tools which were not available at the time because no one really understood at the time how the new geopolitical landscape, following the re-unification of Germany, the disintegration of the USSR and the creation of what is today’s Russia, the emergence of China as a leading player, etc.. No one at the time could have anticipated how things were going to turn out. It was not until Obama came to power and decided that a new world order was needed to address the imbalances. Until 2012, there was a detente between the US, Russia, and China but then the whole relationship deteriorated when the US decided (amongst other issues) to clean up the IMF and the World Bank and to imposing silly and exorbitant conditions on other countries, this is when cracks and stagnations started to appear in the world economies, thus the split of the East from the West and the creation of the new BRICS Bank (as a counter measure to the IMF), etc.. The US under Obama had to search for new consumers, and to limit the US dependency on foreign oil, thus the Obama’s administration policy of pursuing the lifting of sanctions from many countries such as Iran, Cuba, Myanmar, Vietnam, etc. There is no denial that the shift of jobs to countries that provide cheap labour had an impact on the outsourcing countries but this, on its own, is not the main problem, there are very many factors that came into play, not least the mini-wars all over the place and their effect on the energy, commodities and asset markets. Globalisation is a very complicated matter and I agree with JS, it should have been managed better, but politics, events and the vested interests, as always, got in the way. And you are correct in your concluding paragraph, which incidentally I had made a similar remark in my earlier comment herein, the author of this article should have elaborated a bit more on some of the issues in this article. READ LESS Comment Steve Hurst AUG 6, 2016 @M M The effects of relative labour cost disadvantage were detailed in the UK McCrone Report of 1974 when the accurate forecast of Sterling strengthening due to N Sea Oil effecting the dismantling the UK manufacturing base. All that is happening is a larger scale operation. In the 1960s the Sunshine belt drift was studied, aka the migration of North US industry Southwards in search of cheaper labour. This is all known, all predictable. In response to the McCrone prediction the UK developed its service sector and the City - the big bang. You will have seen similar trends in China following the export growth tailing off, development of their service sector and shortly finance The manipulation of the housing market to create short term profit for banks was equally not an accident. The model was and is well known. A 2% shift in transactions gives a boom, transactions varied by access to money. The progression was again quite clear, loosen criteria, develope BTL to replace FTBs, loosen LTV. These were deliberate steps The purpose of pumping debt into an economy is simple, it boosts an economy, at least in the short term. Unfortunately more debt is needed in due course to boost the said economy to stop it declining Unfortunately this article is shallow in that it odes not adress the fundamentals, only the effects and basically it suggests an ointment of limited compensation for loss when the issue is the loss. Very disappointing READ LESS Reply Comment Martin Screeton AUG 6, 2016 These 'people' are not going to believe nothing until their own houses are burning down. That's how utterly blind they are. Reply Comment Stephen Morris AUG 6, 2016 Dig a little deeper and the underlying cause is the corrupt system of 'elective' government (not Democracy) which adversely selects aggressively narcissistic, machiavellian (and possibly psychopathic) political agents and gives them a Monopoly on Power. As another Nobel laureate, James Buchanan, observed: '[S]uppose that a monopoly right is to be auctioned; whom will we predict to be the highest bidder? Surely we can presume that the person who intends to exploit the monopoly power most fully, the one for whom the expected profit is highest, will be among the highest bidders for the franchise. In the same way, positions of political power will tend to attract those persons who place higher values on the possession of such power. These persons will tend to be the highest bidders in the allocation of political offices. . . . Is there any presumption that political rent seeking will ultimately allocate offices to the ‘best’ persons? Is there not the overwhelming presumption that offices will be secured by those who value power most highly and who seek to use such power of discretion in the furtherance of their personal projects, be these moral or otherwise? Genuine public-interest motivations may exist and may even be widespread, but are these motivations sufficiently passionate to stimulate people to fight for political office, to compete with those whose passions include the desire to wield power over others?” (James Buchanan and Geoffrey Brennan, 'The Reason of Rules”.) Under such conditions (and in the absence of true Democracy) it is perfectly reasonable to expect that: a) the system will adversely select megalomaniacal agents who act in their own interests, with minimal regard for the subjects they rule; b) such politicians will deliberately misrepresents the state of affairs to the public in their desperate attempts to secure votes; and c) such politicians will engage in grubby auctions, buying off special interest groups and powerful lobbies piecemeal with gifts from the public purse . . . and look to receive favours in return, either in the form of support in government or employment in later life. The real benefit of Democracy lies not its direct empowerment of the People but in neutralising the tendency for adverse selection of corrupt psychopaths. READ LESS Reply Comment Barry McHugh AUG 6, 2016 Trade finance did collapse in the GFC and developing nations are not key movers in the the global financial architecture. This also