Magazine article The Spectator

The Rich West Must Stop Grabbing the Profits but Ducking the Costs

Magazine article The Spectator

The Rich West Must Stop Grabbing the Profits but Ducking the Costs

Article excerpt

Heroes of anti-capitalist protest don't usually hang out at the Savoy. But Joe Stiglitz is different: the establishment figure who turned on the establishment. He's a former chief economist at the World Bank and a Nobel laureate. He chaired Bill Clinton's Council of Economic Advisers and he's not afraid to tell you about it ('When I was in the White House. . . '). He wears a nice suit and a tidy salt-and-pepper beard. He doesn't even wear Birkenstock sandals, and he looked well at home amid the comforts of the de luxe London hotel when I met him there.

But beneath the professorial façade is a combative mind and an inability to keep his mouth shut -- neither of which sat well with the US Treasury during his tenure at the World Bank. His repeated criticism of the International Monetary Fund, especially its handling of the Asian crisis in 1998, put him on treasury secretary Larry Summers's blacklist, and he was eventually forced to resign.

His first book after leaving the World Bank -- Globalization and its Discontents -- vilified the IMF for enforcing austere one-size-fits-all monetary policies on countries in dire financial straits. It sold over a million copies in 35 languages. It didn't make him many friends in Washington, but it turned him into an unlikely champion of the dispossessed.

His latest book -- Making Globalization Work -- argues that to do as its title says to the benefit of developing countries requires a radical revamp of global financial governance. In his world, lenders would have only themselves to blame if poor countries failed to repay their debts, GDP calculations would take account of ecological damage, limited liability rules wouldn't protect multinational companies from being made to pay for their sins, and the dollar would no longer be the world's reserve currency.

These ideas are decidedly left of centre, but Stiglitz admits there's nothing new about them. What is new -- and comes over strongly in person -- is his thinking on how to get the big players, led by the US, to take them seriously. To speak to him is to glimpse an alternative future: a foretaste of what President Hillary Clinton's international economic policy might look like.

Take the issue of international corporate responsibility. He describes the present system as like 'the Wild West, when the bad guy would roll across the state line' to safety.

Today, 'bad actors in this game take advantage of globalisation . . . but they use the existence of boundaries to escape liabilities'.

He describes one case in Papua New Guinea where an international company dumped 80,000 tons of contaminated material daily in the course of extracting $6 billion worth of gold and copper. After the mine was exhausted, the company turned its shares over to the Papua government -- 'knowing that the cost of the clean-up was greater than anything they'd get out of the mine in the future' -- and rode across the state line.

For Stiglitz that illustrates a deficiency of globalisation: we worry plenty about crossborder protection of investors but not about protection of countries. How can the law ride across state lines too? He argues that using the developing countries' courts works for neither side. Multinationals perceive 'home court bias' against them -- though sometimes, he says, the opposite applies: developing countries' environmental standards are set too low because of the risk that companies will pull out. Papua New Guinea was so afraid of losing revenue if mining companies left that a law was passed making it illegal to sue for environmental degradation. So 'either we create international courts' or we allow companies to defend themselves in their own home jurisdiction. Thus a US company facing a developing country's claim for environmental damage would have to defend itself against the standards of US environmental law.

An admirable idea -- perhaps -- but how do you get the US to go along? Well, besides using pressure from the American environmental movement and 'more enlightened' companies, you can always use the World Trade Organisation. …

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