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Renowned U.S. Economists Denounce Corporate-Led Globalization
Nobel Prize winner Joseph Stiglitz and internationally acclaimed economist Paul Krugman decry undemocratic, unsound, and unethical corporate agenda

Published on the Common Dreams News Center on Nov. 21, 2001.

by James L. Phelan

It seems critics of corporate-led globalization have some new allies.

Recent Nobel Prize winner Joseph Stiglitz, along with well-known economist Paul Krugman, have of late made a flurry of public statements critical of the policies and processes of the World Trade Organization (WTO), the World Bank / IMF, and the proposed Free Trade Area of the Americas (FTAA) while leaving plenty of harsh words for the blatantly pro-corporate actions of the Bush Administration. Both economists point to the disruptive and distorting influence of large corporate entities through their dominance over both domestic and international institutions.

Stiglitz and Krugman have begun to voice their indignation more frequently in the press, raising many of the same concerns that social justice and environmental advocates have long made about the disproportionate influence of big business and the hypocrisy of "free market" dogma.

Taking Care of Business
In a recent column appearing in the New York Times, Krugman stated: "Cynics tell us that money has completely corrupted our politics, that in the last election big corporations basically bought themselves a government that will serve their interests. Several related events last week suggest that the cynics have a point." As evidence of heavy-handed corporate opportunism, Krugman takes issue with the recent claims by security interests that federalizing airport security would represent a "taking" a bald move by private interests to maintain a questionable security status quo free from public calls for more systematic scrutiny.

Krugman then assails the House "Stimulus Bill", stating that the "remarkable thing we learned from that bill was that conservative politicians who used to claim that they were improving incentives by reducing marginal tax rates, and that it was just an incidental side effect that big corporations and wealthy individuals were so richly rewarded no longer feel the need to disguise their payoffs." As he states, the principal goal of the bill is to repeal retroactively the corporate alternative minimum tax, "which means that selected companies would immediately receive huge lump sum payments from the government, totaling around $25 billion, with no incentive effect at all." What's worse is that "there are no strings attached to those gifts: if the companies want to, say, pay huge bonuses to top executives, they can. Republicans have always depended on the kindness of corporations, but this bill takes that faith to extremes."

Very little here, says Krugman, is representative of sound economic policies aimed at economic recovery, not to mention the need for shared sacrifice in times of belt-tightening. Corporate interests, as Krugman rightly points out, have friends in convenient political circles. In a blunt conclusion, Krugman sums it up saying that "the truth must be spoken. Lately our government has not exactly inspired confidence; its response to terrorism is starting to look a bit scatterbrained. But on some subjects our leaders are quite clearheaded: whatever else may be going on, they make sure that they are taking care of business."

Corporate-Led Globalization
When it comes to decrying the disruptive influence of the corporate agenda internationally whether in the WTO or the FTAA most critics have focused their energies on denouncing the anti-democratic nature of international trade and investment regimes and their narrow focus on liberalizing markets at all costs.

A recent interview with Joseph Stiglitz, however the ultimate World Bank/IMF insider sheds new light on what many have long suspected: documents and testimony on secret industry-governmental meetings, the behind the scenes agenda-setting of transnational corporate interests, and the apparent hidden agenda of the WB/IMF.

This conspiratorial assessment of hidden agendas could easily be shrugged off as baseless except that this account comes to us from a fired-up and increasingly political Stiglitz. Fired from the World Bank in 1999 for his criticism of the WB/IMF's policies, Stiglitz has refused to keep quiet as these institutions largely serving under the dictates of the U.S. Treasury Department impose policies internationally that he claims have "condemned people to death."

Only recently in the news for winning the Nobel Peace Prize for economics, Stiglitz seems to be using this surge in international attention to criticize corporate-friendly policies and to lend his support to the momentum of social justice groups organizing for greater transparency and participation in international policy-making processes.

In a recent debriefing with the London Observer's Gregory Palast, the former World Bank Chief Economist roundly attacked the hidden agenda of these international institutions. In addition to testifying to the ideological foundations of much of the WB/IMF's condition-laden policies lending policies, Stiglitz denounces the unethical agenda that these institutions impose on all countries that explicitly create conditions favorable to international oligarchs and transnational enterprise.

Having acquired a handful of World Bank documents from undisclosed sources marked "confidential," "restricted," and "not otherwise (to be) disclosed without World Bank authorization," Stiglitz began to document the real effects and aims of the World Bank's four step, one-size-fits-all, economic restructuring package imposed on less industrialized countries.

The first step, according to Stiglitz, is the promotion of state-level corruption as the facilitator of the "privatization" requirement which often also serves U.S. political goals a process that Stiglitz says would more be accurately called "briberization." This is followed by step two, "Capital Market Liberalization" which sets up predictable cycles of "hot money" speculation in non-productive assets that ultimately leaves the national economy hemorrhaging from loss of controls on capital.

Step three is "'Market-Based Pricing', a fancy term for raising prices on food, water and cooking gas. This leads, predictably, to Step-Three-and-a-Half: what Stiglitz calls, 'The IMF riot.'" An outraged populace predictably reacts to the fact that they can no longer afford to feed themselves. According to the documents obtained from the WB, these "IMF riots" are predicted and documented, stating that the resulting "social unrest" and civil strife has to met with "political resolve." Yet, as Gregory Palast points out, this process has one positive outcome "for foreign corporations, who can then pick off remaining assets, such as the odd mining concession or port, at fire sale prices." Step four is not far behind: the "poverty reduction strategy" called "Free Trade."

Stiglitz, however, is careful to point out that the World Bank and the IMF are not the heartless "free market" ideologues they might seem. Although the WB/IMF work devoutly to remove the uneconomic subsidies placed on food and other items essential to the poor, they are not necessarily against state interventions in markets as Stiglitz makes clear, "when the banks need a bail-out, intervention (in the market) is welcome." For example, as Palast points out, "the IMF scrounged up tens of billions of dollars to save Indonesia's financiers and, by extension, the US and European banks from which they had borrowed" in its enlightened redistribution of subsidies.

A Political Conclusion
Palast notes that from this assessment a recognizable pattern emerges: "There are lots of losers in this system but one clear winner: the Western banks and US Treasury, making the big bucks off this crazy new international capital churn."

So what would Stiglitz recommend in place of the usual WB/IMF fare? "Stiglitz proposed radical land reform, an attack at the heart of 'landlordism', on the usurious rents charged by the propertied oligarchies worldwide, typically 50% of a tenant's crops."

This is, alas, a more delicate subject. It's easier to simply have faith that constant economic growth will deliver us from the difficult issues of land tenure and access to income-bearing assets. This very political program is understandably not on the WB/IMF's list of chores, since as Stiglitz reminds us, "If you challenge [land ownership], that would be a change in the power of the elites. That's not high on their agenda."

According to Palast, ultimately "what drove [Stiglitz] to put his job on the line was the failure of the banks and US Treasury to change course when confronted with the crises failures and suffering perpetrated by their four-step monetarist mambo. Every time their free market solutions failed, the IMF simply demanded more free market policies."

With increasing numbers of prominent insiders and mainstream economists now sounding the alarm bells over corporate-led globalization, the task for social justice and environmental advocates has become ever-clearer. We must organize to demand that these illegitimate trade policies and institutions are either nixed or fixed through deep democratic reform.

Director of Policy Initiatives James Phelan a is also a co-founder of Grassroots Globalization Network.



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