becomes apparent in the CDS risk rating of developing nations whenever there is any sign of global economic difficulties. So in a sense developing nations are bit players due to their limited position in finance and if they want to maintain any money supply on the back of foreign investment they have to debase their currencies to attract that capital. I don't know how this situation can be repaired but whip it persists we can hardly be surprised that developing nation savings rates hold back growth in global consumer markets. But the worlds most Christian nation's, by head count, voters could be better represented so when geopolitical ruptures begin because these bit player nations are just trying to survive, we don't just shoot back rather than begin the hard work of making finance work for all in a downturn. I also don't know how we communicate these facts to the electorate when media and finance are one and the same. PS I'm Christian. READ LESS Reply Comment Alex Leo AUG 5, 2016 Globalization is a dirty word, we get it. All of us, the left , the right, the center - point me to any politician or businessman or economist who would praise globalization in 2016. But, Mr. Stiglitz, labeling and talk is cheap, you have consistently come short on ideas and insights beyond your socialist call for alienation and re-distribution of wealth through taxes and other means, where you and people like you, whom you think of as the responsible intellectuals, would be tasked with overseeing that redistribution in an honorary/scientific/ideation capacity exchange for your leadership and very comfortable lifestyles for you and your families. You are not only failing to grasp key economic concepts like the disruptive nature of trade and technology, you have consistently ignored key aspects of human nature in your research. One book I would really recommend to you is Poor Economics. It is exactly the opposite to what you believe in. I am sure I am the 100th person to state this. An individual today in any country has control over much more resources than he or she or their parents did a generation ago. What you are failing to account is changes in consumption patterns. You see, it is not that difficult to buy enough proteins and nutrients and clothes to protect yourself from the elements. But people in any country would want to spend extra money on more fashionable food (e.g. shrimp, or wine, or eat out), fashionable clothing, an iphone, an imported car. In a very poor country, immunization rates are below 10% even though the cost is brone by a NGO or the government, the only true cost is the opportunity cost; eople could spend a few cents on chloring and purify their own water and avoid dysinteria, but they do not; they could spend 20c on a mosquito net to avoid malaria but they do not; but they do buy iphones and drugs and weapons. Public transportation, education, healthcare are often taken for granted and financially abused by the very people working in the system as well as the people the system is supposed to serve, And more taxes by businesses that are successful will not help that, they will just fund better people like you, who will continue to find fault on one side of the playing field only. You have to turn from shaming those who money you depend on to educating those whose interests you profess to defend. READ LESS Comment Martin Screeton AUG 6, 2016 Alex... perhaps the pitchforks and torches will come to your house first. Comment Curtis Carpenter AUG 5, 2016 The problem isn't 'globalization' per se. The problem is how to achieve distributive justice in the age of globalization. And the marketing promise -- that globalization would raise all boats -- has proven to be a fiction: it raises some, sinks others -- and boosts a very small percentage of the bigger yachts to heights that most of us can't really imagine. So the bad news at the yacht club right now is that the people are starting to catch on. The ones still afloat keep on rowing, but they're starting to wonder why. READ LESS Reply Comment dan baur AUG 5, 2016 But what about global warming? Got any other scare crows? 'Under the assumption of perfect markets' - as opposed to the assumption socialism actually works? 'The Scandinavians figured this out long ago' - you mean Venezuela and Cuba? Please don't explain how you would better manage Globalization - for sure it works on paper especially if no one is challenging you. READ LESS Reply Comment David Olson AUG 5, 2016 First, trade always has a disruptive element. Think how many weavers in India were put out of work by industrial cloth produced in England and exported 200 years ago. Such history is why most Third World nations adopted the ideas of Alexander Hamilton and Friedrich List and erected import barriers, tried to grow their domestic industries and engaged in the policy of 'import substitution'. South Korea, Taiwan, Hong Kong and Singapore went somewhat in the other direction and have become successes. I remember reading c.1993 in 'Financial World' magazine (now defunct) an article that stated the increased globalization would be accompanied by increased inequality. -- Workers of equal skill in America and Europe are now more equal with those in India and China. The one coming down and the other going up. But they are more inequal with professional, bureaucratic and political workers in their own nations. -- BTW, we forget that other nations have 'middle classes' too, and that middle class there is typically not as well off as middle class here. READ LESS Comment jagjeet sinha AUG 6, 2016 GLOBALIZATION NEEDS GOOD SHEPHERDS The reference to Weavers in India put out of business by Industrial Revolution in England is poignant, yet indicative. Migration is a direct consequence when World Economic Growth changes existing networks, for higher economic efficiencies. The reason why Britain became Great is rooted in The Industrial Revolution - and then The Anglosphere. The World's First Free Trade Zone was The Commonwealth Preferences Area - scripting Global Economics Epicentres. The technological innovation advanced Mankind's Greatest Leap forward, in centuries. Global Currencies were born and became the raw materials for the Growth of World Economics. The US$ supplanted and today all four - A$ + B$ + C$ + US$ - have become IMF's hard currencies. Underwriting the script for World's Economic Growth for nearly three centuries and more. Globalization enables Growth of World's Economics - Britain began, America supplanted, taking the Globe forward. Greece could not prevent Rome taking over, Rome could not prevent Britain taking over, Britain could not prevent America taking over. Brexit was a vote for Globalization - back to Globe's Greatest Free Trade Zone - against the confines of a Geographical Regional Union. The World always needs Leadership from The Good Shepherds. READ LESS Reply Comment Steve Hurst AUG 5, 2016 Sounds like a short story called the Emperors New Clothes, that was fiction however. Where are the weavers of this wonderful new economic cloth we are supposed to wear '... the problem was not globalization, but how the process was being managed..' Sorry cannot agree with this. In what way can you 'manage' the supply and demand shift of a billion odd cheap workersin the process of joining the global market wherein less than a billion workers are located in the West - only by restriction of some sort which is contary to the dogma of globalisation. When the Western economic pie shrinks due to supply and demand reducing real labour income in the West compensation for loss cannot occur in full so decline is guaranteed. This has occurred all the way up the ninetynine odd percent. Middle class head count and real income has declined as well as those at the bottom. This is just the disembowelling of major manufacturing economies. Raw opportunism by emerging economies funded by Western cavaliers Scandinavians are not trad product manufacturers to the same extent so impact has been less. The UK was the birthplace of the Industrial Revolution and the US in the civil war developed mass manufacture and distribution, without it the war would have been lost by the industrial North. The US then basically invented the mass production of the motorcar. Due to this early embrace of trad products and manufacture both have suffered early decline. Others are in the process of following The next step is AI and robotics, synthetic labour which will again move supply and demand and the West has no answer. In fact resource is directed at older citizens not younger ones and this policy is deliberate. Youth unemployment steadily rises for decade upon decade It is difficult to identify when the can will be impossible to kick any further down the road due to continual ingenious bodging and manipulation but within the next 10 years for sure, after all tjis process has been in place for decades now building speed as amply shown by debt stats. The one thing which is also sure is the effective seizing of Western pensions as a pot for guvnt playtime will occur and moves are already creeping n place to use these funds to underwrite entirely private commercial loans in the name of 'good for everybody'. Loans that would otherwise not meet the risk reward equation. This is just a new twist on capitalism without risk, it has just shifted from banks directly to taxpayer liability. If that doesnt work sufficiently, which is highly likely, there will be no other money to easily sequestrate so competitive currency devaluation will burn Anybody thinking the public will take another decade of degeneration without reaching for the ballot box needs their head examining At the end of the day it is quite simple. You have growth and decline and inbetween transition. As we neither have effective growth or notable transition we are still in decline READ LESS Reply Comment Allen Mackenzie AUG 5, 2016 ''strong social measures must be in place'' !?. Uh, no thanks we have enough Big Government, thank you. And btw, focus on the positive. We have more stuff at ridiculously low cost than ever before. So the answer to globalization is intelligent competition not more of the dead hand of government. Reply Commented Robbie Jena AUG 5, 2016 The Solution is the intelligent management of Industrial Ecosystems (see MIT) that I provided with my version to China, but need for the whole planet, that is not happening. China is thinking about it now for the planet. Comment Robbie Jena AUG 5, 2016 http://www.china.org.cn/business/2016-08/05/content_39031966.htm Reply Comment Manuel Angel Anido AUG 5, 2016 A view from Latin America, was pointed by Raúl Prebisch, argentinian economist, who in the later 40 exposed a reexamination about the principle of comparative advantage. Trough a division between central and periferics countries, he higlights on the decline of the terms of trade as a cause of the undevelopment in the periferic countries. http://prebisch.cepal.org/sites/default/files/Prebisch%20por%20Dosman.pdf Reply


Commented Simon Barnard AUG 5, 2016 The neoliberals, and indeed many economists are in need of more than therapy. George Osborne declared in the lead up to the Brexit vote that each household would be £4,300 worse off should we leave the EU. This was done by dividing the difference in expected growth in GDP by the the number of households - daft - this is not how GDP is distributed. Growth of GDP is nigh on pointless if it is not distributed somewhat equitably. And it is distribution that is often overlooked by the neoliberals and economists who still believe in trickle down economics. READ LESS Reply Comment Petey Bee AUG 5, 2016 +1 Comment Curtis Carpenter AUG 5, 2016 Add my +1 too :-) Reply


Comment M M AUG 5, 2016 Joseph, others have their little books as well you know. Good article, music to the ears of the many, one wishes you had elaborated a bit more though. Reply Comment David Chipping AUG 5, 2016 This is a very timely article that does much to explain the political volatility in Europe and the US. Unless heeded expect it to get worse.

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